Chicago Grains Scream Higher To Start The Week - Tears Expected Soon!

10/08/15 -- Soycomplex: Beans closed with large gains to start the week, ending at the best levels on a front month in four weeks as weather forecasts pencilled in a hotter and drier look for the 7-10 day period. August is of course long-regarded as the key yield-determining month for beans. The trade is also getting excited ahead of Wednesday's USDA report, with a Reuters survey estimating that they could cut 1.2 million acres off this year's planted area, and drop yields from last month's 46 bu/acre to 44.7 bu/acre. Roach Ag Marketing estimated plantings 2 million acres below the USDA's current 85.1 million. Meanwhile, demand from China remains very strong. Chinese customs data shows that the country imported a record 9.50 MMT of beans in July, up 17.4% from a month previously and up 27% from a year ago. That takes Jan/Jul imports to 44.66 MMT, up 7.1% from a year ago. CNGOIC estimated China’s Aug/Sep soybean imports at 13.0 MMT versus 11.06 MMT in the same period in 2014. Most of that is coming/will come from South America though. South Korea's NOFI bought 55,000 MT of South American soymeal for December shipment, and the country's KFA bought 52,000 MT of similar for January shipment. Weekly US export inspections came in at 152,000 MT. None of that was destined for China. Still, total marketing year shipments to all destinations are up 14% from the previous year. The USDA left crop ratings unchanged on a week ago at 63% good to excellent, with a small one point move from the former into the latter. They have 88% of the crop blooming versus 91% on average and 69% setting pods versus 66% on average. Aug 15 Soybeans closed at $10.44 3/4, up 35 3/4 cents; Nov 15 Soybeans closed at $9.94 1/2, up 31 1/4 cents; Aug 15 Soybean Meal closed at $362.50, up $9.90; Aug 15 Soybean Oil closed at 30.41, up 38 points. A very strong close like this leaves the market ripe for some "Turnaround Tuesday" trade tomorrow. I'd expect the South American producer to view this as a selling opportunity even if their North American counterpart doesn't concur.

Corn: The corn market closed around 17 cents higher, and ended pretty much on session highs. The same reasons that beans posted strong gains are behind the corn move, even if it is widely acknowledged that August is more important a month for beans than corn. "Midwest growing conditions were favourable for corn and soybean development in July, but weather conditions have become hotter and drier in August. The Great Lakes region has received sub-par rainfall in the past 3 weeks, that along with hotter temperatures is stressing corn and soybeans. Illinois, the 2nd leading corn state, has grown steadily drier, along with Indiana, Ohio, Michigan and Wisconsin," said Martell Crop Projections. The trade is expecting some friendlier numbers from the USDA on Wednesday, with reduced US corn acres and yields. Roach Ag Marketing estimated plantings at 88.2 million acres versus the USDA’s forecast of 88.897 million in June. A Bloomberg survey has yields at an average 164.7 bu/acre versus 166.8 bu/acre a month ago. A Reuters survey came in slightly lower at 164.5 bu/acre. Fund money will have been a featured buyer today, but their recent track record on anticipating which way the market moves next has been pretty poor of late, will they live to regret today's purchases again on Wednesday night? Weekly export inspections came in at 804,981 MT, down 12.5% from the previous week. After the close the USDA left corn crop ratings unchanged at 70% good to excellent, where a one point drop was anticipated according to a Bloomberg survey. Silking was at 96%, in line with normal. They said that 50% of the crop was at the dough stage, one point ahead of normal. Elsewhere, the crop in Europe remains in trouble with various analysts queuing up to slash production forecasts. One today was Strategie Grains who cut their estimate to 60 MMT versus the USDA's July forecast of 65.8 MMT. The French Ag Ministry released their first forecast for corn production there this year, pegging the (corn grown for grain) crop at only 13.5 MMT, down 28% year-on-year. There's a school of thought that it could end up even lower than that if French farmers decide what was intended for grain isn't really up to the job, and anticipating a forage shortage this year, go for the whole crop silage option. Israel tendered for up to 110 TMT of optional origin corn for Oct/Dec shipment. Sep 15 Corn closed at $3.90 1/4, up 17 1/2 cents; Dec 15 Corn closed at $4.01, up 17 1/4 cents.

Wheat: The wheat market closed with fairly decent (some would say reluctant) gains, being given a leg up by corn and beans. Weekly export inspections of 365,986 MT were up 15% on a week ago, but 33% down on the same week in 2014. Saudi Arabia bought 505,000 MT of EU, North American, South American, Australian and/or Canadian hard wheat for Sep/Nov shipment. Jordan are in the market for 100,000 MT of hard wheat of optional origin. The USDA said that the 2015 US winter wheat harvest is now 97% done versus 90% on average at this time. Spring wheat harvesting is 28% done versus 20% on average. Spring wheat crop conditions were cut one point to 69% good to excellent. Unchanged at 70% is what the market was expecting. Unlike corn, the French wheat harvest looks like being record high this year, with the Ag Ministry there increasing their forecast from the 37.9 MMT estimated in June to a record 39.3 MMT, up 4.7% on a year ago. Ukraine said that their 2015 wheat harvest was 97% complete producing a crop of 25.8 MMT in bunker weight so far. The USDA currently have that forecast at 24 MMT in clean weight. Russia say that they've harvested 44% of their 2015 wheat crop producing 39.6 MMT to date. Average yields are said to be down 7% at 3.34 MT/ha. Whilst yields in the well-advanced southern areas are up, further north they are considerably lower versus a year ago. Grain yields in the Volga are down nearly 15% and the Central region is seeing yields 17.5% below year ago levels. Russia's grain exports are well below those of a year ago so far, down nearly 40% at 2.29 MMT according to data from the Ag Ministry. That may change as and when they make changes to the new floating export duty on wheat. A recent renewed bout of rouble weakness has seen this rise from only "token" levels to around $7.50/tonne. The Russian PM Dmitry Medvedev is said to have given ministers and agricultural leaders until Sep 10 to come up with some revised proposals, according to a report on Bloomberg. Unlike corn and beans, the trade is thinking that the USDA will raise US 2015/16 production and carryout estimates in Wednesday's report. For all wheat production the average estimate is 2.153 billion bushels, from within a range of estimates of 2.075–2.210 billion. The USDA July estimate was 2.148 billion and US 2014/15 all wheat production was 2.026 billion. US ending stocks in 2015/16 are seen at 858 million bushels, from a range of estimates of 742-913 million and the USDA July estimate of 842 million. Sep 15 CBOT Wheat closed at $5.25 1/2, up 15 cents; Sep 15 KCBT Wheat closed at $5.04 1/2, up 11 1/2 cents; Sep 15 MGEX Wheat closed at $5.34 1/4, up 9 1/4 cents.

Comment: All I can say is that the trade better not be disappointed that Wednesday's USDA report isn't as friendly as it hopes. If it is that could spark a rout, with fund money left holding the baby again. I'm not saying that final US corn and soybean production won't end up where the trade thinks it will, I just don't see them doing anything too drastic - not in August. That isn't their normal style. As mentioned last week the USDA are frequently behind the pace when it comes to either increased, or decreased, yield potential. This time last year, for all the talk then of 170+ bu/acre yields (which we now know was correct talk) the USDA only raised potential from 165.3 bu/acre in July to 167.4 bu/acre in Aug.