Floor Talk May 10
At the close:
The July futures corn contract settled 12 cents lower at $6.36. New-crop Dec. futures settled 12 cents lower at $5.29. The July soybean futures contract ended 9 cents lower at $13.99, new-crop Nov. soybeans finished 13 cents lower at $12.05. July wheat futures finished 19 cents lower at $7.04 per bushel. The July soymeal futures closed $6.40 per short ton lower at $406.80. The July soyoil futures ended $0.01 higher at $49.23.
In the outside markets, the NYMEX crude oil is $1.31 per barrel lower, the dollar is higher and the Dow Jones Industrials are 5 points lower.
USDA/WASDE Report Reaction:
Mike North, First Capital Ag's Sr. Risk Management Advisor, says the reports came in largely as expected.
Some of the highlights….
"Corn shows a production similar to what was delivered last May. With a 158 yield and “intended” plantings of 97.3 million acres, we expect a crop of 14.14 billion bushels. This will obviously be adjusted lower as we go forward given the late planting that we are experienced. Even as we do that, we have plenty of wiggle room in the balance sheet to accommodate a shrinking yield. Ending stocks are pegged at 2 billion bushels for starters. Feed use is being grown by 21% or 925 million bushels while wheat is seeing a decline in the same category of only 70 million bushels. At the same time, ethanol grind is estimated to grow at a rate of 5%, or 250 million bushels.
Exports in the 12/13 marketing year were also dropped to 750 million bu…reflecting the dismal export pace that continues to plague the market. World ending stocks numbers came up short of the average by 2 million metric tons. This will likely be a watch point as we enter the summer and yield expectations are adjusted.
Soybeans came with no change to old crop ending stocks. 13/14 stocks were 265 million bushels, 26 million higher than the average. The world ending stocks number for the same period was higher than the average guess by 4.4 million metric tons. This had an immediate impact on the market as prices plummeted 20 cents after the report’s release. With tight ending stocks expect that grain buyers will be again forced to increase basis levels to pry the remaining stocks out of farmer hands. During planting, this will be especially difficult.
With the report behind us, the market will be quick to return to trading weather and planting progress," he says.
--Jack Scoville, PRICE Futures Group vice-president, says the USDA Report is neutral.
"I think the report itself is sharply neutral, the market reaction is more exciting," he says. The reports are basically neutral when compared to expectations. None of the estimates are that far from trade average guesses. I have no problem with these numbers."
Scoville adds, "I think the selling in today's market is kind of buy the rumor and sell the fact in wheat and old crop corn and beans. New crop corn and beans finding selling on the news that USDA agrees with trade ideas that we can have big crops and carryout next year."
The markets will put some lows in today or next week, he says. "After all, we still have to plant and grow. But, weather next week looks to get a lot better and upside might be pretty limited too," Scoville says.
--Sal Gilbertie, Teucrium Trading Inc. analyst, says the report headline focus is naturally on the massive 2.0 billion bushel carry out projected for the coming corn crop year. "Huge increases in yield and harvested acres are assumed, but it’s very early to tell if these projections will hold since less than half of the corn crop is actually planted, most of these seeds are not yet in the ground."
Gilbertie adds, "Weather will determine planting progress, germination and pollination rates from this point forward, likely resulting in substantial price volatility from now until July for the corn markets."
Soybeans are a bit of a surprise, with 2013/14 crop year carry-out estimates increasing over 100% on huge yield increases and the assumption that demand for beans, while robust, will not keep pace with increasing supplies, Gilberties says. "Chinese demand and elasticity of all other global demand for price will keep soybean prices volatile as well. Wheat woes in the U.S. are offset by global production increases in almost every wheat producing region of the globe. This report is the first of many that will likely provide substantial opportunity for investors and traders following the grain sector."
Corn is down 9 cents, soybeans down a few cents, Nov beans down 12 cents.
U.S. 2012-13 Corn carryout= 759 mill. bu. vs. 754 market thoughts
2012-13 Soybean carryout= 125 mill. bu. vs. 124 analysts estimate
2012-13 Wheat carryout= 731 mill. bu. vs. 731 analysts estimates.
All Wheat Production 2.057 bill. bu. vs. the average estimate of 2.059 bill.
Corn is down 17 cents, Nov. soybeans are down 8 cents.
Overall, the report is a non-mover.
