SunPrairie Grain Morning Comment
MINOT - Jul 1/14 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.
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Market Outlook as of 8:30 AM CDT July 1, 2014:
Wheat is down 5-10 cents, following row crops, some demand news around may limit losses (Mpls Sept last trade 6.74, KC Sept 6.93 ¼)
Soybeans are 22-25 lower, selling pressure continues, USDA reports were obviously not favorable, more stocks and acres than expected were reported (Aug last trade 13.06 ½)
Corn is 7-8 lower, higher stocks, strong acres and lack of weather concern make for lower futures markets
Sunflowers are down 0-5 cents, bean oil warding off losses in the soybean and soybean meal markets
Canola is unchanged - markets closed today for Canada Day
I'm assuming I have a few more interested readers today as you look for some insight as to why the markets are completely tanking. No worries - I'll get you filled in. The USDA released its Quarterly Stocks and Planted Acres reports yesterday morning and they are not at all friendly for grain prices. Losses are continuing as selling pressure is abundant and crop ratings still remain strong so it is really tough for grains to tread water today. As far as recent rainfall goes the market is largely shrugging it off and noting that there are no heat stress or drought concerns to speak of for the corn or soybean crops in the near future.
I'll start by copying in tables sent to me from CHS Hedging that best sum up the information from yesterday's reports.
Trade estimates for Monday's U.S. quarterly stocks:
In million bushels
Corn
Soybeans
Wheat
June
3.854
.405
.590
Average
3.722
0.378
0.598
Low estimate
3.046
.334
.560
High estimate
3.950
.440
.633
USDA March 1, 2014
7.006
0.992
1.056
USDA June 1, 2013
2.766
0.435
.718
2014 Seeding estimates in million acres:
Corn
Soybeans
All wheat
Spring wheat
Durum wheat
June
91.64
84.84
56.47
12.71
1.470
Average
91.725
82.154
55.818
11.860
1.790
Low estimate
91.000
80.500
54.800
10.500
1.694
High estimate
92.200
84.000
57.000
12.200
1.900
USDA March 1, 2014
91.691
81.493
55.815
12.009
1.799
USDA 2013 final
95.365
76.533
56.156
11.596
1.470
Ryan Kelbrants
Market Analyst
So looking at the quarterly stocks numbers you can see that June 1 corn stocks from 2013 to 2014 increased substantially, meaning that there is a heck of a lot of old crop corn that still needs to be marketed by growers. Also, note that the estimate of 3.854 million bushels for June 2014 stocks is well above the average estimate of 3.722 millbu. In addition to higher than expected stocks numbers, there was not the decline in acres that many in the marketplace expected to see. Sure, the average estimate was for corn acres to increase just slightly from the March intentions number. However, many thought that planted acres could come in below the March number of 91.691 million acres. The market already knew that corn acres were down from last year so it isn't really a surprise to see that this year's acres are about 3.5 million less than last year's. Additionally, growing conditions have the market expecting high yields for this year's crop and that sets a lower tone for the corn markets.
Now let's take a glance at soybeans. The soybean market (especially old crop) has been finding a lot of strength lately and that has been mostly due to incredibly tight supplies. So what does the USDA do? They find more soybeans! If you take a look at the average guess for June 1, 2014 stocks you can see the market was expecting the USDA to pin stocks at 378 million bushels...instead the USDA came out at 405 million bushels. So old crop values crumbled yesterday. Then you read a little lower and notice the acreage numbers. It looks like we found some soybean acres! The March estimate for soybean acres was 81.493 million, the average estimate for 2014 acres was 82.154 million...the USDA pegged US acres for 2014 at 84.84 million. So down went new crop prices.
Wheat stocks seem to be the only sort of glimmering light from the USDA yesterday. Stocks were expected to be at 598 millbu and were reported at 590 millbu, lower than last year's 718 millbu. Despite lower stocks this year, though, the US and world are still sitting at very comfortable supply levels. All wheat acres increased from the March estimate by about half a million with most of that going to the "other" spring wheat category. Durum wheat acres were lower than the market expected and the March estimate. North Dakota reportedly has its fourth smallest durum crop on record currently in the ground. Also, there are a large number of abandoned winter wheat acres noted as Kansas, Texas and Oklahoma harvest their smallest crop since 1957 I'm told. However, crops in South Dakota and Montana are making up for some of the drought problems of the southern crop.
In addition to the above reports the USDA also released its weekly crop progress and conditions report. Crop conditions, despite recent rain events, remain very strong. I'll sum it up quickly. US corn is rated 75% good to excellent which is actually a 1% increase from last week. ND corn is 81% g/e which is a 4% drop last week and not at all surprising given the rain and cool temps. Beans are rated 72% g/e in the US, same last week. ND beans are 81% g/e, which is a 4% drop. Despite the wet weather, ND sunflowers are 97% planted, ahead of average pace. US sunflowers are 91% planted, 2% behind the average pace. Overall spring wheat is rated 70% good to excellent with ND spring wheat at 83% good to excellent (same rating as last week). Barley is 68% good to excellent which is a 1% increase from last week. ND barley is 79% g/e.
Looking forward I'm not overly optimistic about prices. I feel like the decline in the soybean market has been coming and it just took this report to make it happen. Unless something huge happens with the weather (and there can always be surprises), it looks like we have a heck of a crop coming and that is not conducive for higher prices. An estimate I saw yesterday called for $10 November soybean futures and $4 December corn futures. That would be about $1.45 out of the bean market and $0.20 out of the corn market. Then basis values are at about -$1.00 so that puts you at cash soybean prices of around $9 for beans and $3 for corn, if those estimates are accurate and basis levels stay where they are at. We could see some rebounds as prices recover a little from heavy losses but it seems the overall trend for prices is lower.
Sorry this is out a bit late but there was a lot of information out and I wanted to make sure I did my best to cover it - even if you've already seen it.
Kayla Burkhart
Broker/Procurement
CHS SunPrairie
kayla.burkhart
To discuss this report further or for specific trade ideas please contact me
directly
Kayla Hoffman
SunPrairie Grain
Kayla.Hoffman@chsinc.com
Toll free: 800.735.4956
Local: 701.852.1429
Fax: 701.839.5515
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