KCG FUTURES PM GRAIN FUTURES COMMENTS

 Grain futures closed mixed as markets continued to consolidate the Friday/Monday rally.  Early weather forecasts indicated significant rain in NE Iowa Sunday night, but the noon forecast lowered expected rainfall to just light amounts.  All in all, the market is reacting to every weather forecast change nuance, but the trade is still concerned that yields are deteriorating and some of the crop will experience a freeze before the end of the growing cycle.

Tomorrow morning the USDA will release its Weekly Export Sales Report.  We are near the end of the 2012-13 marketing year for corn and beans and basis levels are heavily inverted, so it would not be surprising to see cancellations.  The amount of new crop sales will be interesting as many importers have been adding to coverage aggressively for shipment through the fall and early winter and don’t really need to chase the futures market higher.

Friday is First Notice Day for September futures deliveries.  Open interest has been dropping quickly, and both the front month futures spreads and domestic spot market basis levels have been erratic – but mostly working lower.

The wheat futures price structure is making a 180 degree turn as protein premiums have been heating up the last two days.  With so much row crop uncertainty, spring wheat farmers have been storing rather than selling their newly harvested wheat.  Commercials have been holding back on adding to inventory and now have begun to chase the market.  This has brought buying interest into the Long Minneapolis versus Short KC or Chi wheat spreads, as well as the Long KC versus Short Chi wheat spreads.  There are rumors that Brazil is interested in buying HRS as well as HRW to cover freeze damage to Brazilian and Argentine newly planted wheat as well continued wet weather in Brazil and dry weather in Argentina.

– Helen Pound

 

GRAIN FUTURES CLOSING PRICES AND CHANGE

Close – Rounded

 

CZ3

SX3

SMZ3

BOZ3

WZ3

KWZ3

MWZ3

Today’s Close

$4.81

$13.73

$429

$0.4478

$6.60

$7.10

$7.41

     Change

-6

+2

-1

+0.0026

-4

-1

+4

Total Open Interest

1,090,214

571,623

274,447

293,797

369,443

138,668

35,714

     Change

-22,176

+4,993

-346

-977

-7,339

-3,305

-1,290

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Grains

Corn

Soybeans

Soy Meal

Soy Oil

Wheat

KC Wheat

MN Wheat

September, 2013

+0.9 %

+1.3 %

%

+1.6 %

%

+0.6 %

-0.7 %

-0.1 %

+0.7 %

December, 2013

-1.1 %

+0.2 %

-0.1 %

+0.6 %

-0.6 %

-0.1 %

+0.5 %

July, 2014

-0.9 %

+0.6 %

+0.7 %

+0.5 %

-0.7 %

+0.0 %

+0.5 %

OVERNIGHT PERCENT CHANGE IN FUTURES VALUE

Macros

 

Dollar

10 Year

S&P 500

Crude Oil

Copper

Gold

Silver

Percent Daily Change

+0.3 %

-0.4 %

+0.5 %

+0.8 %

-0.8 %

-0.1 %

-1.1 %

TERM STRUCTURE

Carries (Inverses) – Rounded

 

Corn

Soybeans

Soy meal

Soy Oil

Wheat

KC Wheat

MN Wheat

September – December

(23 1/2)

(60 1/4)

(34)

0.0047

13

4

6

     Percent Full Carry

(115 %)

(346 %)

(345 %)

70 %

63 %

12 %

23 %

December – July 2014

26

(63)

(32)

0.0090

13

3

24

     Percent Full Carry

55 %

(87 %)

(137 %)

57 %

27 %

6 %

38 %

INTERMARKET SPREADS

                                                                    Rounded

 

W-C

S-W

S-C

S/C

BC*

MW-W

MW-KW

KW-W

September

142

787

929

2.84 %

74

88

28

60

December

179

713

892

2.86 %

64

81

30

51

July 2014

166

638

804

2.59 %

67

92

51

41

*BC = Synthetic Soybean Crush
COMPARISON OF CURRENT FUTURES PRICE AND JANUARY (F) CROP REPORT LOWS – percent of Low
  Low (F)

Monday

8.19

8.20

8.21

8.22

8.23

Monday

8.26

8.27

8.28

CU3

592

83 %

82 %

84 %

82 %

84 %

87 %

84 %

85 %

CZ3

570

85 %

83 %

85 %

81 %

82 %

88 %

85 %

84 %

CN4

592

86 %

85 %

86 %

83 %

84 %

89 %

86 %

86 %

 

 

