Is There Any Light At The End Of The Tunnel?
Just as markets can't, and don't, carry on going up forever, falling markets also have to bottom out sometime. Of course, a bit like predicting the top of the market, calling the bottom is also extremely difficult if not impossible.
The market WILL turn, that is a fact. But will it be tomorrow, next week, next month or next year?
There could be a bit more bearish news to get out of the way yet.
Early reports suggest that US corn yields are coming in significantly higher than anticipated. Indeed many producers are astounded at how good the corn yield is and wonder, where did this yield come from?
The answer seems to be a lack of heat stress throughout the growing season. The cool August (temps in the 70's/80's) was perfect for corn, and allowed it to reach maturity (although behind normal pace) without the devastating heat that so often causes that crop to be lost.
The subsequent lack of frost in late developing northern areas was the perfect recipe to finish up the season.
Given the large yields (much better than expected) almost across the entire country, its likely corn yields will approach or surpass the record high yield of 160 bu/acre by the time USDA finishes up their numbers in January. Overall, this is bearish corn and with the brunt of the harvest ahead, corn may continue to struggle with the large yields being harvested.
Bean yields haven't been so impressive. That could lead to another cut in soybean yields in future USDA reports.
Overall, the bearish news might be just about all in the corn market (and particularly in the soybean market), with the final bearish news likely to be the much larger than expected corn crop. Once the world knows how big that harvest will be, we may finally bottom the corn market (and all other commodities with it). Mark your calendar for the November crop report as that might very well mark the lows for the corn, soybean, and wheat market.
Beans and corn traditionally bottom out around October, it's harvest time so there's no great surprise there. Whether tradition counts for anything in the present scenario only time will tell.
Historic Corn Chart
Historic Soybean Chart
Informa ups US corn acreage estimate
Informa Economics on Thursday forecast this year's U.S. corn acreage at 87.2 million, above the U.S. Department of Agriculture's current outlook for 86.0 million acres.
The also estimated 2008 soybean acreage in the United States at 73.3 million, up 2 million acres from the company's previous estimate of 71.3 million. However, Informa's soy acreage number was below the U.S. Department of Agriculture's forecast for 74.8 million.
Chicago closing comments
Corn closed around 6-7c lower, although it was down considerably more at one stage. An improved weather outlook for the week ahead means that US farmers will be able to crack on a pace with plantings.
One analyst said that given completed plantings rose last week from 27% to 51% by Sunday, according to the U.S. Department of Agriculture, drier weather would allow growers to make more significant headway.
"If they did 24% more last week, they'll do 30% this week," he said. "They're going to catch up."
Soggy weather has been a bullish influence on corn for weeks, analysts said. Traders and analysts said that after trading mostly higher on weather for weeks, the market was in a wait-and-see mode, and some traders holding long positions were getting anxious.
By contrast beans closed around 35-40c up supported by the same old news. Argentina & crude oil. Crude hit record highs late & beans went with it for the ride. The improved weather outlook this week for the midwest is also seen as a little bearish for beans.
The trade has conveniently forgotton the massive switch back into beans this year and the fact that at some stage the Argy dispute will get resolved. Export prospects for the US won't look quite so rosy then, but hey, we can always invent a weather market!
Wheat was down around 8-9c in tandem with corn continuing its downwards slide as the northern hemisphere harvest approaches with few signs of any significant problems.
"There's very little new news for the wheat traders to look at," said Brian Hoops, president of Midwest Market Solutions. "They see corn falling, and they sell wheat along with it."
Overnight developments
Corn futures are up 4-5c overnight after the USDA planting progress report showed 27% of the new corn crop was in the ground as of Sunday, well under the 45% planted a year ago.
"It's still of a concern," Simon Roberts, head of agricultural commodities at Australia and New Zealand Banking Group Ltd., said by phone from Sydney today. "But there is the general perception that like last year, if there are any breaks in the weather you'll see a rapid planting progress."
