Weekly Grain Update 1.15.16

This week, the USDA gave us a small glimmer of hope for the grain markets. In Tuesday’s reports the Feds lowered both corn and soybean yield for the 2015 crop.  While the yield drop was not entirely unexpected, the small reductions in planted and harvested acres caught the trade off guard.  Corn saw a reduction of 53 million bushels as a result of those changes.  However, total demand was lowered as well, resulting in a new carry out figure of 1,802 million bushels, up 17 million from December.  Soybeans saw a 50 million bushel drop in production coupled with a 25 million bushel reduction in demand, pushing estimated carryout down 25 million.

The focus on supply, or more specifically lower supply , offered a very faint light at the end of the tunnel as soybeans charged higher following the data release.  Corn became a follower, trading higher as well.  However, much of the commentary since the USDA report has tried to refocus attention to the overall carryout and demand side of the picture.  Weather in South America is turning more benign, limiting crop stress, processor margins are continuing to tighten, and export markets are not favoring the US origins.  All this together is not a friendly fundamental picture.  Soybean margins seem to be struggling the most which is creating an erratic basis situation, five cent board rallies often equate to a five-plus cent basis hit.  The reverse is often true as well.  Rallies such as the ones seen this week warrant our attention. Be alert to opportunities and be ready to reward the market.

If you would like to receive the Weekly Grain Recap via email each week, just send Aaron an email and I will get you on the list. aaron.ulland@chsinc.com

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This Material has been prepared by a sales or trading employee or agent of CHS Rochester and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS Rochester bases its recommendations solely on the judgment of CHS Rochester personnel.

 

Weekly Grain Update 1.8.16

Some have said as China goes, so goes the rest of the world.  This was just the case to start 2016.  Disappointing economic data out of China sent equity markets tumbling, pulling commodities along for the ride.  Three times this week March corn futures traded to new contract lows, finally breaking through the $3.50 mark on Thursday before rebounding to close down just over a penny on the week.  Soybeans traded in a relatively wide range through the week, struggling during the equity collapse eventually showing strength to end the week.

Commodities found strength late in the week thanks to a stabilizing equity market and strong US jobs report.  However position squaring ahead of next week’s USDA reports was just as influential.  Each January the USDA releases their final yield for the just-harvested crop.  Many times this report day becomes a wild day of volatile market swings while traders digest the huge data dump.  This year, it appears less likely we will have the volatility seen in previous years.  Expectations are for few changes to be made on the production side of the balance sheet.  It is also expected that demand will likely drop slightly, generally offsetting any production changes.  Bottom line, world supplies of grain are more than ample right now.  Carry out numbers should continue to grow slowly if no new demand impetus comes along.

If you would like to receive the Weekly Grain Recap via email each week, just send Aaron an email and I will get you on the list. aaron.ulland@chsinc.com

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This Material has been prepared by a sales or trading employee or agent of CHS Rochester and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS Rochester bases its recommendations solely on the judgment of CHS Rochester personnel.

 

Weekly Grain Update 12.31.15

Holiday mode dominates the markets this week.  It seems that the of the year is rather mundane with thin, volatile trade.  This holiday season was extremely slow, and mostly lower trending.  Producers have been holding out, waiting for a post-harvest rally, or any rally for that matter, to boost prices closer to break even production costs.  Unfortunately, the rally has not been seen.  The few days when prices have tried to move higher, it was mostly due to fund short covering, and it was very short lived.  Fundamentally speaking, there is a lot of corn and soybeans in the US and the world, with little new demand on the horizon.

Looking ahead, we could be facing a very similar marketing situation as we had a year ago when we had a big crop and no demand.  Last year many held out for a rally until July, only to watch storage costs eat up most of the cash price gains.  Since this scenario is possible again this year, the question is will we see history repeat, or will the producer give in sooner, opting not to pay the additional storage?  This means the next two to three weeks, when most minimum storages comes to an end, will be a very telling time.  Board carries aren’t strong enough to cover most storage rates.  If commercially stored grain is sold first, that first flush of corn will likely be significant enough to negatively impact both futures and basis.

As for market drivers, the only input on the radar right now is the January crop report, in which the USDA will release the final yields for 2015 crop.  Should those yields be reduced for any reason, the market could see that as friendly and move higher, however the lackluster demand should outweigh any yield gyrations.

If you would like to receive the Weekly Grain Recap via email each week, just send Aaron an email and I will get you on the list. aaron.ulland@chsinc.com

Read Full Market Update

CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

 

This Material has been prepared by a sales or trading employee or agent of CHS Rochester and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS Rochester bases its recommendations solely on the judgment of CHS Rochester personnel.

 

Weekly Grain Update 12.11.15

After a strong close to last week, follow through buying failed to materialize this week.  Soybeans took the biggest beating, down over 23 cents on Monday.  Corn futures briefly tried to work higher before falling off sharply on Monday and sideways the balance of the week.  Ultimately, the fundamentals the world markets are not friendly grain prices, capping any gains.  A big US crop in the bin, a large projected South American crop, combined with stagnant world demand lead to stale prices.  Fund short-covering is the only reason we see any rallies at all.

Argentine politics grabbed some headlines this week, with the new president taking office on campaign promises of lower taxes on grain exports.  Now that he is in office, President Macri is indicating change will be slower than anticipated, putting the market back on edge as to when South American producers will sell grain.

