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Corn or Soybeans in 2016?

After reading one of the dozen or more reports on next year’s crop production a thought occurred to me. Do farmers still choose what they will plant from year to year? Now that estimates pop up daily on acreage for 2016/2017 corn and soybeans, are farmers controlling what they will plant?

Of course the answer is yes. But over the next month or two, as forecasters and analysts try to guess where prices will be in a year from now compared to inputs at planting, the estimates will bounce back and forth. My conclusion is estimates make good print.

Especially over the past couple of years, it has become painfully obvious that farmers need to become better at marketing their crops, but when it comes to what they plant, it is almost the exact opposite side of the coin. The costs of inputs and expenses are often known down to the penny. As soon as combines begin taking in old crop, the data is being collected and crunched, comparing costs with possible production settings to the coming year.

Before combines are washed up and put away, farmers are being visited by seed and input sales people, as it happened this past year before crops were marketed.

I’m simply trying to point out that now, mid-January, for many US farmers jumping back and forth over the fence of what should or shouldn’t be planted is good for fill on reports, but probably far from realistic. When it is estimated that 70 plus percent of old crop corn needs to be sold, estimated what will be planted for the coming year is putting the cart before the horse.

Review Last Months Recommendation – Buying Corn

At the end of December, I suggested buying calls or selling puts against short corn futures or taking profits on part of short futures positions. Now that Argentine grain is moving in the pipeline and soon US farmers will move more old crop grain for cash flow needs, I suggest:

  1. Selling Futures.
  2. Selling Calls
  3. Liquidating Short Puts

DECEMBER 2016 GLOBEX CORN AT 1:00PM JAN 2, 2016

December corn, if it moves up to the overhead line (green) around $3.93 will be about an 18 cent move off the low. If holding old crop, take advantage of the front month basis in most areas of the Midwest that is tighter than back months. Do not buy calls to replace cash sales; instead sell calls. For instance; July 2016 corn $3.80 calls as I write are near 20 cents with July at $3.77. To breakeven July futures would need to be above $3.97.

Chart from eSignal Interactive

Today Grain Future

Corn futures closed 4 to 5 cents higher on the day. According to EIA data, US ethanol production increased to average 943,000 barrels per day last week, which was up 16,000 b/d from the week before. Stocks of ethanol were down 400,000 at 17.9 million barrels as the reduced July 4 week production was smaller than demand. Ethanol imports averaged 5,000 bpd. Private exporters reported to the USDA export sales of 210,448 MT of corn to unknown destinations for delivery during the 2014/2015 marketing year. In other export news, South Korean buyers were said to have bought 55,000 MT of optional origin corn for December arrival. Trader talk is the EU is now enforcing a €5.32/t import duty ($7.20/MT) on corn in response to US prices dropping below the EU reference price.

Sep 14 Corn closed at $3.78 1/4, up 4 1/4 cents,
Dec 14 Corn closed at $3.86 3/4, up 5 cents,
Mar 15 Corn closed at $3.98 1/2, up 5 1/4 cents
May 15 Corn closed at $4.06 3/4, up 5 cents

Soybean futures closed 6 to 17 cents higher. Private exporters reported to the USDA export sales of 120,000 metric tons of soybeans to China for delivery during the 2013/2014 marketing year; as well as an additional 240,000 MT of soybeans to unknown destinations for delivery during the 2014/2015 marketing year. Chinese futures prices for September have dropped below $19 per bushel, but the import spread is still very attractive even with tariffs and freight. There is also potential for a widespread strike in Argentina. Trader talk is that South Korea’s MFG is tendering for up to 55,000 MT of soy meal.

Aug 14 Soybeans closed at $11.87 1/4, up 6 3/4 cents,
Sep 14 Soybeans closed at $11.21 1/2, up 17 1/4 cents,
Nov 14 Soybeans closed at $11.02, up 15 3/4 cents,
Jan 15 Soybeans closed at $11.10 1/2, up 15 1/2 cents,
Aug 14 Soybean Meal closed at $383.70, up $4.60,
Aug 14 Soybean Oil closed at $36.83, down $0.07

Wheat futures closed mixed, with Chicago fractionally higher. Trader talk is that Algeria has tendered for 50,000 MT of milling wheat for October shipment. The Russia Ag Ministry has commented their total grain harvest will be 100 MMT, which is up 3MMT from the previous forecast of 97 MMT. According to SovEcon, prices for Russian wheat have come down significantly as the new crop becomes available. Chicago futures are holding above a multi-year uptrend line dating back to 2005. Trade expectations for the weekly USDA Export Sales report are modest, as the reporting period includes the July 4 holiday weekend.