Dale Durchholz, an analyst at AgriVisor in Bloomington, Ill., cautioned against reading much into the numbers because plantings were unusually early between 2004 and 2006. The percentage planted nationwide in those three years was 84%, 79% and 70%, respectively, he said.
"You've got to step back and see that made some kind of a distortion," he said.
Soybean futures are around 11c firmer this morning. Soybean planting was 5% complete as of Sunday, below the average of 14%,according to the USDA. Analysts' expectations were for 7% to 9% complete.
Market participants are closely watching a meeting in Argentina, the world's second-largest corn exporter and the third-biggest in soybeans, today to resolve a dispute between farmers and the government over taxes that disrupted crop exports.
The U.S. has a large amount of unshipped soybean export sales on the books that would be susceptible to cancellation if the dispute is resolved soon.
Wheat is little changed overnight after the USDA report threw up little in the way of a surprise.
The USDA said 47% of the winter wheat crop was rated good to excellent, up from 46% last week and 57% a year ago. Traders had expected the good-to-excellent rating to improve by 1 to 2 percentage points from a week ago.
Durchholz said that as with the other crops' progress reports, there was little in the winter wheat progress that was likely to move the market.
Overnight market developments
Corn is up around 3-5c overnight on ideas that the ongoing cool & wet conditions over much of the US will continue to hamper planting progress. It seems widely accepted that corn planted after the middle of May is unlikely to yield at its full potential, and with corn acres already called substantially lower in 2008 this should continue to support prices.
Whilst corn does have fundamental & legitimate reasons to rally, I for one don't buy the strength of soybeans at the moment. Nearby beans were up around 22c last night, and are up another 5-6c overnight on ideas that the Argentine strike may resume next week. Now that's all well and good, but why was November up 25c last night and a further 3 1/2c this morning? Exactly how long do the expect the strike to go on?! Fundamentally we have a lot more acres this year according to the USDA's planting intentions report, PLUS the potential for corn that couldn't get in on time also being switched to beans. With the Argy bean harvest still only 50% done and a deal having now been reached on the wheat & beef side I wouldn't be surprised to see the truce extended.
Wheat is up 7c overnight on spillover strength from beans & corn. Overall the US wheat crop is a pretty mixed bag at the moment. I have read some reports of winter wheat fields that haven't really taken being ploughed up & replanted with corn. With corn at $6/bushel I guess that the economics do stack up. Whilst this could be called mildly friendly for US wheat, there are of course still some potentially huge wheat crops to come from all over the world.
I'd still be friendly corn & bearish beans and wheat.
Argentine Soybean Harvest 50% Complete
Argentina's soybean harvest has reached about 50 percent. First-crop soybeans are showing signs of good to very good yields. Second-crop soybeans were much more negatively affected by dry conditions throughout the growing season, and reported yields are lower as a result, according to a U.S. Department of Agriculture attache report posted Wednesday on the Foreign Agricultural Services Web site.
Post contacts estimate that by the end of this week, around 57 percent of the entire soybean crop will be harvested. Last year, the harvest advance had reached about 50 percent for this time of year.
The post says the USDA maintains its 2007/08 soybean forecast at 47.5 million tons. This year's sunflower crop, which has now been completely harvested, fared very well and had above average yields for the main sunflower growing regions. Post maintains USDA's forecast for sunflowerseed production at 4.5 million tons on a harvested area of 2.7 million hectares.
Post USDA: "So where do we go from here?"
Possibly more than any other plantings report in memory the 2008 intentions report released a short while ago was expected to be a signal indicator for the grain trade.
The markets have been obsessing over the “battle of acres” in the United States — the world’s top grain exporter — given record high grain prices over the past year fueled by world crop shortages, exploding biofuels production and soaring export demand, all driving food inflation.
So today’s report will likely light some more fireworks, especially after the big sell-off in Chicago Board of Trade markets on Friday as traders seemed unwilling to hold long positions going into the report. As if the grain market needs more fireworks given the unprecedented rallies and volatility seen in Q1 2008, the last day of the quarter should make sure the grain trade closes their March 31 books with a bang.
