Grain prices tick higher as key data loom

Grain futures consolidated their gains on Thursday, at least in early deals, with at least two significant factors likely to determine if they end that way.

One is the latest monthly Wasde report from the US Department of Agriculture, giving closely-watched estimates of world crop supply and demand.

This report is expected to trim the estimate for US corn stocks at the close of 2013-14 by some 50m bushes to 1.90bn bushels, reflecting reduced yield prospects.

Even if potentially-damaging hot weather for the US Midwest is still forecast rather than arrived there is reason for investors to cut expectations for yield, with the 97.4m acres that farmers have planted slightly more titled towards lower-productivity states, such as Texas, than had been thought.

Not that everyone agrees, with one broker saying that “there is a chance to see a higher yield since the crop ratings have been improving”.

Wasde expectations

For soybeans, the US stocks figure for the close of 2013-14 it seen coming in little changed, at 266m bushels, with the wheat number trimmed by 27m bushels to 632m bushel, after a decent start to the season for exports and slightly diminished harvest prospects.

The hard red winter wheat crop is seen coming in a touch below previous expectations, at 773m bushels.

World wheat numbers will be in the spotlight too, with some anticipation over the Russian crop number, which the USDA currently sees at 54.0m tonnes, but which some domestic analysts have downgraded following undue dryness in the Central and Volga regions.

On demand, there is likely to be some focus on Chinese demand, with concerns that the USDA has been too generous on the soybean import number, at 69m tonnes, a jump of 10.0m tonnes year on year, but has underestimated wheat needs (of which more later).

Hot topic

The other factor that the market will focus on are the latest rounds of the US weather outlook, whose turn hotter has been behind the revival in Chicago corn and wheat prices from multi-year lows.

In fact, “early summer Wasde estimates of new crop US corn and soybean production are secondary to updated weather forecasts”, Richard Feltes at RJ O’Brien said.

And there are still some concerns over heat – at a threatening time of year for corn especially, given the US crop’s increasing development into the heat-sensitive pollination phase – even if the threat is not seen as large as it was.

“The European model again has followed the GFS model in weakening the heat dome over the western Corn Belt /Plains early next week into a heat ridge,” WxRisk.com said.

“This weakening keeps temperatures from getting hot over the Midwest and allows for some rains over the eastern Corn Belt, the western Great Lakes into northern Minnesota, North Dakota and south central Canada,” although is not as enthusiastic on this score as the GFS.

‘Flash drought’

In fact, not all commentators are quite so concerned about the heat, with one US broker saying that while “the forecast is still calling for ridge next week, although the south west section of the Corn Belt is looking at potentially crop damaging conditions the rest of the Belt should be rather favourable”.

The broker added: “We still have to get through pollination with average weather but as we get closer to harvest the market should be working out more risk premium as it shifts its focus back to demand.”

Whatever, the outlook has focused attention on some of the more troubled US areas, including the Delta where Mr Feltes reported talk of a “flash drought” across much of the region, parts of which have not seen significant rainfall for five or six weeks at a time of rising temperatures

In Kansas, heat has left the western quarter of the state under “severe stress”, causing some abandonment already in dry areas.

Crude talk

Furthermore, ags used as biofuels, notably corn, are getting some support from energy markets.

Brent crude continued its recovery to approach $109 a barrel in early deals, despite the International Energy Agency saying on Thursday that the rise of US shale gas offered oil bulls “cause for alarm”.

Mr Feltes said that the “impressive” crude oil rally was “another reason to approach the post-Independence Day row crop price strength with respect and caution”.

US ethanol data on Wednesday showed production bouncing 18,000 barrels a day to 881,000 barrels a day, meaning more corn consumption on this score.

More on demand from importers will be seen later with weekly US export sales numbers expected to come in at 300,000-600,000 tonnes for corn old crop and new, a figure which will exclude 120,000 tonnes revealed on Wednesday as sold to China (and too late for today’s export sales report).

Corn for December added 0.4% to $5.23 ¾ a bushel as of 09:50 UK time (03:50 Chicago time).

Beans bounce

New crop November soybeans rose 0.2% to $12.87 ¾ a bushel, also helped by the weather concerns, at a time when many investors are already questioning the USDA’s estimate of a 44.5 bushels-per-acre domestic soybean yield.