Sep 14 CBOT Wheat closed at $5.38, up 1/4 cent,
Sep 14 KCBT Wheat closed at $6.37 1/4, down 1 3/4 cents,
Sep 14 MGEX Wheat closed at $6.28, down 2 1/2 cents

Live Cattle futures settled $0.05 lower to $0.07 higher. Feeders were $0.72 to $1.07 lower. Wholesale beef prices were mixed. Choice boxes were 29 cents higher today at $250.82, with Select boxes down 60 cents at $242.86. The choice/select spread widened 89 cents. A few cash cattle trades have been reported at $155 today, with $244 in Kansas on a dressed basis. Asking prices are mostly in the $248+ range in the north. The CME Feeder Cattle Index was off $0.65 from the previous day at $216.12. Week to date FI slaughter at 344,000 head is down 6.5% from year ago.

Aug 14 Cattle closed at $147.675, up $0.050,
Oct 14 Cattle closed at $151.300, up $0.075,
Dec 14 Cattle closed at $152.050, down $0.050,
Aug 14 Feeder Cattle closed at $209.825, down $1.075
Sep 14 Feeder Cattle closed at $210.500, down $0.725
Oct 14 Feeder Cattle closed at $210.675, down $1.000

Lean Hogs settled $0.17 to $0.75 lower. The average pork carcass cutout value continues to rise seasonally, gaining 71 cents to $135.89 today. The volatile belly primals were down $4.92, but loins were quoted $5.50 higher. The CME Lean Hog Index has tacked on another $0.58 at $133.36. Cash hog prices in the Eastern Corn Belt (ECB) were not reported due to confidentiality rules. The WCB weighted average is down $1.35, with the IA/MN area values down $1.65 from the day before in the pm report. Week to date hog slaughter at 1.555 million head is down 32,000 from last week and off 4.4% from the same point in 2013.

Aug 14 Hogs closed at $130.525, down $0.175,
Oct 14 Hogs closed at $115.075, down $0.750
Dec 14 Hogs closed at $104.000, down $0.400

Cotton futures closed 14 to 24 points lower on the day. December futures on the ICE settled at the lowest reading for an “active month” since June 2012. October is ignored due to limited volume. China cotton futures on the Zhengzhou exchange for Jan delivery were up 0.50%. Cash trading for business to business sales was reported at 54 bales on the Seam. ICE Certified stocks were last reported at 321,455 bales, with 3,953 new certs, 49,712 decerts, and 6,384 bales awaiting review. The Cotlook A Index is down 0.50 at 83.05.

Oct 14 Cotton closed at 68.39, up 14 points,
Dec 14 Cotton closed at 67.64, down 11 points
Mar 15 Cotton closed at 68.3, down 24 points

 

Today Grain Future

Corn futures closed 5 to 9 cents lower on the day. The Sept 14 forged new low for the move at $3.71 before bouncing a few cents to finish at $3.74. Forecasts for much above normal temps in the WCB next week supported the market as crops there have limited deep root development after all the rain in June and early July. On the other hand, things are nice and cool for pollination. 34% of the US crop is now silking. The national crop condition was upgraded again this week with 76% in the good or excellent category. The Brugler500 index rose 2 points to 392.

Sep 14 Corn closed at $3.74, down 7 1/2 cents,
Dec 14 Corn closed at $3.81 3/4, down 6 1/2 cents,
Mar 15 Corn closed at $3.93 1/4, down 5 3/4 cents
May 15 Corn closed at $4.01 3/4, down 5 1/4 cents

Soybean futures closed steady to 16 cents lower on the day. It was a volatile session with the Aug 14 contract establishing a 42 cents range on the day. Earlier today, private exporters reported to the U.S. Department of Agriculture export sales of 120,000 MT of soybeans to China during the 2014/2015 marketing year. Approximately 41% of the national soybean crop has reached the blooming stage; four points ahead of the 37% average for this date. NE is 15 points ahead and MO is 8 points ahead of normal. The Brugler500 Index for crop condition was UNCH from last week. Condition ratings dropped in 10 of the 18 major states, but increased enough in 7 others to leave the index at 381. In the monthly NOPA report, both oil stocks and crush came in on the low side of the average trade expectations. Oil stocks were 1.847 billion pounds at the end of June; monthly crush was reportedly 118.72 mbu.

