SunPrairie Grain Morning Comment
MINOT - Apr 11/14 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.
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Market Outlook as of 8:50 AM CDT:
Wheat is 0-4 lower, increased US supplies continue to weigh on the market (Mpls May last trade 7.01, KC May 7.20 ¼)
Soybeans are down 10-18 cents, Chinese defaults have the market concerned about further demand (July last trade 14.45 ¼)
Corn is down 1-3 cents, follow wheat and soybean prices, some planting has begun in the US (July last trade 5.06 ¼)
Sunflowers are down 10-20 cents, weaker oilseeds in general will push sunflower prices lower
Canola is 10-20 cents lower, selling pressure spurred by soybean complex losses
The grain futures look to finish out the week on a lower note if early trade is any indication. Markets are very focused on US weather and price swings happen with every forecast change. Recent forecasts call for pretty favorable weather across much of the US corn producing areas for the last half of April. The US dollar is a bit higher this morning but gains could be limited as the Fed has indicated that core interest rates will remain low for the time being, indicating that the US economy could still be struggling. Crude prices were lower but have turned to about 10-15 cents per barrel higher.
Weekend rains are expected to fall to some areas of the US hard red winter wheat belt. However, the driest areas are expected to miss out on receiving any precipitation. As I've mentioned before, it is not certain that rain at this point would benefit the most heavily drought damaged areas anyway. Russian exports for the year have increased pretty substantially, which is not really great news for US exports as it means they have likely been sweeping up more business. Egypt is in the market for some grain and that could be lightly supporting prices. Spring wheat is about a penny higher at the moment but the other wheat markets are trading lower. The increase in US ending stocks will continue to limit gains for wheat prices until more can be learned about the state of the winter wheat crop.
Soybeans are focusing primarily on demand right now, which really does not look too great with all that's going on with China. There are estimates that as many as nearly half of a million metric MTof US soybeans are being defaulted on by China. This makes one wonder how many soybeans can possibly be shipped to China if they are not paying for some of what they have already received? Argentina had a pretty big labor strike take place and that resulted in grain movement being slowed down, which is pretty inconvenient given the strike is smack dab in the middle of soybean harvest. Canola and sunflower prices will probably take direction today from a falling soybean complex and finish the day lower ahead of the weekend.
At the end of my update is an article that was sent to me by a CHS Hedging analyst regarding Chinese corn imports and the GMO issue. It's pretty interesting and worth the read. As I said above, planting has begun in some areas of the US but the marketplace is still expecting a late spring. However, it seems once growers start that seeding progresses pretty rapidly and planting progress numbers increase quickly. The balance of the month is expected to see fairly favorable weather so we could get rolling along. For now the market is neither willing to take the weather premium out of futures or add any additional premium either. As has been the case lately, we will continue to be very sensitive to changes in weather forecasts.
Have a great weekend!
DJ DJ US Corn Exports To China Dry Up Over GMO Concerns
(FROM THE WALL STREET JOURNAL 4/11/14)
By Jacob Bunge
China's tougher stance on imports of genetically modified corn is roiling U.S.
agribusiness, largely halting trade in the biggest U.S. crop in its fastest
growing market. By one industry estimate, exports are down by 85% compared with
last year.
Since mid-November, China repeatedly has refused shipments of U.S. corn,
saying officials detected that some contained a genetic modification developed
by Syngenta AG that Beijing hasn't approved.
The rejections have hurt grain-trading companies such as Cargill Inc. and
fueled frustration with what some U.S. executives say is Beijing's opaque
regulatory process when its clout as an importer is growing. China is the
world's fastest-growing market for corn.
Some U.S. industry observers suspect China is using concerns over the Syngenta
product to cover commercial motives.
In the first full tally of the impact, a U.S. grain-industry group says the
rejected shipments have come to nearly 1.45 million metric tons. That is far
more than the 545,000 tons that Beijing has reported and the roughly 900,000
tons that has circulated in news media.
The rejected shipments have cost grain companies $427 million from lost sales
and reduced prices for China-bound shipments that must be resold elsewhere, the
National Grain and Feed Association says in a report to be released as soon as
Friday. The figure includes corn and related products. China's scrutiny of the
Syngenta product also has affected the price of corn and soybeans, translating
to hundreds of millions of dollars in losses for farmers, according to the
report.
The trade association, which bases its tally on data from exporting companies,
says U.S. corn exports to China have dropped to just 171,000 tons since January,
down 85% from the same period last year.
Industry executives say the issue has hobbled U.S. corn exporters as they face
heightened competition from other countries, such as Ukraine and Brazil.