“Prospects for the US harvest were questioned as the soybeans crops were developing slower than usual,” Joyce Liu at Phillip Futures said.

“Worsening the situation were the showers that stalled the harvesting of the eastern Midwest’s soft red wheat, which in turn slowed down the planting of soybeans,” at least the sowing of double-crop soybeans seeded on land vacated by the wheat harvest.

These have been expected to account for an unusually large 10% of total US soybean plantings this year, a size approaching 8m acres.

The old crop July contact, up 0.3% at $15.97 bushel, recouped some of the last session’s losses, blamed on a weakening US cash market after elevated values teased out producer selling.

“Producer pricing of old crop beans has certainly accelerated in recent days with many northern elevators telling me that producers who told them last week they had no old crop beans were ‘finding’ and selling them,” Kim Rugel at Benson Quinn Commodities said.

Chinese imports

And wheat gained too, helped not just by the rise in its fellow grain corn, an alternative for some uses such as animal feed, but on its own score, amid a renewed focus on demand.

Some of this has been spurred by Chinese purchases, after a rain-disrupted harvest, which affected the quality, if not quantity, of the crop.

Indeed, China’s CNGOIC official crop bureau forecast the country’s wheat imports in 2013-14 at 5m tonnes, up from 2.89m tonnes last season, and well above the 3.5m tonnes that the USDA has the figure at.

It kept the harvest estimate at 120.6m tonnes, above a 118m-tonne figure from USDA staff in Beijing last week.

… and other buyers too

However, Iran has also been on a wheat-buying spree, buying 450,000 tonnes for August shipment, after 800,000 tonnes purchased last month.

Egypt, the top wheat importer, this month made its first purchase since February, after a gap blamed on the country’s poor finances, with Jordan, Syria and Tunisia among other recent buyers, and Pakistan said to be importing after a poor domestic harvest.

As for what part the US is playing in this, more will be known with the weekly US export sales data, expected at 600,000-900,000 tonnes, and released at 12:30 GMT, 3.5 hours ahead of the Wasde.

Wheat for September added 0.6% to $6.82 ¾ a bushel in Chicago.

Sweeter sugar

Among soft commodities, raw sugar managed some bounce, adding 0.2% to 16.289 cents a pound in New York for October delivery, as traders took a less downbeat view of Brazil cane crushing data released late on Wednesday.

The data showed Brazilian Centre South sugar producing down 16% year on year, thanks to rain interruptions and a switch by mills to producing more ethanol from cane, although the figure had been largely discounted by investors.

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Wheat prices rise as US slashes world supply hopes

Wheat prices extended gains after the US slashed its estimate for world stocks to a five-year low, citing raised expectations for use in China, whose imports will soar to an 18-year high.

The US Department of Agriculture, in its much-watched Wasde crop report, cut by nearly 9m tonnes to 172.4m tonnes its forecast for world wheat inventories at the close of 2013-14.

The revision, which was far bigger than the downgrade of a little under 1m tonnes that investors had expected, put inventories on course for their lowest finish in five years.

As compared with consumption, stocks will end the season at 24.7%, the lowest since 2007-08, the year that tight inventories of wheat and other cereals sent prices soaring to record highs, which still stand in US markets.

The immediate market impacted was to send wheat for September up 2.1% to $6.93 a bushel in Chicago, taking above 6% the lot’s recovery from a contract low last week.

Chinese needs

The USDA lifted its estimate for world wheat production in 2013-14, citing improved prospects for Australia, where “conditions significantly improved with abundant June rainfall”, and in the US itself, for which yield prospects were raised, for both hard and soft red winter wheat, and for spring wheat.

However, the upgrade was more than offset by an estimate that China was using far more wheat than had been thought in feeding livestock, in the face of elevated corn prices.

The USDA hiked its forecast for Chinese wheat feeding in both 2012-13 and 2013-14 by 5.0m tonnes to 25.0m tonnes.

Even though the department kept its estimate of the domestic crop steady at 121.0m tonnes, ignoring the advice of its Beijing bureau to cut the production figure, it hiked its estimate for Chinese wheat imports by 5.0m tonnes to 8.5m tonnes to cover some of the extra consumption needs.