Locally, basis is steady on corn but getting weaker for beans.  General consensus is that grain will move en masse from the producer after the first of the year.  Should this take place, this flush of grain could push basis lower very quickly.  Be cautious moving forward, but be proactive as well.  Give us a call to discuss pricing targets and have offers working to help avoid missing your goals, especially as we move through the busy holiday season.

 

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

Weekly Grain Update 11.20.15

There’s nothing friendly about the grain markets lately.  Board prices continue to drift sideways to slightly lower, often taking two steps forward and one step back.  Traders and producers continue to look and hope for a rally, but there is not fundamental reason to push prices higher right now.  Just one carrot in front of the markets right now and that is the lack of producer selling.  As the producer becomes more discouraged by lower prices and disengaged by the forthcoming holiday season, end users keep looking for grain.  Basis is slowing creeping higher, but basis alone cannot do all the work.  Most traders are of the opinion that board prices will have to move higher to help move the grain to market.  The big question becomes when.

This marketing year has the makings of a near repeat of the 2014-15 crop year.  The world is awash in corn and soybeans, but the producer is reluctant to sell at these prices below the cost of production.  This will keep front end basis supported and reduce some of the carry to future months.  And just like last year, barring any unforeseen weather event, we are likely to see a second harvest in late summer to make space for new crop.  When this happens, prices are likely to fall sharply.  Although this isn’t likely to happen soon, it would be best to stay proactive in marketing.  Don’t hesitate to give us a call to discuss market opportunities.

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

Weekly Grain Update 10.30.15

Halloween Trick or Treat?

First, the treat.  November is just about to begin and, unlike last year, harvest is quickly winding down instead of just ramping up!  I would venture to guess most prefer this treat to last years tricky harvest season.

This year’s trick?  The markets.  Marketing 101 comes down to the rule of Supply and Demand.  Domestic supply of corn this year will be more than sufficient to meet demand for the year, the trouble is regional supply versus demand.  Eastern corn belt producers appear to have a less than average corn crop this year but eastern belt end-users have not seen slower demand as of yet.  Here in the western corn belt, corn yields have been average to slightly above average.  This regional supply difference is impacting market dynamics from freight costs to basis levels across the country.  Compounding the issue is the fact that a large percentage of producers are not willing to sell at these depressed level, opting instead to pay for storage while they wait for higher prices.  This lack of commercial and processor ownership in the face of stagnant board prices is pushing basis levels higher from southeast back toward the northwest.  Eventually this domino effect will hit our market and levels should improve, however, the timing and duration of basis appreciation is always the question.  At some point we will reach the target price that moves enough bushels to market and keeps the pipeline fully charged.

 

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

Weekly Grain Update 10.16.15

Harvest rolls on in the U.S.  Focus has shifted from soybeans to corn in this part of the country.  After record breaking bean yields most producers are happily surprised with what could prove to be record corn yields as well.  Local elevators, already bursting at the seems following the huge bean harvest, are now faced with the prospect of a huge corn crop overfilling what little space remains available.  Mountains of yellow are sure to be dotting the landscape in the coming weeks, covering seemingly every available grassy patch.

As a result of ongoing corn harvest and an extended open stretch of weather, corn futures traded lower for the week.  A general lack of demand along with the big crop has had corn on the defensive.  Soybeans, not ready to give up the lime light just yet, had a strong showing in the futures market.  When the USDA returned to work after the long weekend, export inspections were well above expectations.  This, along with additional sales announced daily, was enough to provide a big rally on Tuesday, pushing November beans above the $9.00 mark.

As the week wore on, exports lost their luster as big yields continue to weigh on the market.  For the week, soybeans were able to hold some of the gains, however, November futures were unable to close above $9.00.

Local basis has held surprisingly steady through harvest pressure.  Trucks keep rolling, but producer sales are still light.  Until the commercial elevator fills allocated space and forces sales, basis should hold fairly constant.  End users are getting their fill now, but general consensus says that once harvest is done, producers will lock the bin doors for a while.  Look for potential basis opportunity at that time.

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

Week Grain Update 10.9.15

With harvest in full swing throughout the country, one would think markets would be very quiet.  And for most of the week, futures trade was just that, quiet.  Corn tried to trade higher to begin the week, eventually stalling as the December contract neared $4.00.  Resistance in soybeans remained near the $9.00 mark.  With more concrete yield results in soybean rolling in, it is a wonder we have been able to hold as strong as we have.  Most reports in Southern Minnesota have soybeans averaging between 60 to 70 bushels per acre, well above average.  Corn yields are still too early to project with confidence, however, early reports are above average.

The latest round of USDA Crop Production and Supply & Demand reports were released to end the week.  Trade expectations had bean yields increasing and corn yields staying unchanged.  The Feds agreed, only partially.  Bean yields were increased 0.1 to 47.20 bpa while corn yields surprised at 168.0 up 0.5.  The biggest surprise of all was in harvested bean acres, down 1.1 million.  Reaction was initially lower for both corn and beans due to higher yields, but the reduction in acres and corresponding drop in production eventually pushed beans higher.  Corn was not so lucky, closing lower on the day.

In the thick of harvest, basis levels are slowly getting worse as storage space fills at the processor and local elevator both.  This serves to encourage the elevator and producer to carry grain for a later date.  However, it also serves to push more grain to open storage or warehouse storage, limiting ownership.  A lack of ownership at the end-user level will ultimately start putting a floor under basis.  Bottom line, the freefall will likely be short lived.

 

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

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