Aug 14 Soybeans closed at $11.80 1/2, down 16 1/2 cents,
Sep 14 Soybeans closed at $11.04 1/4, down 3 3/4 cents,
Nov 14 Soybeans closed at $10.86 1/4, unch,
Jan 15 Soybeans closed at $10.95, unch,
Aug 14 Soybean Meal closed at $379.10, down $9.50,
Aug 14 Soybean Oil closed at $36.90, up $0.02

Wheat futures closed steady to 8 cents lower on the day. The Sept 14 MGE Wheat contract displayed the most weakness and finished down more than a nickel. According to Sovecon, prices for Russian wheat have come down significantly as the new crop becomes available. USDA reported that HRW harvest has caught up to normal at 69% completed (vs. 68% average). Kansas was reported at 90% harvested, which compares to the 5 year average of 96%. Oklahoma is 97% harvested, just below the 5 year average of 98%. Spring wheat is 69% headed, also vs. a 5 year average of 68% for this week. The spring wheat crop condition rating improved by 1 point. Montana was reported at 68% headed, well ahead of the 5 year average of 54%.

Sep 14 CBOT Wheat closed at $5.37 3/4, unch,
Sep 14 KCBT Wheat closed at $6.39, down 7 1/4 cents,
Sep 14 MGEX Wheat closed at $6.30 1/2, down 8 3/4 cents

Live Cattle futures settled $0.67 to $1.07 higher on the day. Feeders were $0.67 to $1.07 higher. Wholesale beef prices were higher in the morning report, but lost some steam before the afternoon report. Choice boxes were off $0.61 at $250.53 and select boxes averaged $0.96 lower at $243.46. Cash cattle trade has not yet developed for the week, but a few isolated sales were reported between $152-$154, and dressed sales between $243 and $250. The CME Feeder Cattle Index was off $0.85 from the previous day at $216.77. Week to date estimated slaughter is 228K head, off 1K head from a week ago, and 14K head smaller than a year ago. USDA showed a slight deterioration in pasture conditions, with 55% of the acreage rated good or excellent, down from 56% the week before.

Aug 14 Cattle closed at $148.575, up $0.675,
Oct 14 Cattle closed at $151.850, up $0.975,
Dec 14 Cattle closed at $152.500, up $0.225,
Aug 14 Feeder Cattle closed at $211.525, up $1.075
Sep 14 Feeder Cattle closed at $211.825, up $0.900
Oct 14 Feeder Cattle closed at $211.775, up $0.675

Lean Hogs settled $0.22 to $0.50 higher. The average pork carcass cutout value was higher again today, up $0.33 at $135.18. That is the third time in five sessions with the afternoon carcass price reported North of $135. Estimated week to date slaughter is 760K head, 30K head smaller than last Tuesday, and 42K head smaller than the same period a year ago. The CME Lean Hog Index tacked on another $0.40 at $132.78. Cash hog prices in the Eastern Corn Belt (ECB) were not reported today. The WCB weighted average was down $0.88, with the IA/MN area values off $0.51 from yesterday.

Jul 14 Hogs closed at $133.875, up $0.500,
Aug 14 Hogs closed at $130.725, up $0.400
Oct 14 Hogs closed at $115.950, up $0.225

Cotton futures closed 35 to 54 points lower on the day, settling at the lowest price for the front month contract in more than two years. Smaller production prospects are unable to counter the large stocks. ICE Certified stocks were last reported at 367,214 bales, with 1,554 new certs, 16,653 and 9,703 bales awaiting review. The Cotlook A Index is up 0.20 at 83.55. USDA reported 70% of the crop is in the squaring stage; 24% is setting bolls. Cotton condition rating was 53% good/ex, down from 55% last week but above the 42% from year ago.