US export hopes

The upgrade put Chinese wheat imports on course to hit their highest since 1995-96, and far exceeded a separate forecast on Thursday by China’s own CNGOIC bureau of purchases of 5.0m tonnes this season.

However, expectations of elevated import needs gained credence through a separate report on Thursday, on weekly US exports, which showed China buying 1.03m tonnes of US wheat last week.

Factoring in 174,800 tonnes of cancellations, China has bought 2.85m tonnes of wheat from the US alone with the season only some six weeks old, and with other purchases reported from Australia and France too.

Indeed, the USDA cut its estimate for US wheat stocks at the close of this season, by 2.25m tonnes (83m bushels) despite the harvest upgrade, citing improved export hopes, “reflecting strong sales, particularly to China”.

‘Supportive to prices’

The USDA’s revision followed a cut earlier on Thursday by the United Nations food agency, the Food and Agriculture Organization, to its estimate for world wheat stocks at the close of 2013-14, by 3.6m tonnes to 169.5m tonnes.

While the FAO raised its estimate for world production to a record 704.0m tonnes, it said that the stocks figure had been “lowered somewhat, mostly on anticipated consumption”.

However, Steve Kahler, chief operating officer at Teucrium Trading, a New York-based issuer of commodity exchange traded products, warned investors against getting too carried away by ideas of reduced wheat supplies.

The USDA downgrade was “supportive to prices, but not completely bullish”, he said.

“Wheat still has to price itself into feed rations, which means being competitive against other grains,” Mr Kahler told Agrimoney.com.

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Oryza U.S. Rough Rice Recap – Market Very Quiet Ahead of WASDE; Old Crop Supplies Seen Limited | Ory za

Oryza U.S. Rough Rice Recap – Market Very Quiet Ahead of WASDE; Old Crop Supplies Seen Limited | Oryza

The U.S. cash rice market was very quiet today ahead of tomorrow’s USDA World Agriculture Supply and Demand Estimate which many believe should be friendly for new crop prices. Currently, seller price ideas remain firm at unattractive levels while buyers struggle to identify the limited number of lots remaining unsold.

As of today, old crop offer from farmers were unchanged near $16.90 per cwt fob farm (about $373 per ton) for July shipment while offers from resellers increased with the futures market to similar levels however loading out Chicago Board of Trade warehouse receipts continues to be more attractive to buyers.

Bids from mills and exporters increased to around $16.00 per cwt (about $352 per ton) for July delivery however they were no sellers willing to come off of their price ideas to make a trade.

As for new crop, most offers were unchanged near $15.55-$16.11 per cwt fob farm (about $343-$355 per ton) while bids could be seen around to around $14.60-$15.10 per cwt (about $322-$333 per ton) for October-November-December delivery although no trades were reported today.

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Interesting USDA Reports for June 2013 | Focus on Ag

The late June USDA Acreage and Grain Stocks Report is always highly anticipated because it becomes the first hard data after the March USDA Plantings Intentions Report to give an indication of crop production levels in a given growing season, as of June 1. Many times the June USDA reports can have a big impact, either upwards or downwards, on grain market trends. There was much anticipation for June 28 report this year, given the uncertainty surrounding crop planting in some areas of the Midwest, and the poor growing conditions in other areas of the U.S.

The June 28 USDA Acreage Report showed total 2013 planted corn acres in the U.S. at 97.4 million acres, which is the highest number of planted corn acres since 1936, and marks the fifth year in a row that planted corn acres in the U.S. has increased. Interestingly, the June 28 report showed an increase of about 100,000 planted corn acres in the U.S. in 2013, compared to the USDA Planting Intentions Report in March. The 2013 U.S. estimated corn acreage compares to 97.2 million acres of planted corn in 2012. The USDA projections for U.S. planted corn acreage exceeded the average of major grain analysts by over 2 million acres, and even exceeded the highest private estimate by nearly 1 million acres.

