CBOT Closing Comments
Soybeans
March soybean futures closed at USD9.24 ½, down 5 cents, March soymeal futures at USD270.60, down USD3.80, and March soy oil futures at 38.38, up 43 points. USDA lowered US soybean ending stocks by more than expected to 210 million bushels from last month's 245 million bushels. Output in Brazil this year was raised by 1 MMt to a record 66 MMT however. "Although a record South American harvest is expected to reach the market in coming weeks, tight old-crop South American supplies resulting from last year's historic drought in Argentina continue to support U.S. exports," they said.
Corn
March corn futures closed at USD3.58 ½, up 2 ½ cents, and May corn futures at USD3.70 ¼, up 2 ¾ cents. The USDA lowered corn ending stocks by 95 million bushels by increasing feed, seed and industrial usage. "Corn used for ethanol is projected 100 million bushels higher reflecting the latest ethanol production data from the Energy Information Agency," they said. Corn exports for 2009/10 were projected 50 million bushels lower on increased competition from Argentina, where production was raised from 15 MMT to 17.2 MMT.
Wheat
March CBOT wheat futures finished the day at USD4.82 ¼, down 1 ¾ cents, March KCBT wheat futures at USD4.90, down 5 ½ cents, and March MGEX wheat futures at USD5.05 ¾, down 6 cents. US wheat ending stocks increased 5 million bushels from last month to 981 million, whereas a small reduction had been expected. Global wheat supplies for 2009/10 were projected 1.4 MMT higher, reflecting production increases for Argentina and Ukraine. Global wheat consumption for 2009/10 was raised 1.1 MMT, higher consumption offset most of this month’s increase in world production, with projected global ending stocks rising 0.3 MMT.
Corn Ethanol Production In The US Gets A Boost
News coming from the US Environmental Protection Agency appears to potentially open the door for large-scale increases in corn ethanol production in the US.
Only two months ago the EPA frustrated US farmers and the ethanol industry bully boys by refusing to bow to pressure and increase the maximum inclusion rate of ethanol in gasoline from 10% to 15%. The EPA said it needed more time to assess the effect of an increase on the environment.
In 2007 the Bush administration passed a law calling for annual biofuel production in the US to reach 36 billion gallons of biofuels, to be blended into the US gasoline supply, by 2022. An emissions reduction that they said would be like taking 27 million cars off the road.
The law currently allows the production of up to 15 billion gallons per year, which the industry is already close to reaching. Ethanol production from corn beyond that would have to be subject to a requirement that its "lifecycle" - from growing the corn to producing the biofuel - reduces greenhouse gas emissions at least 20 percent more than the production of gasoline.
The EPA are now saying that they've had a bit of a rethink and lo and behold it does. They will now be under strong pressure to relent on the so-called E15 blend too. If you've GOT to produce 36 billion gallons, then you've GOT to up the inclusion rate right?
That potentially leaves US ethanol producers free to ramp up production, which will require them taking an even larger share of US farmers' corn production than the one third of the 334 MMT currently being grown there that they now use.
That's good news for US corn farmers, although it potentially opens up a whole new can of worms elsewhere. Like what are the environmental implications of two thirds of all the corn grown in the US being used to produce biofuels? What are the knock on effects for the production of other crops there? And if most of the corn grown in the US goes for industrial use, driving global prices higher (they currently produce over 40% of the world's corn), then who's to say that Brazil won't be tempted to steal a few more million acres of rain forest to grow corn on?
Chicago Corn: Review Of The Week
May corn closed at $4.14, up 9 ¼ cents on the day and 7 ¾ higher on the week. Rising crude oil, a weak dollar and planting delays in the US were the main concerns for the corn market this week.
Crude oil closed at $58.46/barrel, it's highest weekly close since late November. Ethanol closed higher Friday at 167.5 up 2.2 cents. Meanwhile the dollar shed around 3 cents against the pound and 3 ½ against the dollar over the course of the week.
US planting progress from the USDA due Monday night is expected to show around 45-50% complete, up from 33% a week ago, but still well behind the five year average of 72% done.
The USDA is also out Tuesday with revised production & stocks estimates. Little or no change is expected for old crop corn ending stocks, but the existing weather problems are anticipated reducing 2009/10 stocks to 1.383 billion bushels, in a range of 1.129 - 1.720 billion, compared to 2008/09 ending stocks of around 1.7 billion.
The USDA confirmed 296,000 MT of US corn sold to "unknown" during the session Friday split 176,000 MT old crop and 120,000 MT new crop.
