Chicago Market Begins Week On The Offensive On Weather Worries
19/08/13 -- Soycomplex: Now that last week's USDA report is a distant memory, we are back to trading the weather. The weekend was a bit drier and warmer than expected, and the forecast for the week ahead is losing some of the coolness that's been a feature lately in exchange for heat. "August rainfall is the key determinant of soybean yields. Very heavy rains optimise the yield. Rainfall has been sparse in Iowa and Illinois, the 2 leading soy states. Also very dry in August are Wisconsin, North Dakota, Missouri and Upper Minnesota placing roughly 40% of US soybeans at risk for a reduced yield. Worse conditions in soybeans are anticipated in the August 18 report, as the yield-sensitive pod filling period advances. Fifty-eight percent of soybeans were setting pods a week ago. Perhaps 75% will have reached that key stage this week," said Martell. Crop Projections. After the close the USDA cut good/excellent crop conditions by two points to 62%, although that's still double what it was this time last year. They reported that 72% of the crop was setting pods versus 81% for the 5-year average. "After weeks of coolness the weather pattern is turning hotter. The jet stream would build up a warm, stable ridge of high pressure over the heartland, ratcheting up temperatures in the central United States. Moderate temperatures, mid 80s today, would give way to upper 80s-low 90s F by Wednesday in Nebraska, Iowa, Missouri, Illinois and Wisconsin. The Tuesday evening forecast shows hot air encroaching on the Midwest from the Great Plains. The GFS model sees just light rainfall in the 5-day forecast for Midwest corn and soybeans," Martell added. Weekly soybean export inspections came in a bit better than expected at 5.294 million bushels versus 3.433 million last week. Sep 13 Soybeans closed at USD13.22, up 38 3/4 cents; Nov 13 Soybeans closed at USD13.03 1/4, up 44 cents and the first close above USD13.00 since mid-June; Sep 13 Soybean Meal closed at USD420.30, up USD11.50; Sep 13 Soybean Oil closed at 43.45, up 64 points.
Corn: As with soybeans, today was all about the weather. With funds sitting on a record large short position in CBOT corn it was always going to be a volatile August, and so it has proven to be. "Drought in the Midwest would continue to stress corn and soybeans this week with a stable ridge of high pressure aloft. The temperature forecast is much hotter. Prolonged dryness in the Midwest is taking a toll on corn and soybeans. Maximum temperatures over the weekend were 2-3 F higher than the GFS model predicted in Iowa and Illinois. When fields become extremely dry, there is less evaporative cooling which, in turn, increases surface temperatures. Corn leaves begin curling in the afternoon to conserve crop moisture. This slows down plant activity hindering kernel filling," said Martell Crop Projections. "Corn conditions are expected to move lower in Iowa, Illinois, Wisconsin, Minnesota, Indiana and North Dakota in the August 19 crop progress report today. The dry August follows on the heels of sub-par rains in July," they added. After the close the USDA cut good/excellent crop ratings by 3 percentage points from last week to 61%, more than the 1-2 point drop that the trade was anticipating, although again much higher than only 23% this time last year. They have 97% of the crop silking versus 99% normally and 52% at the dough stage versus 65% normally. Only 11% of the crop is dented against 30% normally. There's still a wide difference of opinion over final US corn yield potential with the USDA and one or two others in the 154-155 bu/acre area, many in the 156-158 bu/acre region and still some 160+ bu/acre estimates from the likes of Goldman Sachs and Deutsche Bank. The Vice President of FCStone forecast a US corn crop of just under 14 billion bushels at 13.993 billion, 1.7% above the USDA's 13.763 billion. The high profile Pro Farmer Crop Tour kicked off today, and will conclude Thursday with the results expected to be made public on Friday. Weekly corn export inspections came in at 7.061 million bushels, less than half last week's total. New crop export commitments are strong though, at 33% of the current USDA forecast for the new season ahead that's said to be the highest percentage forward sold for this time of year since 1996/97. Sep 13 Corn closed at USD4.93 1/4, up 19 1/2 cents; Dec 13 Corn closed at USD4.85 1/2, up 22 cents.
Wheat: The wheat market was happy to follow corn higher. CBOT wheat gained the most, probably due to the fact that fund money still holds a sizable short position in that. Funds were estimated as buying around a net 2,000 CBOT wheat contracts on the day. Weekly export inspections added some support, coming in at a strong 33.787 million bushels versus 24.345 million the previous week. That takes the 2013/14 marketing year to date total to 274.46 million bushels, versus 213.97 million a year ago. The US winter wheat harvest is winding down at 96% done, ahead of the 5-year average of 94%. Spring wheat crop conditions saw a 2 point switch from good into excellent, although the two combined were unchanged from a week ago at 66%. Spring wheat harvesting was placed at 18% complete versus 38% normally at this time. With the French wheat harvest wrapping up, Agritel estimated the crop there at a 9-year high of 37.0 MMT today, up 4 percent versus last year. The Ukraine Ministry upped their 2013/14 grain export estimate from 28 MMT to a new record 30 MMT, close to APK Inform's estimate of 30.4 MMT last week. They have the early grain harvest (excluding corn) at around 32.5 MMT in bunker weight, or somewhere in the region of 31.0 MMT in clean weight. Russian analysts IKAR trimmed their forecast for grain production there this season from 89.7 MMT to 89.2 MMT due to a lower than previously forecast barley crop. The Russian Ministry said that the 2013 barley harvest currently stands at 9.0 MMT, with average yields at 2.19 MT/ha, not hugely better than 1.90 MT/ha a year ago. IKAR left their forecast for Russian wheat production unchanged at 51.9 MMT versus 54.0 MMT from the USDA. With the Russian wheat harvest approaching the halfway mark, domestic prices are steady on strong export demand, according to SovEcon. In a complete reversal of Morocco's fortunes, where grain output has almost doubled this year, Tunisia's crop is seen down 47% on dry weather, from 2.61 MMT to 1.37 MMT. That means that 2013/14 grain imports could rise 30% from last season to 3.57 MMT and up 23% on the 5-year average, according to the FAO. Sep 13 CBOT Wheat closed at USD6.41 1/2, up 10 1/2 cents; Sep 13 KCBT Wheat closed at USD7.03 1/4, up 5 cents; Sep 13 MGEX Wheat closed at USD7.45 1/4, up 8 cents.
