Soybeans (CBOT:ZSX14)
The bean market took off a big chunk of the frost premium that was added to the market Friday. There is still a risk of a frost freeze hitting the North West farm belt at the end of the week but the intensity of the cold is being debated. With the weakness seen today it seems that the majority of the markets participants believe that there will not be much damage being done. Some of the models are calling for temps below the freeze mark while others are keeping above the critical freezing levels.
Early Sunday night the market firmed on the GFS model calling for a great chance of a freeze. Weakness then set in at 2:00 A.M. Chicago time (this is when European markets open) as the Euro model did not suggest temps will drop to below freezing. The divergence of the models will keep the markets trade action choppy until all models agree or the weather event has played itself out. Also keep in mind that it isn’t just how cold it gets but how long the temps stay below freezing which will have an impact on how much damage is done to the crop.
The other event dominating the trade attention is Thursdays WASDE report. The Reuters newswire poll of analysts found the average analyst estimate for bean yields is expected to increase from 45.4 to 46.3. Production is seen increasing from 3.816 billion to 3.883. For new crop soybeans Allendale’s 25th annual Nationwide Producer Survey suggested yields of 46.4 vs. the 45.4 USDA August estimate. We expect new crop ending stocks to increase from 430 million up to 459. As for old crop beans its marketing year officially ended on August 30. We believe that the USDA won’t show the true ending stock changes on Thursday though.
In tight crop years they usually wait for the release of the quarterly Grain Stocks report (released September 30th) to see what the survey says. On that same report they usually go back and revise the previous year’s production. Allendale estimates actual old crop exports and crush ran 20 million and 10 million higher than USDA’s August estimate. We look for the coming old crop production increase, shown on the Sep 30 Grain Stocks, to offset this demand revision.
Tonight’s crop ratings remained unchanged at 72% good to excellent. This is way above the five year average of 53% for this week. Allendale continues to look for beans to fall to the $9.50 area when the fall low is scored and would recommend not chasing rallies. Producers should continue to sell into a price rallies if it were to occur.
Corn (CBOT:CZ14)
Overnight European traders were quick to sell as soon as their markets opened and the day session traders seemed happy to keep prices where the overnight closed. There is still some light concern over the cold temperatures as corn did bounce when the noon maps were still showing low temps. By the end of the day it was obvious that while there is concern about the cold, there is more concern over just how much the USDA could raise yields on Thursday. For the most part, it is likely that the cold weather will keep corn stuck close to where it is. Yield thoughts will keep pressure but cold fears could hold contract lows, at least until Thursday.
Bulls:
- No change to the forecast maps with Wednesday still seeing temps 14 to 16 degrees below normal
- Cold temps suggest that some ND low temps could reach right to freezing on this forecast
- Buyers are best to defend contract lows but should not chase this market higher on weather with an upcoming USDA report on Thursday
Bears:
- Analysts are expecting a yield increase of 3.3 bushel on Thursday up to 170.7
- With more concern in this market based on yield, bears can keep selling weather bounces at least until Thursday
- Last time the move to 343 3/4 saw good size buying at that level, before thinking corn will take that out there has to be more news than just a slow grind lower
Wheat (CBOT:WZ14)
Wheat finished lower today on lack of new news. No escalation between Ukraine and Russia which is keeping the markets subdued. This mixed with decent planting weather in the forecast for winter wheat over the next few weeks and temperatures that aren’t threatening would suggest we should keep this market fairly subdued. Thursday we have a USDA WASDE report and we are not expecting to see a lot of excitement on this as the end of the month has a small grains summary which will give us an idea about wheat and a hand full of additional markets. Export estimates were below trade estimates this week which is disappointing even after the drop in domestic prices the United States has had a difficult time gaining much in the export market. Over the last four weeks we have been behind the USDA’s pace for exports but due to better than expected early season booking we are still at 45% of USDA’s export goal and our 5 year average at this time is 42%. We would expect to find the USDA adjusting U.S. demand down in the coming months based on a major slowdown in demand for U.S. wheat. World buyers could be waiting to see how Australia and Argentina’s crops begin to take shape before rushing to find any wheat from the U.S. market. We are still going to expect sideways to lower range moving forward.
Export inspections totaling 530,773 within the range 550-675,000 tonnes.
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