Some grain marketing analysts and observers have questioned the numbers released by USDA in the June 28 Acreage Report. The biggest question is how USDA could justify the increase in actual planted corn acres in 2013, above the intended planted corn acres in March 2013, given the serious planting delays in many portions of the primary growing area in southern Minnesota, Iowa and Wisconsin. USDA did lower the intended corn planted acres by 300,000 acres in Minnesota, 200,000 acres in Iowa and 150,000 acres in Wisconsin, compared to the March planting estimates. However, those reductions in 2013 corn acreage were more than offset by increases in projected corn acreage in Nebraska, Texas and Michigan, compared to the March estimates. USDA did acknowledge that there about 3.4% of the intended corn acres were not planted on June 1, which would represent approximately 3.3 million acres. USDA does not plan any follow-up survey of U.S. corn acreage until harvest time, so no future adjustments in the planted corn acreage will occur in the coming months.

Another big question mark in the USDA report on June 28 is what percent of the planted corn acres will be harvested for grain in 2013. Typically, about 92% of the planted corn aces in the U.S. are harvested for grain, with the balance being used for corn silage, or being non-harvestable for various reasons. In 2013, USDA is projecting the corn acres to be harvested for grain at only 91.5%, with that half of one percent reduction representing approximately 487,000 less acres being harvested for grain this year, compared to normal. This would seem to indicate that USDA is recognizing some of the potential crop production problems that existed in early June in many areas of the Midwest.

The report listed 2013 planted soybean acres at just below 77.7 million acres, which is in increase of over 600,000 acres from the March 1 planting intentions, and compares to 77.2 million acres planted to soybeans in 2012. The USDA projections for increases in planted soybean acreage in 2013 were very similar to the average grain trade estimates. Most grain analysts expected corn acreage to decline and soybean acreage to increase in the June USDA Report, due to the major planting delays in portions of the Midwest. USDA will re-survey the 2013 planted soybean acreage in 14 States in early July, with results reflected in the August USDA report. The June 28 report pegged total 2013 U.S. wheat acreage at 56.5 million acres, compared to 55.7 million acres in 2012, and estimated 2013 cotton acreage at 10.25 million acres, compared to 12.3 million acres last year.

Stocks Report

The June 28 USDA Quarterly Grain Stocks Report listed total corn stocks available on June 1 at 2.76 billion bushels, compared to 3.15 billion bushels in June 2012, with about 46% of that corn still stored in on-farm storage. This is the smallest amount of corn ending stocks on June 1 in 16 years, which has helped to keep cash corn markets fairly strong in recent weeks. The U.S. soybean stocks in the June 28 report were estimated at nearly 435 million bushels, which compares to soybean stocks of 667 million bushels on June 1, 2012. The soybean stocks on June 1 were at the lowest level in nine years, which has also helped maintain strong market prices for remaining 2012 soybeans that are in storage and are not yet priced.

New-crop 2013 corn and soybean prices have reacted in a much more bearish fashion to the crop acreage trends identified in the June 28 USDA reports. Chicago Board of Trade (CBOT) futures prices for December corn futures prices have dropped nearly 80¢/bu. from mid-June until early July, and closed at $4.91/bu. on July 5. This a new low price for the CBOT December 2013 corn futures contract, and was the lowest corn futures price thus far this year. The current spread between the July CBOT corn futures price and the December CBOT futures price is almost $2/bu., which could signal a drop in the cash corn market in the coming weeks. Local cash corn prices at most locations in southern Minnesota closed above $6.50/bu. on July 5, which compares to harvest-time new-crop cash bids for 2013 corn in the $4.50-4.60 range.

Near-term CBOT soybean prices have remained quite strong in recent weeks, reflecting the very tight supply of existing soybeans, with a closing price on July 5 of $15.88/bu. However, new-crop November CBOT futures for the 2013 crop have dropped by over $1/bu. since early June, and closed at $12.28 on July 5. Local cash soybean prices in southern Minnesota on July 5 closed near $15.50 for cash soybeans, and in the $11.70-11.90 range for new-crop 2013 soybeans at harvest-time, which, again, is a very wide price spread.

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Corn and Soybean Market Prospects Following USDA Reports

The USDA’s June 1 Grain Stocks and Acreage reports contained estimates that were generally as expected for soybeans, but both reports contained surprises for corn, according to University of Illinois agricultural economist Darrel Good. The estimates were friendly for old-crop price prospects, but negative for new crop prices, at least in the short run.