OU3

350

110 %

109 %

110 %

109 %

104 %

101 %

104 %

107 %

OZ3

338

99 %

99 %

99 %

98 %

98 %

102 %

103 %

103 %

ON4

409

84 %

84 %

81 %

80 %

79 %

84 %

85 %

85 %

 

 

WU3

765

84 %

83 %

83 %

82 %

83 %

86 %

85 %

85 %

WZ3

779

84 %

83 %

83 %

82 %

83 %

86 %

85 %

85 %

WN4

775

86 %

85 %

85 %

85 %

85 %

88 %

87 %

87 %

 

 

KWU3

876

86 %

85 %

86 %

85 %

85 %

87 %

87 %

87 %

KWZ3

830

85 %

84 %

85 %

84 %

84 %

86 %

86 %

86 %

KWN4

790

90 %

89 %

89 %

88 %

88 %

91 %

90 %

90 %

 

 

MWU3

860

87 %

85 %

85 %

84 %

83 %

85 %

85 %

85 %

MWZ3

858

87 %

86 %

86 %

85 %

84 %

86 %

86 %

86 %

MWN4

890

86 %

85 %

85 %

85 %

84 %

86 %

86 %

86 %

 

 

SU3

1288

103 %

102 %

103 %

103 %

106 %

111 %

110 %

111 %

SX3

1259

104 %

103 %

104 %

102 %

105 %

110 %

109 %

109 %

SN4

1287

97 %

97 %

97 %

97 %

99 %

102 %

101 %

102 %

 

 

SMU3

369

114 %

112 %

114 %

112 %

117 %

124 %

124 %

126 %

SMZ3

353

115 %

114 %

116 %

113 %

119 %

124 %

122 %

122 %

SMN4

365

104 %

104 %

105 %

104 %

107 %

110 %

108 %

109 %

 

 

BOU3 49.81

87 %

86 %

86 %

85 %

86 %

89 %

89 %

89 %

BOZ3 49.00

89 %

88 %

88 %

87 %

88 %

92 %

91 %

91 %

BON4 49.92

89 %

88 %

88 %

87 %

88 %

91 %

91 %

92 %

 

  • +   Jan lows occurred in anticipation of bearish Production, Stocks, Winter Wheat Seeding, and WASDE reports.  Instead the Jan reports were friendlier than expected, with less than expected US stocks and tighter world carryover.
  • –  The USDA February report showed just a few changes – more wheat feeding – but was viewed as “not bullish”.  South American and US crop growing weather improved during February.
  • -/+  The feature in the USDA March report was an increase of 100 mln bu of US corn feeding offset by 75 million bushels fewer US corn exports and an additional 25 million bushels of US corn imports.
  •   The March Quarterly Stocks report was a bearish surprise with grain stocks above estimates – and corn stocks well above trade estimates forcing corn limit down.
  • -/+  The April S+D report showed World carryover for corn, beans and wheat above the high end of the analysts’ range of guesses.  US carryover didn’t increase as much as suggested by the Stocks report – with bean carryover unchanged at pipeline needs.  Cool, wet weather delayed planting and reduced HRW quality.
  •   The May S+D report showed increased South American corn production, as well as increased South American old crop corn and bean carryover as China reduced old crop imports.  US old crop bean and corn stocks continue to be exceedingly tight.  New crop US and World corn, bean and wheat carryover were larger than the average guesses.  Planting weather is erratic, and analysts expect some corn, bean and spring wheat acres to go unplanted.
  • -/+  The June S+D report showed another increase in ‘12-13 South American corn production, but a decrease in bean production.  The ‘13-14 S+D showed reduced Ukraine and Russian wheat production, as well as lower US corn production.  World wheat supplies continue to be abundant, while world corn and bean supplies are expected to become more comfortable as US new crop is harvested this fall.  In contrast, US bean supplies are expected to remain exceedingly tight.
  • +   The 6.28.13 Quarterly Stocks Report was a bullish surprise which showed less than expected corn and bean stocks with greater than expected March-May use.  
  • –  The 6.28.13 Acreage Report was a bearish surprise which showed harvested corn acres up 2% from last year and up 1% for beans.  In addition, yields are expected to be much improved over last year.  Harvested wheat acres are expected to be down 7% from last year – with many less HRW and HRS acres, but many more SRW acres.  This was somewhat offset by heavy old crop HRW and HRS stocks and less abundant SRW stocks.
  • -/+   The July S+D was the most neutral report that the USDA has issued in a while, with changes mostly well within the range of guesses.  New crop US carryover for soybeans remains quite tight (but more abundant than old crop) and corn remains tight (but much more abundant than old crop), while wheat carryover is finally moving back to more normal levels (much less than the overly abundant carryover of the past several years).  Improving weather has supported new crop quality and progress, and weighed on prices. 
  • +     The August S+D Report was a bullish surprise as the USDA cut yield and production estimates for US new crop corn and beans. The result was reduced US and World carryout.  Carryout as a percent of use for new crop beans dropped to 6% (-2%) – indicating exceedingly tight new crop supplies but still better than the 2012-13 C/U% of 4%.  Corn C/U% is also tight at 14 %.  Tight stocks create volatile responses to changes in the weather forecast.  Last Half August US weather turned hot and dry, and sparked a short covering rally.