"It's a watershed-type of moment," says Gary Martin, president of the North
American Export Grain Association, which also represents U.S. commodity
merchants and whose members contributed data to the study. "It's pretty dramatic
if the U.S. can't supply the Chinese market."
Cargill, one of the world's biggest agriculture companies, this week said
China's rejections were a main factor behind a 28% decline in its latest
quarterly earnings.
Big seed companies such as Syngenta, Monsanto Co. and DuPont Co. generally are
aligned with traders like Cargill and Archer Daniels Midland Co. in the desire
to grow and sell as much grain as possible. The traders have embraced farmers'
use of genetically modified seeds, introduced in the U.S. in 1996, which
proponents say have helped increase yields.
But the seed companies and traders now are debating who should shoulder the
costs for the rejected shipments.
The North American Export Grain Association, which includes ADM and Cargill,
has called on seed companies to fully bear the risks and liabilities from
selling their products. It also has objected to introducing seeds with genetics
that haven't secured approvals in major markets. Grain groups have called on
Syngenta to stop selling such seeds until China grants approval.
Syngenta has rejected those calls and this year introduced a new corn seed
that China hasn't approved. The company declines to say if the seed companies
should bear financial responsibility for rejected shipments.
The episode reflects international discord over genetically modified seeds,
which are altered to make them resistant to pests or to certain herbicides.
Critics say genetically modified crops cause increased use of some chemicals
and could pose health concerns. Some countries, particularly in Europe, maintain
tighter restrictions on genetically modified seeds than does the U.S., where
such seeds are used for 90% of the corn crop.
China has approved some types of genetically modified crops, but its approval
process often takes longer than in other big countries, U.S. industry executives
say. China also allows its port officials to reject an entire cargo of corn if
even one kernel has an unapproved gene, exporters say.
China, long a significant importer of soybeans, suddenly has become a major
corn buyer. It purchased an estimated 5 million tons of foreign corn last year,
up from 47,000 tons in 2008, according to the USDA.
China began rejecting shipments of U.S. corn in November after tests found
that some cargoes contained Agrisure Viptera, a Syngenta strain engineered to
produce proteins that ward off bugs such as the corn borer and black cutworm.
Syngenta has sold Viptera since 2011 to farmers in the U.S., Argentina and
Brazil, with their governments' approval. The Basel, Switzerland, company says
it submitted the product for Chinese approval in 2010.
China's Agriculture Ministry is evaluating Syngenta's application, which was
incomplete, the agency says.
Syngenta says it submitted additional information last month.
Some people in the U.S. agricultural industry suspect that Beijing has
competitive motives. Chinese officials have voiced concern about overreliance on
U.S. corn, which makes up more than 90% of its corn imports. Nearly all of
China's corn is homegrown, however, and the country harvested its own bumper
crop last year.
"It's 100% economics," says Karl Setzer, a market analyst for MaxYield
Cooperative in West Bend, Iowa. "If China was facing a corn shortage or really
needed the corn, it wouldn't be a problem, because they've probably been
importing that [Syngenta variety] for the last three years."
A spokesman for China's embassy in the U.S. says it reviews imports according
to relevant laws and regulations and that the review process for genetically
modified crops "is open and transparent."
Exports account for only about 12% of the U.S. corn crop, but China's rapid
growth gives the country an outsize influence over prices.
Grain traders say Syngenta and other seed companies should be cautious about
selling farmers seeds that aren't approved in major markets such as China.
Cargill, ADM and Bunge Ltd., another big grain trader, have restricted their
purchases of corn grown with the Syngenta seeds, to help avoid further
disruptions. Still, the grain-company executives say it is impractical for them
to police which corn is grown with which seeds when the crops are purchased from
farmers.
Syngenta this year started selling a new corn variety called Duracade in the
U.S. that the company says isn't likely to be approved in China until next year
at the earliest. Syngenta says farmers need the new corn it has introduced to
combat insects that are resilient to established pesticides.
Taking the products off the market "would mean that it is the Chinese
regulatory system -- currently not functioning in a predictable or timely manner
-- which will decide which tools are going to be available to U.S. corn growers
in the future," David Morgan, Syngenta's director for North America, has written
to grain groups.
Some people say the grain industry needs to get better at trading products
geared toward certain buyers. Gavilon LLC, a Nebraska grain-trading company
owned by Japan's Marubeni Corp., approached Syngenta this year about a
commitment to buy Duracade corn. That would provide a market for farmers who
bought the seeds but risk rejection by other grain companies.
---
Chuin-Wei Yap and Tony Dreibus contributed to this article.
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(END) Dow Jones Newswires
04-11-14 0005ET
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Kayla Burkhart
Broker/Procurement
SunPrairie
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Kayla Hoffman
SunPrairie Grain
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