Oct 14 Cotton closed at 68.25, down 35 points,
Dec 14 Cotton closed at 67.75, down 55 points
Mar 15 Cotton closed at 68.54, down 54 points

 

Today Grain Future

Corn futures closed 4 to 7 cents lower on Wednesday. CONAB raised its Brazilian 13/14 corn production estimate to 78.2 MMT, which compares to the previous month forecast of 77.9 MMT. USDA pegged the Brazil crop at 76.0 MMT in its June report. According to EIA data, US ethanol production slowed to average 927,000 barrels per day, which was down 26,000 b/d from the week before. Stocks of ethanol were up 100,000 at 18.3 million barrels. Ethanol imports (the first in nearly two months) were reported at 9,000 bpd. Earlier this morning private exporters reported to the USDA the export sales of 101,600 metric tons of corn to Japan during the 2014/2015 marketing year; and export sales of 107,696 metric tons of corn to unknown destinations during the 2014/2015 marketing year. The trade average guess for US corn yield on Friday is 165.9 bpa, up from 165.3 in the prior report. Old crop ending stocks are expected to rise to 1.233 billion bushels, with the June 30 report suggesting smaller feed & residual use. New crop stocks estimates are mostly in excess of 1.8 billion bushels.

Jul 14 Corn closed at $4.04, down 4 1/4 cents,
Sep 14 Corn closed at $3.91 1/4, down 7 cents,
Dec 14 Corn closed at $3.98, down 6 1/4 cents
Mar 15 Corn closed at $4.09 1/2, down 6 1/4 cents

Soybean futures settled 4 3/4 higher to 14 lower. Brazil’s CONAB raised 13/14 soybean production to 86.3 MMT, this is up from 86.1 MMT in June but still below the most recent USDA estimate of 87.5 MMT. Trader talk is that Soybean acres in India are expected to drop to the lowest in five years because of the late monsoon season. There were 3 deliveries against the July 14 contract, bringing the MTD total to 35 lots. The trade average yield estimate for the Friday USDA reports is 45.1 bpa according to a Bloomberg survey. Trade expectations for the USDA weekly export sales report in the morning are in the 250,000 to 650,000 MT range, with some again expecting net cancellations for old crop.

Jul 14 Soybeans closed at $13.34 1/2, up 4 3/4 cents,
Aug 14 Soybeans closed at $12.46 1/2, down 2 cents,
Sep 14 Soybeans closed at $11.32, down 8 3/4 cents,
Nov 14 Soybeans closed at $11.03 3/4, down 12 1/2 cents,
Jul 14 Soybean Meal closed at $439.50, up $2.20,
Jul 14 Soybean Oil closed at $37.04, down $0.76

Wheat futures lower on all three exchanges, with double digit losses in the hard wheat markets. There were 18 deliveries against the July 14 CBOT contract overnight, bringing the MTD total to 258 lots. Official Russian wheat exports for last year (July 1-June 30) were 18.297 MMT. Egypt bought 240,000 MT of Romanian wheat for August shipment. US wheat was competitive on a FOB basis, but not after freight. A Bloomberg survey puts the average trade guess for all wheat production at 1.964 billion bushels vs. 1.942 billion in June. USDA will update the number on Friday morning. Traders are looking for USDA to show weekly export sales totaled 350,000 to 650,000 MT last week.

Jul 14 CBOT Wheat closed at $5.39 1/2, down 5 3/4 cents,
Jul 14 KCBT Wheat closed at $6.60 3/4, down 14 1/4 cents,
Jul 14 MGEX Wheat closed at $6.40, down 12 cents

Live Cattle closed $1.30 to $3.00 lower on the day. Feeders were limit down for a while, but both markets rallied back into the close. We suspect a big long or two getting out on trader talk of demand concerns. Wholesale beef prices were mixed in the afternoon report, , with choice boxes up $0.59 and select boxes down $.36. The price for choice was a record at $250.57. USDA reported moderate demand and moderate packer offerings. Cash cattle asking prices appear to be in the $160-162 vicinity with some reported basis trades at $157. The CME Feeder Cattle Index was up $.24 at $214.09.