Corn prices have risen sharply in the past few weeks from mid-April lows, and seem to be re-attaching themselves to the energy complex:
CBOT Closing Comments
Soybeans
May soybeans finished at $9.11, up 34 ½ cents; November soybeans finished at $8.50 ½, up 26 ¾ cents; May soy meal finished at $288.40, up $11.70. Beans gained as the dollar weakened, crude rose and equities rose. US soybeans inspected for export were near 22.42 million bushels, in line with expectations. The primary destination for the soybeans was China. Fund short-covering was a feature ahead of tomorrow's meeting between the government and farm leaders in Argentina. Various private crop production estimates emerging from South America suggest that official output numbers are too high. Brazil will yield around 54-55mmt and Argentina around 40-41mmt, they say, compared to official estimates of 57-58mmt and 42-44mmt.
Corn
May corn settled at $3.91 ½, up 3 cents. Corn benefited from outside influences such as equities, a weak dollar and firmer crude oil despite OPEC leaving output unchanged at the weekend. Weekly export inspections were lower than expected, at 29.039 million bushels, which conspired to make corn the weakest leg of the complex today. The jury is still out on how much corn will be seeded by US farmers this spring, with conflicting numbers emerging from Allendale & Informa Friday. Until that issue becomes clearer sideways trade may be the order of the day.
Wheat
May CBOT wheat closed at $5.44 ¼, up 26 cents. As with corn & soybeans a weaker dollar and firmer crude oil and the Dow Jones IA lent support. Concern for the welfare of US wheat on the Plains also remains after QT Weather reported the driest Jan/Feb since records began in 1895. Wheat rated good/excellent fell 3 points in the top US wheat producing state of Kansas last week, according to the USDA. Funds still hold a large 41,000 short position on CBOT wheat which leaves the market vulnerable to a short-covering rally if some stop-losses get triggered. May closed just half a cent short of a one-month high of $5.45/bushel.
CBOT Closing Comments
Corn
Corn closed a mixed session lower, with March corn ending down 3 1/2 cents to $3.58 1/4 per bushel. Demand isn't great, although South Korea bought 165,000mt of US corn overnight. Rain in Argentina is seen as beneficial, but quantifiying exactly how much good it will do is still a contencious issue.
Soybeans
Beans closed slightly higher with March ending up 3 1/2 cents a bushel at $9.49 1/2, still well off the day's highs of $9.68. The weather in Argentina has certainly improved, but it is still difficult to say how much this has help the soybean crop there, I guess we can at least say more than it has aided the corn crop. Still production looks like being well down on the originally anticipated 50mmt.
Wheat
March wheat closed down 10 1/4 cents at $5.42 1/4 a bushel, frustrated by news that the US had picked up little interest in export tenders today. Egypt bought mostly French wheat, and Pakistan bought optional origin wheat. Japan will almost certainly buy US wheat tomorrow, but that is normally a given. Korea at least bought a bit of US wheat also, but these trades highlight how very competitive the world export market is at the moment. Chinese and US drought issues got pushed to the background, but may emerge sometime soon.
CBOT Corn closes higher despite bearish USDA numbers
The corn market shrugged off the USDA coming out with quite bearish 2008 US production numbers of 12.288 billion bushels & a yield of 155 bu/acre, the second-highest on record. Both numbers were well above trade estimates, yet the corn complex managed to throw off it's initial lower opening to close higher.
September corn closed up 11 3/4 cents to $5.09 per bushel.
Many traders feel USDA missed the mark and have overstated yield and production and are "selling the rumour, and buying the fact."
After dropping $3/bushel from recent record highs breaking through and staying below $5 is proving a difficult nut to crack.
As with soybeans, the trade is concious that we have a late maturing crop here & that is going to leave it vulnerable to early frosts, much more so than normal with crop development 2-3 weeks behind normal.
Friday CBOT Closing Comments: Corn
Corn stopped the rot closing around 4-6c higher despite a bearish slant to the USDA numbers.
For corn, the USDA estimated the U.S. 2007-08 carryout at 1.598 billion bushels, vs. its June estimate of 1.433 billion bushels, and the average trade estimate of 1.514 billion. For 2008-09, the USDA's corn carryout is pegged at 833 million bushels, vs. its June estimate of 673 million bushels, and the average trade estimate of 820 million bushels.
Almost as soon as it had been issued, the report was being dismissed as minor in comparison to the Aug 12 report which will more accurately reflect the impact of the recent Midwest flooding.
On the week as a whole cash US corn prices dropped a pretty steep 65 cents.
The last of nearly a dozen flooded navigational locks on the middle Mississippi River reopened to commercial traffic July 6, permitting a resumption of grain barge traffic to New Orleans-area export terminals.