“June 1 stocks of corn were estimated at 2.764 billion bushels, about 90 million bushels less than the average pre-report guess and the smallest June 1 inventory in 16 years,” Good said. “The stocks estimate implied feed and residual use of about 920 million bushels during the March-May quarter, about 60 million more than use during the same quarter last year. Feed and residual use during the first three quarters of the marketing year totaled 4.06 billion bushels. To reach the USDA projection of 4.4 billion bushels for the year, use during the summer quarter needs to be only 340 million bushels, nearly the same as use of last summer,” he said.

Good reported that while the number of cattle on feed on June 1, 2013, was 3 percent less than the inventory of a year ago, the June 1 hog inventory of market hogs was equal that of a year earlier, broiler numbers are equal to or slightly higher than those of a year ago, and it appears that dairy cow numbers are holding steady (USDA no longer reports numbers on a monthly basis). It appears that feed use this summer could exceed that of a year ago, becaus large quantities of new-crop corn will not be available before Sept. 1, as was the case last year, reducing year-end stocks to a pipeline level.

“The June survey revealed planted acres of corn of 97.379 million acres, 97,000 acres more than March planting intentions, slightly larger than planted acreage of a year ago, and about two million acres above the average pre-report guess,” Good said. “Compared to March intentions, acreage estimates were larger for Michigan, Missouri, Nebraska, and Texas and unchanged or smaller for most other major corn-producing states. Acreage of corn to be harvested for grain was estimated at 89.135 million acres, 1.76 million more than harvested last year. The difference between planted acreage and acreage harvested for grain of 8.244 million acres is smaller than the difference of 9.78 million experienced after the drought of last year, but is about one million acres more than is typical following a favorable growing season. Harvested acreage of other feed grains (sorghum, barley, and oats) was estimated at 10.356 million acres, 1.112 million more than harvested last year,” he said.

June 1 stocks of soybeans were estimated at 434.5 billion bushels, which Good said is very near the level that would be expected given the magnitude of March 1 stocks and estimates of use during the March-May quarter.
“June 1 stocks were at the smallest level in nine years and suggest that the pace of the domestic crush will have to slow substantially this summer and that year-ending stocks will be at a minimum pipeline level of about 125 million bushels,” Good said.

According to Good, the June survey revealed soybean planting and planting intentions of 77.728 million acres, 602,000 above March planting intentions and slightly larger than the previous record acreage of 2010. Compared to March intentions, the June estimates were smaller for Michigan, North Dakota, and Ohio and were unchanged or larger for most other major producing states.

The acreage intended for harvest was estimated at 76.918 million, 814,000 more than harvested last year and 302,000 above the 2010 record, Good said. “The difference between planted- and harvested-acreage estimates this year is only 810,000 acres, compared to the average difference of 1.114 million acres in the previous five years. Planted acreage of other oilseeds is estimated at 4.392 million acres, 561,000 below March intentions and 1.497 million less than planted last year. The survey for the current acreage estimates was conducted between May 30 and June 16. Due to the very late-spring planting season in some areas and the unusually large percentage (10 percent) of the acres to be planted following another crop, more of the survey responses likely reflected planting intentions than is normally the case,” Good said.

The USDA indicated that producers in 14 states will be resurveyed in July to determine if plantings deviated from intentions. The results of that survey will be included in the August Crop Production report.

Good concluded that the June 1 stocks estimates for corn and soybeans confirmed very small inventories and the need to continue to limit consumption until new crop supplies are available.

“As a result, old-crop corn and soybean cash prices are expected to be well supported through the summer months,” Good said. “There is considerably more uncertainty about new crop production and price prospects. We expect planted and harvested acreage of both crops to be less than revealed in the June survey. However, production will be influenced more by yield prospects than by acreage estimates.

“The period for determining yields is just beginning, with July and August weather critical for both crops. Based on current crop condition ratings and near-term weather forecasts, prospects for yields likely exceed current market expectations, particularly for corn. If weekly condition ratings remain high, new-crop prices are expected to remain under pressure,” Good said.

Debra Levey Larson, News and Public Affairs
University of Illinois
College of Agricultural, Consumer and Environmental Sciences
1301 W. Gregory Dr. MC-710
Urbana, IL 61801
217-244-2880
dlarson
www.aces.uiuc.edu/news/
www.twitter.com/uiGnome

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