Aug 14 Cattle closed at $150.800, down $2.725,
Oct 14 Cattle closed at $153.550, down $2.425,
Dec 14 Cattle closed at $154.050, down $1.300,
Aug 14 Feeder Cattle closed at $213.600, down $2.300
Sep 14 Feeder Cattle closed at $215.200, down $2.275
Oct 14 Feeder Cattle closed at $214.875, down $2.675

Lean Hogs closed 90 cents lower to $1.20 higher. The average pork carcass cutout value was $1.05 higher at $135.38 in the afternoon report. The CME Lean Hog Index is up another $0.83 at $130.08. Cash hog prices in the ECB and were not reported due to lack of receipts. The WCB carcass average was up $1.81, with the IA/MN area on average $2.01 higher. Estimated week to date slaughter is 1.187 million head vs. 1.215 million a year ago. That is a 2.4% drop.

Jul 14 Hogs closed at $133.300, up $1.100,
Aug 14 Hogs closed at $129.600, down $0.250
Oct 14 Hogs closed at $115.400, down $0.900

Cotton futures settled 54 lower to 46 higher. December was down for the 10th day in the past 11 sessions. There were 49 deliveries against the July 14 contract overnight, with New Edge being the largest stopper of 36 contacts. Today was the last trading day for July futures. ICE Certified stocks were last reported at 409,824 bales, with 5,941 new certs, 14,569 decerts and 17,846 bales awaiting review. The Cotlook A Index is unchanged at 85.25. USDA is expected to reduce projected abandonment in the Friday report, raising estimated production.

Jul 14 Cotton closed at 74.97, down 3 points,
Oct 14 Cotton closed at 70.55, up 46 points
Dec 14 Cotton closed at 69.67, down 43 points

 

Corn Futures Slump Below $4 for First Time Since 2010 – Bloomberg

Corn Futures Slump Below $4 for First Time Since 2010

Corn futures fell below $4 a bushel for the first time in four years on bets that rain will boost yields for crops in the U.S., the world’s biggest grower. Soybeans extended the longest slump since 2009.

Forecasts for cooler and wet weather in the Corn Belt over the next week will favor plants, Bethesda, Maryland-based Commodity Weather Group said in a report. The showers and mild temperatures are improving the outlook for U.S. production, already forecast by the government to climb to a record for the second straight season.

A bumper crop will help global stockpiles before the 2015 Northern Hemisphere harvest rise to the highest since 2000, a Bloomberg News survey showed. Soybean inventories will probably jump to a record, according to the average estimate by analysts. The prospect of bigger harvests are helping to keep a lid on world food inflation with the United Nations reporting prices in June down for the third consecutive month.

“Now, we have a situation where everything is perfect, and that will probably continue into the middle or end of July,” Dennis DeLaughter, an Austin, Texas-based market analyst at VantageRM.com, said in a telephone interview.

On the Chicago Board of Trade, corn futures for December delivery fell 1.5 percent to close at $3.98 a bushel at 1:15 p.m. Earlier, the price touched $3.95, the lowest for a most-active contract since July 29, 2010. The grain slumped into a bear market last week.

Global reserves may rise to 184.47 million metric tons, the Bloomberg News survey of 15 analysts showed. That would top the USDA’s June forecast of 182.65 million. The agency will update its outlook for world crops on July 11.

Crop Ratings

As of July 6, about 75 percent of the U.S. crop was in good or excellent condition, according to the USDA. About 15 percent of corn was pollinating, compared with 5 percent the previous week.

An index of 55 food items fell 1.8 percent to 206 from 209.8 in May, the UN’s Food & Agriculture Organization said on July 3. World prices were 2.8 percent lower than a year earlier.

Soybean futures for November delivery dropped 1.1 percent to $11.0375 a bushel. The price touched $11.0075, the lowest since Dec. 12, 2011. The price dropped for the eighth straight session, the longest slump since February 2009.

The USDA may raise its forecast for domestic production to 3.789 billion bushels from 3.635 billion estimated last month, according to Bloomberg’s survey. The corn harvest may be 13.931 billion bushels, similar to June’s projection.

Wheat futures for September delivery declined 0.9% to $5.5125 a bushel. The price touched $5.4775, the lowest since July 14, 2010.

To contact the reporter on this story: Lydia Mulvany in Chicago at lmulvany2

To contact the editors responsible for this story: Millie Munshi at mmunshi Patrick McKiernan, Joe Richter