At the open:
The July futures corn contract opened 2 cents lower at $6.46. New-crop Dec. futures opened 3 cents lowerat $5.38. The July soybean futures contract opened 1/2 of a cent higher at $14.09, new-crop Nov. soybeans opened 2 cents lower at $12.16. July wheat futures opened 6 cents lower at $7.17 per bushel. The July soymeal futures opened $1.20 per short ton higher at $414.10. The July soyoil futures opened $0.11 lower at $49.11.
In the outside markets, the NYMEX crude oil is $1.87 per barrel lower, the dollar is higher and the Dow Jones Industrials are 14 points higher.
--Jeff Coleman, Trean Group analyst, says that all eyes and ears will be on Ben Bernake’s speech at the Chicago Fed Banking Conference scheduled to begin at 9:30 AM EST.
--He also says, in his morning wire, that there is a belief in the market that this year's U.S. corn harvest will approach record numbers.
--S. Korea feeedmiller has bought 400,000 tons of corn, wheat in the last three day. The kicker is that very little is of U.S. origin. It's really a sign of the times.
Early calls: Corn is seen 1-2 cents lower, soybeans 2-4 cents higher, and wheat 6-8 cents lower.
Overnight grain, soybean markets=Trading mostly lower.
Crude Oil=$0.89 per barrel lower.
Wall Street=Seen opening higher, as overseas markets rally.
World=Asia/Pacific stocks were higher and Europe's stocks are higher.
More in a minute,
Re: Floor Talk May 10
In case you missed it late yesterday afternoon. Here are highlights of the CME Group's Ask the Analysts pre-report press briefing Thursday:
--U.S. corn acreage numbers are not expected to see a big change in Friday's Report. Due to weather concerns, the USDA is expected to tweak lower the corn yield estimates 2-3 bushels per acre. Some analysts see the yield pegged at 160.2 bu./acre, others 161.6 vs. the USDA's previous 163.3.
--U.S. corn exports are expected to fall significantly, mainly due to Brazil's big corn crop.
--U.S. soybean crush number is expected to be big.
--Wheat global ending stocks could be bigger than expected. Why? Black Sea countries could see a big bump in wheat production for next year. Ending stocks could be pegged at a 10-year high.
--Though the U.S. wheat crop is limping along, a normally bullish factor, oversea production will get more attention from the market. Market could react bearish.
--Maybe not in tomorrow's report, but one analyst sees the U.S. soybean plantings at 78.0 million acres and a longterm carryout at 385 million bushels.
--Delta farmers are switching out of corn to cotton.
--On the subject of corn demand returning to the U.S., it could be a slow return, analysts say. Other countries have picked up production, they are looking and finding new trade routes, using corn for country credit. While some countries can't start an export program from scratch, they are finding ways to take marketshare. But, while there is likely to be a lower figure for corn demand next year, world consumption will pick-up. Some countries will re-build government supplies eventually, on these low prices.
Overall, there is just too much competition worldwide, much like the wheat market. There are a lot more countries producing corn. They see the need to open up new sources of supply.
One analyst doesn't see these corn developing countries maintaining export competition. Brazil's safrinha crop is exported and is grown in risky conditions. All of that second crop was produced at a loss, due to low prices. So, there is an expectation that more soybeans will be planted next year, due to lower prices. Will they grow more safrinha acres, put on more fertilizer, etc. when they can't turn a profit?
--Growing corn in Ukraine is like growing in Saskatchewan, it doesn't grow very well. These countries don't have the price infrastructure like the U.S. farmers.
Re: Floor Talk May 10
The National Supply Company is saying that Brazil will produce 184.1 million tons of grains in thgis crop season. Of this, 81.5 million tons is soybeans, 43.19 million tons is corn and 11.9 million tons is rice.
Re: Floor Talk May 10
Yes. Wheat figures were not released because a significant amount of planting was added in the last few days. Farmers are interested in better pricing of wheat in Brazil.
Re: Floor Talk May 10
Perhaps you guys saw an estimate from a different source. I just called to Conab (National Supply Company) and they told me that those figures are right. (The survey is here: http://www.conab.gov.br/OlalaCMS/uploads/arquivos/13_05_09_11_56_07_boletim_2_maio_2013.pdf)
The wheat figures were around 5 million tons.
Re: Floor Talk May 10
You are not asking the right question. Remember there are two corn crops in Brazil. Full season and Safrina. The total corn crop estimate given by CONAB released on Wednesday was 78MMT.