When the dust settles after the report, the grain market will settle into the more usual uncertainty offered by its traditional most influential player: Mother Nature. If the Midwest stays cool and wet in April, there’s always the possibility for some intended corn acres getting switched to soybeans, a later planted crop. If, of course, US farmers can actually procure the seed.
I pointed out on this blog last week that there has been a strong trend over the last few years for the USDA to up it's final acreage figure for corn by around 1.5m acres between it's March & it's June report. Whether that will happen this year is anybody's guess.
So for now, we are expecting beans well down this afternoon (Mar 1st stocks were also higher than expected) and corn substantially higher (Mar 1st stocks were lower than expected). How long these two can move in opposite directions is also anybodys guess. They have already been posturing this way during the last few weeks with corn closing steady 5-6c higher on Friday despite beans dropping 50-60c.
Wheat is also an interesting conundrum all of it's own. The acreage & stocks figures here were also a little higher than anticipated and it too is called modestly lower this afternoon. However, unlike beans & corn, for wheat the Americas aren't the only shops in town.
The European market doesn't seem to like today's figures too much, French milling wheat futures which were bumbling along slightly lower pre-USDA have dropped sharply EUR11.25 lower as I type. London feed wheat is down around £3-4. Rapeseed futures too have suddenly plunged EUR16.
I expect to see wheat end much lower tonight than the 5-10c lower currently being touted around. Soybeans are likely to flirt with limit down at some point, and quite likely to end there I'd guess unless corn can generate some spillover strength.
Some early reports are suggesting corn could hit limit up. Corn limit up, soybeans limit down in the same session, not sure if we've ever seen that before. Tonight could be the night.
Early Call On Chicago
Corn Called Up 20-30c, Soy Dn 40-50c, Wheat Dn 5-10c.
U.S. farmers intend to plant 74.8 million acres of soybeans this spring, an 18 percent increase, lured by sky-high market prices, while cutting back by 8 percent on ethanol-darling corn, the government said on Monday.
The soybean crop could total 3.1 billion bushels, the third largest on record, and corn (maize) plantings of 86 million acres could yield 12.2 billion bushels, the No. 2 crop, based on the Agriculture Department's projected yields and the usual amount of shrinkage from plantings to harvested area.
Wheat plantings of 63.8 million acres, up 6 percent, could produce a crop of 2.3 billion bushels. USDA said cotton plantings would tumble by 13 percent, to 9.39 million acres, the smallest plantings since 1983.
Brazil New Soy Crop 62% Sold - AgRural
Brazil's 2007-08 soy crop is 62% sold as of March 24, farm consultancy AgRural said Tuesday.
At the same time last year 51% of the crop had been sold.
No. 1 soy producer Mato Grosso has 80% of its soy crop sold compared with 72% last year. Parana, the No. 2 producer, has sold 53% of its crop compared with 41% last March, and Rio Grande do Sul, the No. 3 producer, has sold 40% compared with 23% last year.
We're already taking 2/3rds of their production what more do they want?
The SoyMor Biodiesel plant in Glenville, Minnesota, is the most recent facility of its kind to go dark in the face of tough economic times. A notice on the company's web site cited the high cost of soybean oil as the reason for the, hopefully, temporary shut-down.
Myke Feinman is editor of the Biofuels Journal in Decatur, Illinois. He told Brownfield what happened to SoyMor Biodiesel isn't an isolated incident. "It's a nationwide problem for the biodiesel industry," Feinman said. "The feedstocks are the majority of the costs for those plants and the costs of those feedstocks have been very high because the cost of soybeans has been so high and soybean oil has also been high."
In the meantime, the National Biodiesel Board recently formed a Sustainability Task Force aimed at keeping the industry viable. And it's worth noting that soybeans and soy oil prices have both fallen from recent highs, including a limit down move for the entire soy complex on Monday.
But Feinman warned that for some biodiesel plants, relief can't come fast enough."So I just hope the biodiesel industry can weather this storm," Feinman said, "because they're struggling right now."
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