Floor Talk September 11

[marketeye]

At the close:

The Dec. futures corn contract settled 5 1/4 cents lower at $7.78. Nov. soybean futures contract finished 17 1/4 cents lower at $17.01 1/2. Dec. wheat futures finished 6 cents lower at $8.83 per bushel. The Dec. soyoil futures contract settled $0.58 lower at $55.98. The Dec. soymeal futures contract settled $3.50 per short ton lower at $515.90.


In the outside markets, the NYMEX crude oil is $0.37 per barrel higher, the dollar is lower and the Dow Jones Industrials are 69 points higher.

Mike

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At mid-session:

The Dec. futures corn contract is trading 3 3/4 cents lower at $7.79 1/2. Nov. soybean futures contract is trading 8 3/4 cents lower at $17.10. Dec. wheat futures are trading 3 cents lower at $8.86 per bushel. The Dec. soyoil futures contract is trading $0.47 lower at $56.09. The Dec. soymeal futures contract is trading $.90 per short ton lower at $518.50.


In the outside markets, the NYMEX crude oil is $0.42 per barrel higher, the dollar is lower and the Dow Jones Industrials are 84 points higher.

Mike

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At the open:

The Dec. futures corn contract is trading 2 cents higher at $7.85. Nov. soybean futures contract is trading 5 cents lower at $17.13. Dec. wheat futures are trading 6 3/4 cents higher at $8.96 per bushel. The Dec. soyoil futures contract is trading $0.27 lower at $56.29. The Dec. soymeal futures contract is trading $.30 per short ton lower at $519.10.


In the outside markets, the NYMEX crude oil is $0.53 per barrel higher, the dollar is lower and the Dow Jones Industrials are 61 points higher.

Egypt bought 235,000 tons of wheat from Ukraine, Russia, and France. This is short-term negative for the U.S. wheat market.

Mike

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At 6:45am:

Early calls: Corn 2-4 cents higher, soybeans 1-2 cents higher, and wheat 2-4 cents higher.

Trackers:
Overnight grain, soybean markets=Trading higher.
Crude Oil=$0.05 per barrel higher.
Dollar=Lower.
Wall Street=Seen opening higher, ahead of the Fed Reserve meeting Thursday. Also, the markets are eyeing a German court decision that is tied to economic stimulus measures.

World=Mostly lower.

More in a minute,

Mike

[c-x-1]

Mike,

will there be another CMEgroup pre report briefing today?

thanks,

c-x-1

[docharing]

Mike,

Do you think the USDA has had time to calculate the last 10 days of rain into the soybean yield estimate? By some accounts this September rain has doubled our yield, lol!

[giolucas]

Mike,

Considering going long for tomorrow's report.  Do you think I might have a fighting chance or am I dreaming. I know it is a gamble on what the USDA reports in terms of the actual facts on the street but with the input from various farmers everyone has stated that the yields are considerably down.   So what gives? 

[marketeye]

c-x-1,

No. I talked with the CME Group folks yesterday. They say they will not hold a preview for this report. But, they will have one for the end-of-month report and next month's report.

Mike

[marketeye]

Here's a story that is running in Gazeta do Povo (A Brazilian newspaper). This story has been translated into English. So, it may read a little choppy. But, I think you can get the gist. It's an interesting read, written by Cassiano Ribeiro.

Record prices are spurring the biggest global producers of soybean to shave their inventories. The world consumption exceeds production by 18 million tonnes in 2011/12, sparking the major producers to empty the warehouses. The direct consequences are the odds of sustaining records and building pressure on the next harvest in South America.

Only Brazil is "burning" more than 2 million tons of reserves on the eve of a crop above 80 million (t), which promises to put the country on condition largest producer and exporter. Of the more than 3 million tonnes that were stored at the beginning of the cycle, less than 1 million remains, according to the National Supply Company (Conab). In the United States, who faced historic drought, is forecast down 5.8 million to 4.6 million tons of soybeans, in stock.

Unlike soybeans, corn framework is internal inventory comfortable. After harvesting the largest winter production history, Brazil increased by more than 3 million tons of reserves their product. The level of stocks are set to rise from 10.2 million tons to 13.27 million tons, according to the Ministry of Agriculture.

The challenge will be overcoming the logistics, or transport the product from Brazilian regions where there is excess product to local production deficit without hindering the chain of chicken production, for example. This exercise required for the flow has added up to $ 8 per bushel of corn transported from Mato Grosso to the Paraná, for example.

