Chicago Soybeans Rally To Fresh Highs On Strong Demand, Fund Buying

24/02/14 -- Soycomplex: Beans rallied to fresh highs on the continued tightening of supply in the US. Weekly export inspections of 1.27 MMT, whilst tapering down a little in recent weeks, are still impressive for this time of year, especially when you consider that 84% of the USDA's target for the season has already been shipped. Despite the anticipated record large South American crop, fund money continues to extend their long in beans - now estimated at over 200k lots. They were judged to have been net buyers of around 6,000 soybean contracts on the day today. This does however leave the market heavily overbought and vulnerable to a sudden downside correction at some point, but when will that be, and what might trigger it? The Brazilian harvest is gathering pace. Safras e Mercado said that the Brazilian bean harvest is 31% complete, up from 21% a week ago, and ahead of last year's 28% and 18% on average at this time. They said that the Mato Grosso bean harvest is 45% complete and they are 37% done in Parana. Safras said that they will update their Brazilian bean crop estimate next week. Looking further ahead, the trade is digesting the figures published at last week's USDA Outlook Forum and thinking hmmmm. Record US soybean yields, what are the chances of that? Record usage of 3.430 billion bushels, yes I can buy that. Assuming usage at this level and instead pencilling in last year’s yield of 43.3 bushel per acre, ending stocks would only be 136 million bushels next year, not the 285 million that the USDA gave us on Friday. And don't forget that was also based on a 150 million carry-in from this year, a number that many think is overstated. That's why Nov 14 beans closed at almost $2/bushel more than the USDA's forecast average price for 2014/15 of $9.65/bushel tonight. Mar 14 Soybeans closed at $13.86 1/2, up 15 3/4 cents; May 14 Soybeans closed at $13.75, up 14 3/4 cents; Mar 14 Soybean Meal closed at $465.90, up $10.10; Mar 14 Soybean Oil closed at 40.75, down 20 points.

Corn: The corn market closed a cent or so lower. Weekly export inspections came in at 791,947 MT (31.17 million bushels), pretty much exactly what the market expected. "Cumulative inspections for the marketing year are now approximately 667 million bushels. To keep pace with the USDA's 2013/14 corn export estimate of 1.6 billion bushels, weekly inspections will need to average 34.56 million bushels (or 878,000 MT) over the final 27 weeks of the marketing year," noted Benson Quinn Commodities. The trade is also looking at last week's USDA numbers and thinking, record 165.3 bu/acre yields, oh really? It would take a near perfect growing season to hit that target. The USDA's estimated average price for corn in 2014/15 of $3.90/bushel is around 75 cents below the current price of the Dec 14 future. The market currently clearly thinks that production has more potential to be lower in the US this year than it does to be higher. As Bruce Forsyth would say "it's a king, what do you want to do? Higher or lower than a king?" Planting of the US 2014 corn crop is actually already underway in Texas, at 3% done as of 23 Feb, which is in line with the 5-year average. Turmoil in Ukraine is supportive, at least in the short-term. They have been majoring on corn exports for some time. Even though APK Inform said that Ukraine sea ports shipped 704.5 MMT of grain last week (with 86% of that corn), the trade is thinking that some buyers will shy away from booking Ukraine corn for the time being until the political situation calms down. That potentially provides a small window of opportunity for US corn in the near term to some homes. Reuters reported that Russian corn prices are up "at least" $5/tonne in the past week as buyers look to sellers there as an alternative to Ukraine. The Russian Ministry say that Russia has exported 2.3 MMT of corn so far this season, and traders estimate that they have the potential to ship around 1 MMT more. Mar 14 Corn closed at $4.51 1/2, down 1 1/2 cents; May 14 Corn closed at $4.57 3/4, down 1 1/4 cents.

Wheat: The wheat market closed mostly higher with the exception of front month Mar 14 Minneapolis wheat. Fund money was seen further covering in it's short position in Chicago wheat, buying an estimated net 4,000 contracts on the day. Weekly export inspections of 427,239 MT were in line with expectations. That was up versus 306,707 MT last week, but down on 576,562 MT a year ago. Weather concerns remain for US winter wheat. "The Midwest winter may go down as one of the coldest on record, as abnormal cold weather dominated also in January and most of December," said Martell Crop Projections. "Brutally cold temperatures have redeveloped in the US heartland, after a brief warm spell last week. The jet stream this week will carve out a deep cold trough over North America, delivering a fresh batch of d Arctic air to the Midwest and Great Plains. Midwest temperatures are predicted to plummet to -15 F to -20 F Wednesday and Friday mornings, some 25-30 F below normal," they said. "With cold dry polar air dominating the heartland, the precipitation forecast indicates mostly below-average precipitation this week. Hard red wheat continues to struggle from winter drought not expecting significant moisture this week," they added. In contrast, conditions in Europe are positively benign, aside from some excessive wetness in one or two places. Generally though, the worst affected areas of the UK and France aren't high producing wheat regions. Demand for EU wheat remains solid. The German Stats Office said that the country had exported 7.6 MMT of grain between July–Dec, up 17% versus 6.5 MMT a year ago. Reuters report one Canadian analyst forecasting all wheat plantings there to fall by 10% this year to 23.3 million. That's below Ag Canada's estimate of 24.7 million acres released last week. The Canadian railway system is said to be "overwhelmed" by the logistics of attempting to transport last year's record wheat and canola crops to the ports for export. Mar 14 CBOT Wheat closed at $6.17 3/4, up 8 cents; Mar 14 KCBT Wheat closed at $6.89, up 6 1/4 cents; Mar 14 MGEX Wheat closed at $6.62 3/4, down 1 1/2 cents.