 

 

 

KCG FUTURES   PM GRAIN FUTURES COMMENTS

 

Grain futures closed mixed as markets continued to consolidate the Friday/Monday rally.  Early weather forecasts indicated significant rain in NE Iowa Sunday night, but the noon forecast lowered expected rainfall to just light amounts.  All in all, the market is reacting to every weather forecast change nuance, but the trade is still concerned that yields are deteriorating and some of the crop will experience a freeze before the end of the growing cycle.

Tomorrow morning the USDA will release its Weekly Export Sales Report.  We are near the end of the 2012-13 marketing year for corn and beans and basis levels are heavily inverted, so it would not be surprising to see cancellations.  The amount of new crop sales will be interesting as many importers have been adding to coverage aggressively for shipment through the fall and early winter and don’t really need to chase the futures market higher.

Friday is First Notice Day for September futures deliveries.  Open interest has been dropping quickly, and both the front month futures spreads and domestic spot market basis levels have been erratic – but mostly working lower.

The wheat futures price structure is making a 180 degree turn as protein premiums have been heating up the last two days.  With so much row crop uncertainty, spring wheat farmers have been storing rather than selling their newly harvested wheat.  Commercials have been holding back on adding to inventory and now have begun to chase the market.  This has brought buying interest into the Long Minneapolis versus Short KC or Chi wheat spreads, as well as the Long KC versus Short Chi wheat spreads.  There are rumors that Brazil is interested in buying HRS as well as HRW to cover freeze damage to Brazilian and Argentine newly planted wheat as well continued wet weather in Brazil and dry weather in Argentina.

– Helen Pound

 

 

WORLD CORN PRODUCTION / TRADE / CARRYOVER –mmt – AUG 2013 

 

13-14

12-13

13-14

12-13

13-14

12-13

 
 

Prod

Prod

Trade

Trade

C/U %

C/U %

 
World

957.2

855.1

15 %

13 %

Huge production increase over last year
 

 
Exporters

Export

Export

 
 US

349.6

273.8

31.1

17.8

14 %

7 %

Heat and scattered light rains during the last two weeks of Aug are helping to push maturity, but also stressing drier areas – and cutting yield – southern harvest well underway
 Argent

27.0

26.5

18.5

19.0

3 %

3 %

Expect exports through Fall and Winter – fall planting begins in several weeks into dry soil
 Brazil

72.0

77.0

18.0

22.0

18 %

15 %

2nd crop harvest near complete – expect sizable exports through Fall and Winter
 Ukraine

26.0

20.9

18.0

13.5

10 %

4 %

Eastern Ukraine has been hot and dry, but situation improving
 S. Africa

13.0

12.2

2.0

1.9

25 %

27 %

 
 

 
 

 
Importers

Import

Import

 
 Japan

0.0

0.0

15.5

14.5

4 %

4 %

Buying corn from S Am and Black Sea much cheaper than US prices
 Mexico

22.0

21.5

8.0

6.5

7 %

5 %

Mostly favorable growing conditions
 

 
S Korea

0.1

0.1

8.4

8.0

16 %

18 %

Buying corn from S Am and Black Sea
 SE Asia

26.4

24.7

8.0

7.4

6 %

7 %

Improved harvest conditons
 Egypt

5.6

5.8

5.2

4.0

8 %

12 %

 
 EU-27

65.0

58.5

7.5

10.5

8 %

8 %

Weather erratic
 

 
China

211.0

205.6

7.0

3.0

24 %

29%

Too wet northeast, but improving
 

Hot, dry south but improving

*C/U%  is Carryover as a Percent of Use

Total world corn imports 102 mmt – exports 104 mmt

SE Asia- Indonesia, Malaysia, Philippines, Thailand, and Vietnam

 

WORLD BEAN PRODUCTION / TRADE / CARRYOVER – in mmt – AUG 2013

 

