1 Early Call 8:45am EST: Corn up $.01, soybeans steady, wheat up $.05. The grain and oilseed complex traded steady to higher overnight into Wednesday morning. Look for continued volatility Wednesday in equities with DJIA futures swinging wildly again overnight. The U.S. dollar was stronger again, putting pressure on the energy complex while metals traded mostly higher. Softs were mostly lower, with cotton able to post small gains. The index fund roll is expected to start today, which will boost CBOT volume at the close. Grains: Grain and soybean futures bounced Tuesday as traders bet that hot and dry weather in Argentina would create an opportunity for U.S. exporters. Argentina, a major producer of corn and soybeans, struggled through heat and dryness for large parts of its growing season. Rain later this week and over the weekend is expected partially relieve crops, forecasters said, before difficult conditions return next week. As a result, analysts expect the USDA to lower its production estimates for the South American country in its monthly supply-and-demand report tomorrow. That could create more opportunity for U.S. exporters to fill the void. Global sales of American corn have recently picked up. The USDA said on Tuesday morning that exporters sold 120,000mt of the grain to Japan alongside a further 105,000mt to unidentified customers, both for 2017-18. U.S. corn is currently a bargain on the global market and both sales and shipments have picked up. The Argentine drought increases the odds that we could see corn production decline in the major producers. Grain and oilseed markets also benefited from a turnaround in chart signals, which traders interpreted as indications that prices hit a short-term bottom. That encouraged them to buy contracts ahead of the USDA's Thursday report. Soybean futures for March rose 1.7% to $9.86 1/4 a bushel at the Chicago Board of Trade. March corn contracts climbed 1.3% to $3.63 1/2 a bushel while March wheat gained 1.4% to $4.46 1/4 a bushel. The best chance of rain in Argentina is with a frontal passage from Saturday into Monday, with totals estimated in a range of .25-1.25”. The southern half of the Argentine ag belt looks to receive just .2-.6” of rain while the north sees totals near Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach 2/7/2018
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Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach · decline in the major producers. Grain and oilseed markets also benefited from a turnaround in chart signals, which
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Early Call 8:45am EST: Corn up $.01, soybeans steady, wheat up $.05. The grain and
oilseed complex traded steady to higher overnight into Wednesday morning. Look for
continued volatility Wednesday in equities with DJIA futures swinging wildly again
overnight. The U.S. dollar was stronger again, putting pressure on the energy complex
while metals traded mostly higher. Softs were mostly lower, with cotton able to post
small gains. The index fund roll is expected to start today, which will boost CBOT
volume at the close.
Grains: Grain and soybean futures bounced Tuesday as traders bet that hot and dry
weather in Argentina would create an opportunity for U.S. exporters. Argentina, a major
producer of corn and soybeans, struggled through heat and dryness for large parts of its
growing season. Rain later this week and over the weekend is expected partially relieve
crops, forecasters said, before difficult conditions return next week. As a result, analysts
expect the USDA to lower its production estimates for the South American country in
its monthly supply-and-demand report tomorrow. That could create more opportunity
for U.S. exporters to fill the void. Global sales of American corn have recently picked
up. The USDA said on Tuesday morning that exporters sold 120,000mt of the grain to
Japan alongside a further 105,000mt to unidentified customers, both for 2017-18. U.S.
corn is currently a bargain on the global market and both sales and shipments have
picked up. The Argentine drought increases the odds that we could see corn production
decline in the major producers. Grain and oilseed markets also benefited from a
turnaround in chart signals, which traders interpreted as indications that prices hit a
short-term bottom. That encouraged them to buy contracts ahead of the USDA's
Thursday report. Soybean futures for March rose 1.7% to $9.86 1/4 a bushel at the
Chicago Board of Trade. March corn contracts climbed 1.3% to $3.63 1/2 a bushel
while March wheat gained 1.4% to $4.46 1/4 a bushel.
The best chance of rain in Argentina is with a frontal passage from Saturday into
Monday, with totals estimated in a range of .25-1.25”. The southern half of the
Argentine ag belt looks to receive just .2-.6” of rain while the north sees totals near
Daily Grain / Hogs Marketing Outlook Written by: Jim Gerlach
2/7/2018
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1.00”. Rain was limited to the southwest fringes of Argentina overnight, with highs
mainly in the mid/upper 90s, with a few low 100s in far northern/southwestern areas
yesterday. Slight adjustments were made to the rain placement forecast Thu-Fri, but the
next result reaches 2/3rd of the Argentina with about 1” on average. Similar heat the next
two days eases into next week, but a brief return of 90s are possible around the end of
the 6-10 day period. About ½ of the belt is currently under stress and will rebuild once
again in central/southern Argentina after next week, but there are some wetter model
risks. In Brazil, lessening showers in the Center-West region will limit fieldwork
interruptions, but delays start to mount next week in central Brazil. Showers early next
week and in the 11-15 day period are adequate for far southern Brazil. In the U.S.,
southern Plains dryness continues the next two weeks, while Delta wheat sees rain end
moisture deficits. More light snow in the Midwest wheat belt next weekend adds further
protection from cold pushes and needed moisture. The 90-day SOI is just 3.46 and the
daily indicator is in full retreat at 27. La Nina requires a +8 90-day SOI. The La Nina is
still in effect, as reflected in drought in both Argentina and the U.S. southern Plains, but
if this trend in SOI keeps up, it will be gone by spring as is forecast by most
climatologists.
