Floor Talk January 10 (Report Day)

[marketeye]

At the close:

The March corn futures contract closed 20 3/4 cents higher at $4.32. The March soybean futures contract settled 4 3/4 cents higher at $12.78. March wheat futures finished 15 cents lower at $5.69 per bushel. The March soymeal futures contract ended $0.70 per short ton lower at $413.60. The March soyoil futures settled $0.27 higher at $38.23.
In the outside markets, the NYMEX crude oil is $0.62 per barrel higher, the dollar is lower and the Dow Jones Industrials are 36points lower.

Mike

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At mid-session:

The March corn futures contract is trading 11cents higher at $4.23. The March soybean futures contract is trading 3 3/4 cents higher at $12.77. March wheat futures are 17 cents lower at $5.66 per bushel. The March soymeal futures contract is trading $2.30 per short ton higher at $416.60. The March soyoil futures are trading $0.12 lower at $37.84.
In the outside markets, the Brent crude oil is $0.81 per barrel higher, the dollar is lower and the Dow Jones Industrials are 35 points lower.

Mike

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USDA SAYS:

Corn Production= `13.925 billion bushels

Soybean Production=3.28 billion bushels

2013 Ending Stocks:

Corn=1.631 billion bushels

 Soybeans=150 million

U.S. Stockpiles as of Dec. 1

All within trade ranges.

Corn=10.4 billion bushels, up 30% from a year ago.

Soybeans=2.15 billion bushels, up 9% vs. this same time a year ago.

Wheat= 1.463 billion bushels, down 12% vs. a year ago.

After the report release, corn is trading 8 cents higher, soybeans are 10 cents higher but falling.

One trader sees the report as bullish for corn, bearish for beans.

TRADE REACTION:

Mike North, Sr. Risk Advisor for First Capital Ag, says the biggest surprise is the reduction in corn yield to 158.8…not what the world expected.  
"This came in concert with a 500,000 acreage increase.  Consequently, this reduces the supply by 64 million bu.  The second biggest surprise was feed usage.  To raise feed usage at this point seems a bit questionable.  Ultimately, they project feed usage will grow by 965 million bushels or 22% over last year.  The 138 million bushel decline in wheat feeding doesn’t explain it either.  Ending stocks, rather than being closer to 2 billion are now 1.631 billion.  The market has responded accordingly.  Soybeans fell mostly in line with expectations."

Sal Gilbertie, Teucrium Trading summarizes the report this way: "The surprise in the report is clearly in the corn sector, with large year-on-year increase in quarterly demand and an unexpected 1.6 bushel per acre reduction in yield resulting in a reduction of estimated corn ending stocks of nine percent. The increase demand is led by feed and ethanol. Clearly the trade expected neither the yield reduction nor the surprisingly reduced December 1, 2013 corn stocks number, which could result in some significant near-term short covering. Global corn usage estimates were raised again, indicating increased demand likely in response to the lower price of corn last year. Soybean data was largely as expected, with old crop soybeans remaining uncomfortably tight given apparent current global demand led by Chinese imports. Global wheat supply and demand are balanced overall. Overall, the report seems to confirm what many in the trade have been saying, that low prices are buying demand, especially in corn and soybeans. For the moment farmers around the globe are responding with adequate production. Focus will now turn toward South American weather and how it might affect the current harvest," Gilbertie says.
 
Jack Scoville, PRICE Futures Group vice-president, says the report is certainly helping the corn market.
"Bullish corn, the quarterly stocks and the ending stocks projections the opposite direction than all estimates and corn reacting accordingly.  It's very likely that we have seen a short term low there.  Beans bigger production went right to demand as expected nothing much there but not bearish, or not yet.  Wheat was bearish no doubt with reduced feed demand although exports went up a bit, some good news there.  All in all, maybe the grains bottom in here and we trade a little higher.  Beans might have trouble with rallies given South America which are big crops coming right at us," Scoville says.

Meanwhile, Alan Brugler, President of Brugler Marketing & Management LLC, sizes up the report like this: "Corn yield as expected at 158.8, matching the Brugler500 index projection based on final crop conditions ratings.  Demand continues stout at these bargain basement prices.

Wheat acreage smaller than expected for 2014, continues a pattern of trade over estimating winter wheat plantings."

Jason Roose, U.S. Commodities says the report is a clear signal to farmer-marketers. "These numbers are going to give the producer holding onto grain a big sigh of relief. We had a good crop, but it wasn't a great crop.

"We were heavily oversold going into the crop report. The trade was bracing for a very large nnumber, not only bigger yield, but stocks and heavy farmer selling," he adds. "Then, as you see the report, just like the last crop report, it just was not as bearish as the trade was expecting. In fact, this may even have a touch of bullishness to it, with lower yield and lower stocks."

Roose says had the corn production number for the 2013 crop been at or above 14 billion bushels, corn would be trading in the $3/bushel range. But, Friday's numbers give some hope that the $3s may not be a constant moving into spring. While there now will likely be more movement in either direction moving forward -- not just the mostly lower trend of the last few weeks -- the trading window won't be as wide-open as it has been in recent years. That will put a premium on farmer-marketing to capitalize on smaller rallies.