13-14

12-13

13-14

12-13

13-14

12-13

 
 

Prod

Prod

Trade

Trade

C/U %

C/U %

 
World

281.7

268.1

19%

17 %

Moderate increase in world supplies
 

 
Exporters

Export

Export

 
 Brazil

85.0

82.0

41.5

37.9

26 %

24 %

Expect aggressive exports through Fall – Expect increased acreage
 US

88.6

82.1

37.7

36.2

7 %

4 %

Tight supplies continue – High basis levels may cut world market share
 Argentina

53.5

50.2

13.7

7.8

52 %

56 %

Expect aggressive exports through Fall
 

 
 

 
Importers

Import

Import

 
China

12.5

12.8

69.0

59.0

18 %

15 %

Northeast has been too wet, but is improving
 

East-Central has been hot, dry but is improving
 EU-27

1.2

1.0

12.1

12.2

2 %

3 %

 
 Mexico

0.3

0.3

3.6

3.7

1 %

1 %

 
 Japan

0.2

0.2

2.8

2.9

3 %

5 %

 

*C/U%  is Carryover as a Percent of Use

Total world bean imports 105 mmt – exports 107 mmt

Also note that Argentina charges a 35% tax on exports.

 

WORLD WHEAT PRODUCTION / TRADE / CARRYOVER in mmt – AUG 2013

 

13-14

12-13

13-14

12-13

13-14

12-13

 
 

Prod

Prod

Trade

Trade

C/U %

C/U %

 
World

705.4

655.2

20 %

21 %

Large increase in world supplies
 

 
Exporters

Export

Export

 
 US

57.5

61.8

29.9

27.5

23 %

30 %

North American Spring wheat harvest is beginning to ramp up  – protein is expected to be well below 14%.  – Sizable protein premiums developing for good quality, higher protein wheat
 Australia

25.5

22.1

19.0

19.0

13 %

13 %

An aggressive seller –especially to China – Freeze in east last week may have caused some damage in reproducing wheat – irrigated wheat more mature and more vulnerable – unirrigated wheat needs rain
 

West and southeast conditions more favorable
 Canada

29.5

27.2

20.0

18.8

18 %

17 %

Today’s StatsCan production report showed wheat production at 30.5 mmt – recent warmth has accelerated growth
 EU-27

141.4

133.1

22.0

22.0

8 %

7 %

Aug report increased production 3 mmt and exports 2 mmt over July report
 

Eastern Europe -Aggressive seller to Middle East and North Africa – cheaper than US
 Russia

54.0

37.7

17.0

11.1

12 %

12 %

Aggressive seller to Middle East and North Africa – Much cheaper than US
Kazakhstan

17.0

9.8

9.5

6.5

19 %

22 %

Production and exports up 2.5 mmt from July report – aggressive seller
 India

92.5

94.9

5.5

6.5

21 %

27 %

Less aggressive seller as they only want to sell high priced exports
 Argentina

12.0

10.0

6.0

4.0

6 %

1 %

Production and exports down 1 mmt from July report – concerns about freeze damage in newly planted crop
 Ukraine

21.5

15.8

10.0

7.0

11 %

12 %

Production and exports up 2 mmt from July report.
 

Aggressive seller to Middle East and North Africa – cheaper than US
 

 
 

 
Importers

Import

Import

 
 N Afr

20.4

17.2

20.6

21.2

24 %

27 %

Political problems in Egypt may limit imports
 M East

20.0

17.4

18.9

20.2

32 %

27 %

Imports up 1.6 mmt from July report – but political problems in region may limit imports – favorable weather for harvest
 SE Asia

0.0

0.0

16.4

15.4

20 %

22 %

Buying from Australia
Brazil

4.8

4.3

7.5

7.7

13 %

9 %

Aggressively buying US HRW and Canadian Spring wheat to offset South American freeze issues – now indicating more damage than originally thought -weather continues to be unseasonably wet
China

121.0

121.0

9.5

3.2

45 %

43 %

Imports up 1 mmt from July report
 Pakistan

24.0

23.3

0.9

0.2

14 %

12 %

 

*C/U%  is Carryover as a Percent of Use

Total world wheat imports 149 mmt – exports 144. mmt

M East-  Lebanon, Iraq, Iran, Israel, Jordan, Kuwait, S Arabia, Yemen, UAE, and Oman

N Afr- Algeria, Egypt, Libya, Morocco and Tunisia 

SE Asia- Indonesia, Malaysia, Philippines, Thailand, and Vietnam

 

 

 

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