Chicago Market Generally Higher, Friday's USDA Reports Eyed
06/01/14 -- Soycomplex: Beans recovered some of last week's losses as the weather forecast for Argentina turned hotter and drier than normal across the next 15 days. Southern Brazil is in for good rains, but northern and central areas are also in for a lack of moisture although temperatures here are seen as normal for the time of year. That might not be too much of a problem in Mato Grosso, Brazil's leading soybean state, as growing conditions in December were exceptionally wet, say Martell Crop Projections. "Mato Grosso soybean potential is believed to be very good based on a 'green' satellite vegetation image valid late in December. This is Brazil’s leading soybean state accounting for 31% of national production, on average. Improved vegetation late in December, increased greenness, suggesting that a favourable crop is in the making," they say. The trade is a little nervous ahead of Friday's USDA report, with trend-following fund traders still holding a large net long position in CBOT beans. Talk of fund rebalancing of positions starting Wednesday could signal that a reduction of this length is on the cards in the week ahead. The trade is thinking that the USDA may raise US 2013 soybean production from the 3.258 billion bushels and yields of 43.0 bu/acre suggested in December. Exports however may also rise now that the US already has net sales commitments in excess of 100% of the USDA target for the season on the books, unless they strongly fancy hefty Chinese cancellations once the Brazilian harvest gets underway in earnest. US soybean exports show no sign of slackening off yet, weekly export inspections were a robust 56.5 million bushels today. That takes the net total for the current marketing year to date to 922.578 million bushels versus 819.96 million a year ago. The Buenos Aires Grains Exchange estimated that Argentine soybean plantings are 87.2% complete versus 83.3% a week ago and 84.9% a year ago. Jan 14 Soybeans closed at $12.96 3/4, up 7 1/2 cents; Mar 14 Soybeans closed at $12.76 3/4, up 5 1/2 cents; Jan 14 Soybean Meal closed at $428.80, up $4.30; Jan 14 Soybean Oil closed at 37.87, down 47 points and the lowest close for a front month since July 2010.
Corn: The corn market closed around 4 cents higher, despite news out of China that they'd rejected over 600 TMT of corn and corn by-products (DDGs) in 2013. Maybe the market viewed that as old news? Of more immediate concern may be Friday's upcoming USDA report, with funds sitting on a large net short position in corn, and talk that rebalancing of that position will give corn a (short-term at least) boost. Funds were estimated to have covered in around 4,000 lots of their short position today, and may close out more in the run-up to Friday. Heat and dryness issues in South America, Argentina in particular, are a threat to corn. "Severe planting delays resulted from excessively heavy rainfall in November. Argentina crop vegetation appeared worse than normal December 21-31 in a satellite image showing conditions compared to a 7-year average. Smaller plants, due to severe planting delays, may be responsible. However intensifying heat and moisture stress also played a role. The 2 weeks leading up to Christmas were particularly hot and dry," said Martell Crop Projections. The Buenos Aires Grains Exchange said that Argentine corn is now 77% complete versus 72.7% a week ago and 82% a year ago. The USDA announced 110,600 MT of US corn sold to Mexico for 2013/14 delivery. Weekly export inspections of 19.318 million bushels were welll down on the 28.744 million reported for the previous week (with over 5 million bushels heading for China despite the ongoing dispute over MIR 162 corn). Nevertheless, cumulative marketing year to date exports are 471.97 million bushels versus only 263.11 million a year ago. As of December 26th, cumulative corn commitments stand at 77.5% of the USDA forecast for the current 2013/14 marketing year, versus the 5-year average of 56.8%. The trade thinks that the USDA may raise their current US 2013 corn production estimate of 13.989 billion bushels and yield figure of 160.4 bu/acre on Friday. They may also cut harvested acres though. Mar 14 Corn closed at $4.27 3/4, up 4 1/4 cents; May 14 Corn closed at $4.35 3/4, up 4 cents.
Wheat: The wheat market traded higher overnight (but lost most of that shine once the daytime session opened), on spillover carry-through from Friday's strong close, still basking in the glow of Egypt and Algeria booking more than 1 MMT of wheat between them. Even so, none of that is likely to come from the US. However, Friday's Egyptian tender does at least show that US wheat is competitively priced on a FOB basis relative to European and Black Sea origin wheat. Strong sales by both the latter two during the first half of the season could see export interest switch back to the US in the second half as stocks tighten. At least that's what the market is thinking might happen. The very cold spell currently gripping the US is not generally thought likely to be too much of a threat to US winter wheat, as almost all of the crop is covered by snow. Bloomberg reported Midwest temperatures as low as -18C today, with Reuters saying that things got as low as -23 in the top US winter wheat state of Kansas overnight. The latter said that whilst western and northern Kansas has about 2 inches of snow on the ground, there is little snow cover in Nebraska. Weekly export inspections were a so-so 13.60 million bushels, up only marginally from 13.39 million the previous week. Nevertheless, the marketing year to date total is 743.04 million bushels, way ahead of 529.14 million this time a year ago. The USDA also reported the sale of 160 TMT of US wheat sold to unknown for 2014/15 delivery under the daily reporting system today. It is thought likely that US wheat futures could also get a shot in the arm from fund rebalancing of positions for 2014 in the week ahead. The latest Commitment of Traders report shows them sitting on a net short position of over 70k contracts in CBOT wheat. Friday's USDA report isn't all about corn and beans for once, as they will also give us their US winter wheat planted area estimate. The average trade estimate for that is 43.531 million acres, a six year high. Mar 14 CBOT Wheat closed at $6.05 3/4, unchanged; Mar 14 KCBT Wheat closed at $6.44, up 1 1/2 cents; Mar 14 MGEX Wheat closed at $6.30 1/2, unchanged.
