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Morning Comments

Dec corn +2 ¾ at 4.19

Jan beans +17 ¾ at 11.7125

The DOW is UP

USD is Down

Crude oil -.55 40.79

 

Good morning,

Overnight grain markets featured upside gaps in corn and beans that remain in place this morning with wheat lagging in a mixed trade. After a brief cup of coffee at $11.50, Jan beans are off into new highs with our longstanding $12.00 target area just ahead. The $12 objective is justified by our current market fundamentals but any substantial cut to the South American crop this season could easily add dollars to the price of beans from here. The bull spreads are showing stability up front after Jan-March widened out to a carry yesterday for the first time in two months. Meal is gaining sharply on oil in the oil share spread with both products in positive territory.

The buying is fueled by South American weather concern where dry conditions and only limited relief at best showing in the forecasts for some key growing regions. In a La Nina year, the markets will be ultra-sensitive to weather threats, particularly when the tight global balance sheet for soybeans is counting on record production out of the southern hemisphere to replenish the pipeline. There is talk of China kicking the tires on additional US corn purchases but nothing to confirm the rumor yet, we think it is a matter of when, not if.

The outside markets have the dollar trading -.31 to 92.32 and threatening to break down the September spike trade extending to 91.75. The reality is, the currency may be friendly to market sentiment but has little bearing fundamentally in a rationing market which is where soybeans are headed.

Cordonnier lowered his Brazilian corn production est. by 2 mmt to 106 mmt with a neutral bias going forward due to dryness in S Brazil on first season yield potential and delays in planting the Safrinha crop later on. He left the Brazil soybean production unchanged at 132 mmt with a neutral bias. He lowered Argentina soybeans by 1 to 50 mmt on dryness with a neutral bias and left corn unchanged at 49 mmt, again with a neutral bias but noting dryness concern.

US soybean harvest advanced 4 to 96% complete. This time last year 89% of the crop had been harvested, and the average for this date is 93%. Kentucky, Arkansas, North Carolina, and Tennessee remain the few states that are lagging.

Overnight, the corn market was mostly better, finishing a couple cents higher by the morning pause. Beans are the star of the show early, as they so often are, gapping higher on the Monday night open and posting double-digit gains. South American weather was said to take a dryer tilt on model runs after-hours yesterday, driving the enthusiasm? The grain half of the news is a little less thrilling. Private analysts at APK-Inform pegged the Ukraine corn crop at 31.8 mmt, 25.2 of which would be made available for export. Both are slightly above the aggressive USDA forecast downgrades from November. There was a little export business around, including South Korea’s KFA picking up another optional origin corn cargo, this time for FH June and paying $242.70/mt. For the first time in over one week, there was an 8 AM flash sale – 195,000 metric tons of U.S. corn to Mexico. Still no ‘official’ word on additional Chinese purchases despite such rumors around the past several sessions? Crop Progress data after the close found 95% of the U.S. corn crop harvested, up +4% wk/wk, and +8% ahead of average. Only two states were running behind average; Ohio was the most notable at 5% behind, but within that represents significant catch-up over the past couple of weeks. Outside markets are a little softer to start today on classic ‘Turnaround Tuesday’ action. Overall, they are handling the uptick in Covid cases well, though corn end-user markets are not. Ethanol barely finished in the green yesterday, dragging spot margins close to breakeven (from consistent 5-10 c/gal margins since May), while Dec milk futures have sold off more than 15% in four days.

 

Darren, David, and Elizabeth

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