"The corn market is at fair value for what we know. On big breaks, wwe're going to see strong end-user buying, and we'll see exports pick up. That's why at these levels, it's probably vey good for our exports. If the market rallies too much, we will see aggressive farmer-marketing in the range where we are now," Roose says. "I think with these higher prices today, farmers are going to be watching 10-cent moves rather than 50-cent moves to do some marketing, and I think that's why good, solid marketing this year's going to be more important than in the last few years," Roose says.

Mike

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At 9:40am:

Soybeans have jumped up 16¢, while corn is still lower.

Mike

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At 8am:

--USDA announces Friday that China has bought 216,000 tons of U.S. soybeans for 2014-15 delivery.

--USDA announces Friday that an unknown has bought 180,000 tons of U.S. corn for 2013-14 delivery.

--USDA announces Friday that Venezuela bought 125,700 tons of U.S. wheat.

Meanwhile, Jeff Coleman, The Trean Group analyst and CME Group floor trader previews today's trade like this: "We’ve seen some heavy selling this week in corn as traders seem wary of the numbers due to be released at 11:00 AM CST from the USDA. Corn crop estimates seem to be pretty tight with most experts shooting for a 13.8-13.95 billion bushel crop for 2013. March soybean futures are 3 cents higher this morning as traders are squaring up positions in front of the number. March Chicago wheat futures are 1.5 cents lower also extending 3 days of losses as we near the close of the overnight session as traders are expecting little change in the crop number estimates due out today," he says.

Mike

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At 6:30am:

Early calls: Corn is seen 1-2 cents lower, soybeans 3-5 cents higher, and wheat 2-4 cents lower. Today's WASDE Report will be released at 11am CST. We will have the report data and trader reaction here in Marketing Talk.

Trackers:
Overnight grain, soybean markets=Trading mostly lower.
Brent Crude Oil=$0.35 per barrel higher.
Dollar=Higher.

Wall Street=Seen higher, ahead of U.S. Jobs Report.

World Markets=Asia/Pacific stocks were lower, Europe stocks higher.

More in a minute,

Mike

[marketeye]

So, what do you think? With all of this bearish pre-report talk do you think everyone rushes to one side of the boat and the USDA finds some bullish nuggets in its data? Or, will this report go the way of the bears? It appears that any chance of a friendly report lies in the soybean camp.

Mike

[giolucas]

With weather and the beginning of South America harvesting and the fact that most analysts are bearish this report might send us on a rollercoaster.  I am short but will adjust if the report gives us a big surprise.

[sw363535]

I did notice how much of the discussion was based on historic probability of usda reports compared to usda reports.  Which usually means "we have nothing else to base an opinion on".  

The trend is down so who is going to buck that?  With two years of drought shorted production supplies should be up.  And cattle being scarce, obviously shown by live prices, placements are going to be shorter than everyone would like.

But overall I am still impressed how strong demand is at these prices.

The term "exports" got mentioned at least once,  sheepishly.   They are all running well above annual usda expectations.  Beans exports in the report will need raised  --- they are already 50 over the usda annual prediction ----- record levels for the first 20 weeks of the year.

Corn and wheat are running above expectations as well.

Will be interesting to see how usda " handles" those issues.

[ECIN]

For the most part - I'm 99.9 precent wrong on this marketing stuff - so this will probably be no defferent - but think it will ( the report ) will be a non event - How long have all the PRO's been say'n The corn will be better - on higher yields - Yet the price on corn has traded sideways for better than a month with everybody and there brother on the say boat - well all but MT1 lol

Wouldn't be surprised to see corn up after  they Drop the Bomb

[luisvieira]

From AgroSouth News:

Argentina’s Center of Cereal Exporters has reached an agreement with the Argentine government in order to sell nearly US$ 600 million in grains just this week. However, even if these sales are confirmed, Argentinean farmers would be stocking at least approximately nine million tons of soybeans or US$ 4.6 billion, according to the explanation of Pablo Fraga, a market analyst at BLD in Rosario.

Local farmers expect that they potentially can win more money just selling the soybeans when the official value of the Argentinean Peso reaches its “real” market value when compared to the US dollar. “Nobody wants to sell beans if they know that the dollar will be worthy more than today’s value”, told Fraga in an e-mail interview to AgroSouth.

The current value of soybeans in Argentina is US$ 514/ton at the port of Rosario. Retentions of 35 percent are paid and transportation costs make the local farmers receive just U$ 322/ton.  The Argentine government has urged local farmers to sell its stocks of both soybeans and corn.

[sw363535]

Luis,

I can see why the government wants them to sell.  That is a big tax number.

Nearly 38% of value in taxes and transportation fees??

[Longcreekfarms]

So the Argentine farmer gets 9.66 a bushel and has to truck it x amount of miles, all while their currency is expected to be more valuable in the near future. Sounds like the government is hoping to hold that currency and make some money on their 35% retention.
Thanks Luis. I think I would be investing in grain storage and padlocks if I was an Argentina farmer!

[sw363535]

Nearly as disturbing as the difference in price of a JD tractor in brazil compared to one in the US.

[sw363535]

A metric ton is bigger.   I think it would be $8.85 per bu compared with $14.12 at the port