For part of American industries, on the other hand, it is still advantageous to get the product in Brazil and bring it to North America. "Corn from Brazil arrives in the United States between $ 7 and $ 8 per bushel. There, the same industry would have to pay $ 8.30 to $ 8.50 to buy the product in the domestic market, "compares the analyst at Informa. He remembers that, because of that and also the significant drop in U.S. production, imports of the country should be expanded to 640 000, registered last year, to about 2 million tons. The numbers are from the USDA, the U.S. Department of Agriculture. "This should be sent by Brazil," says Pereira. (CR)

18 million tons of soybeans are being consumed without that much being produced in 2011/12.

"The demand is relatively inelastic at the moment. Having any kind of problem in the South American harvest [that hits the market in a significant way from February], will miss a lot of soy, "says Peter Dejneka analyst Futures International, Chicago (United States). Last year, there were breaks in Southern Brazil, Argentina and Paraguay. "The world needs in South America more than ever."

The tightness between supply and demand until the beginning of the South American crop announces increased risk of rationing. Confirmed good productivity, the expectation is rebalancing from February. "I do not even like to think about the possibility of frustration crop in South America", says Stefan Tomkiw, vice president of The Future Jefferies Bache, New York.

For analysts, the shortage has been embedded in prices traded on the Chicago. For soybeans, the high accumulated is 70% in nine months - U.S. $ 12.18 per bushel in January to more than $ 17 per bushel. Still, consumption follows firm.

"Who can buy now are buying stocks to have protection at least until the end of the year. Prices will only be significantly lower when demand is supplied accumulated, "examines Dejneka.

The market does not rule out reducing inventories stronger than predicted by Conab in Brazil. The industry admits that needs 3 million tons of soybeans to meet its goal of processing this year.

The shortage in Brazil began to take shape a year ago. The potential of last season, which was 75 million tonnes, was down to about 66 million due to drought last summer. "As domestic demand is virtually the same, the consumption of inventories was primarily for export," said Glauco Monte, an analyst at FC Stone, of St. Paul.

"We produce less and export more," says Pereira Aedson, Informa Economics FNP, in relation to the rhythm of Brazilian sales of soybeans this year. Were exported about 30 million tons of soybeans, 17% more than last year. Almost all of the extra demand is underpinned by China. In the same period last year, Chinese purchases totaled 17.5 million tonnes.

For next year, the Department of Agriculture (USDA), provides that the global consumption of soybeans will grow by 6 million tonnes and border on the 257 million tonnes (see the chart). Alone, Brazil will be responsible for ship 38 million tons, according to projections from Informa.

Brazil is eyeing reserves neighbors

Trade in stocks is not restricted to Brazil. The country itself is about to expand imports of soybeans. Argentina, Paraguay and Uruguay can even help in supplying the Brazilian market entry until the next harvest.

"In January 2013 [when the Brazilian harvest has just begun], we have to bring soybeans from somewhere and probably be a Mercosur country, they also need to export some of their stock," said Pereira Aedson, market analyst Informa Economics FNP. The break last summer also affected Brazil's neighbors.

The Brazilian supplier more likely, considering the volume of production, Argentina should end the year with halved the reserves recorded in late 2011 - to 2.2 million tons. By having a low internal consumption, Uruguay also happens to be harassed, evaluates Pereira.

According to Informa, Brazilian imports should add up to 300 thousand tons by the arrival of the new production. The National Supply Company (Conab) estimates that 50,000 tonnes will be brought from abroad, but should review their numbers until December. Last year, Brazil has sought 41,000 tonnes of soybeans, according to Conab.

Mike

[c-x-1]

thank you Mike for briefing info and great article!

giolucas, read "sell before the report" thread. last post from goredhusker makes common, technical sense in my playbook. coupled w/ facts of backlog that's only gonna become more prevalent (aflatoxin checks), Brazil dryness while trying to plant. appears to me our mkt is simply scraping out as many weak handed longs as possible before report.

c-x-1

[giolucas]

Thanks CX1,

I did read that report but that was on Friday.  Thought we have taken that info already into the market.  Well lets see what happens. 

[c-x-1]

yes, but goredhusker's comment was yesterday - didn't know if you saw that.

[SouthWestOhio]

cx1 I agree with goredhusker's point but I have been wrong before too. With very little new crop sold I guess I am going into the report long as well.