The USDA ag attache sees Brazil’s total corn crop at 92mmt, below the USDA at
95mmt and down from last year’s 98mmt due to a reduction in first crop planted area
and on average yields for the second crop being planted. With about 70% of Brazil’s
corn crop second crop, yields and acreage that gets planted will be critical. Planting so
far is running behind in key locations due to the slow soybean harvest and could
ultimately impact acreage decisions. Current ideas suggest a 9% cut in second crop corn
acreage, with profitability favoring cotton at this time. Despite the lower crop, the
attache sees corn exports the same as last year at 34mmt due to larger carry in stocks of
11.2mmt vs. 6.8mmt the prior year. The attache sees Brazil’s soybean production at
112.5mmt vs. the current 110.0mmt USDA forecast. He reduced soybean exports to
65mmt from 68.3mmt previously and the USDA at 67.0mmt. Local consultancy
AgRural raised their Brazilian soybean estimate to 116.2mmt from 114.1mmt
previously. The Buenos Aires Grains Exchange says that if currently forecasted rains in
Argentina this weekend and next week fall short, the soybean crop could decline to as
low as 40mmt vs. their current estimate of 51mmt (USDA 56mmt) and last year’s
57.8mmt, indicating just how important these rain events are for the crop. A prominent
South American crop scout is pegging Brazil/Argentina soybean production at
112mmt/51mmt, respectively and pegs the 5 nation South American soy crop at
178.6mmt (down 9.1mmt vs. last year), while pegging corn at 132mmt, down 11.3mmt
from last year assuming Brazil/Argentina crops at 88mmt/39mmt, well below USDA
forecasts.
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A Reuters survey suggests the expectation is for WASDE to reduce their Argentine
soybean production estimate to 54mmt in Thursday's monthly report, which would
result in a yield that is 0.6bpa (1.4%) below trend, assuming no change to harvested
area. According to a report from Mike Tannura at www.tstorm.net, soybean yields have
varied widely in Argentina since 1981, most notably including seven years in which the
yield was at least 10% below trend, implying the downside risk to yields is high in poor
weather years. The coverage of dryness is extensive in Argentina with 69% and 84% of
soybean production having been drier than normal over the last 30- and 90-day
periods. Our data set is new in Argentina, which does not allow us to compare current
dryness to previous growing seasons, but we do have similar data for the U.S. dating to
2011. The U.S. soybean yield was 10% below trend in 2012. Overlaying 30- day dryness
from Argentina and the U.S. over approximately the same growing periods (starting
December 1, 2017 in Argentina, and June 1, 2012 in the U.S.) shows that the coverage
of 30-day dryness in Argentina was considerably lower over much of the last five weeks
than at approximately the same period of late-June and July of 2012 in the U.S. This
indicates that Argentina soybeans were wetter than at the height of U.S. drought in
2012. However, the coverage of 90-day dryness in Argentina has been similar to higher
than the same period in the U.S., indicating the 2017-18 drought in Argentina began
earlier than the 2012 drought in the U.S., such that dryness has been a potential
problem for a longer period of time for Argentina soybeans. The Argentina drought has
yet to break with some significant rainfall in expected in central and northern areas
over Friday-Sunday, though totals over the next two weeks are expected to be below
normal (1.00" to 2.00" north, 0.50" to 1.00" south). Argentina soybean yield of at least
10% below trend (49.3mm or lower) cannot be ruled out unless 30- or 90-day dryness
diminishes over the next few weeks. Historically, note that yields were ~25% below
trend three times since 1980/81, indicating the lowest production potential is around
42mmt, but likely only if significant stress exists now, and rains failed this weekend and
beyond (we are confident in at least some helpful rains this weekend).
The CME is said to be exploring the corn/soybean futures contracts on complaints that
they’re not representing the cash markets very well. Farmers out in the Dakotas don’t
need to be told that after watching basis levels drop $1 below futures on several
occasions over the last few years. Some traders are calling for cash settlements rather
than physical delivery points on the river. The CME has already made changes to the
SRW wheat contract by introducing the variable storage rate in an attempt to force
greater convergence between cash and futures. One thing that many grain producers and
some traders have yet to grasp about the markets is how much they’ve changed in the
last 20 years regarding the impact non-commercial money has had on prices. While the
value of U.S. farm goods has risen over the last 20 years, it’s nothing compared to what
equity values have done. In fact, a look at the attached chart that shows the S&P 500 vs.