Morning Comments – Monday August 15, 2016

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Buchheit Morning Comments from Dave Danker

Last week’s markets were lower for corn, higher for soybeans and wheat.    The energy markets were higher, financial markets higher and the Dollar Index was lower, closing the week at $95.72.  The US bond market strengthened with the 10 Year Bond yielding 1.51% and the 30-year bond closed at 2.23%.  For the week, SEP Corn was 2 cents lower, closing at $3.2225, AUG Soybeans lost 0.5 cents, closing at $10.0325 and SEP wheat was 6.5 cents higher, closing at $4.225.  For the week, Crude Oil gained $2.83, closing at $44.63.  The DOW gained 31 points, closing at 18,575 and the US Dollar Index closed at $95.72, down $0.58.  September Heating Oil futures closed at $1.4108, up $0.1036 for the week.  CBOT closes in the NOV-DEC contracts were $3.33, $9.8175 and $4.40 for 2016 DEC Corn, 2016 NOV Soybeans and 2016 DEC Wheat, respectively.  SEPTEMBER 2016 soybeans traded 11 cents higher for the week and settled at $9.99.  MARCH 2017 corn closed at $3.435, down 1 cent for the week, MAY 2017 corn closed at $3.5025.  MARCH 2017 wheat gained 2.25 cents, closing at $4.62, MAY 2017 wheat closed at $4.75, JULY 2017 wheat closed at $4.82.  The Baltic Dry Index closed at 653, up 17 points from last week’s 636, a new all-time low for the index was set on 2-12-16 when the index hit 290, establishing a new low for the index stretching back thirty plus years.  The Baltic Dry Index is up 36.61% YTD.

The USDA WASDE report was released at 11:00 am – CDT on Friday, August 12th.  The average trade estimate for corn was 14.784 billion bushels and 170.8 bpa.  The average trade estimate for soybeans was 3.949 billion bushels and 47.6 bpa.  The average trade estimate for 2016-2017 US Ending Stocks was 2.287 billion bushels of corn, 323 million bushels of soybeans, 56 million bushels of grain sorghum and 1.115 billion bushels of wheat. The trade estimate for 2015-2016 US Ending Stocks was 1.72 billion bushels of corn, 328 million bushels of soybeans and 50 million bushels of grain sorghum.  WORLD ENDING STOCKS for 2015-2016 were estimated at 206.3 MMT for corn, 71.4 MMT for soybeans and 244.2 MMT for wheat.  WORLD ENDING STOCKS for 2016-2017 were estimated at 211.8 MMT for corn, 67.4 MMT for soybeans and 251.5 MMT for wheat.  Corn and wheat global ending stocks are expected to grow by 2.5-3.0% for corn and 3% for wheat.  Global Soybean Stocks are predicted to decline by 5-6%.

The USDA WASDE report released their estimate for corn was 15.153 billion bushels and 175.1 bpa.  The estimate for soybeans was 3.929 billion bushels and 48.9 bpa.  The estimate for 2016-2017 US Ending Stocks was 2.409 billion bushels of corn, 330 million bushels of soybeans, 60 million bushels of grain sorghum and 1.100 billion bushels of wheat. The estimate for 2015-2016 US Ending Stocks was 1.706 billion bushels of corn, 255 million bushels of soybeans and 60 million bushels of grain sorghum.  WORLD ENDING STOCKS for 2015-2016 were estimated at 209.3 MMT for corn, 73 MMT for soybeans and 241.9 MMT for wheat.  WORLD ENDING STOCKS for 2016-2017 were estimated at 220.8 MMT for corn, 71.2 MMT for soybeans and 252.8 MMT for wheat.  Corn and wheat global ending stocks are expected to grow by 5.2-5.5% for corn and 4.5-5.0% for wheat.  Global Soybean Stocks are predicted to decline by 1.8 MMT (2.5-3%).

Dow Jones released their survey of analyst’s crop estimates Wednesday afternoon.  The national corn yield was estimated at 14.8 Billion bushels (170.8 bpa) and the national soybean yield was estimated at 3.96 Billion bushels (47.6 bpa).  Both of these estimates were within current expectations.  The 2016-2017 Ending Stocks Estimate from this group average is approximately 2.35 billion bushels of corn and 323 million bushels of soybeans.  FC Stone released their estimates on Thursday with 2015-2016 US Carryout estimate of 1.697 billion bushels of corn and 331 million bushels of soybeans.  The national corn yield was estimated at 175 bpa and the national soybean yield was estimated at 48.8 bpa.  These estimates generate a national 2016 yield of 15.146 billion bushels of corn and 4.054 billion bushels of soybeans.  If these numbers are correct, we could be looking at 2016-2017 US Carryout’s of 2.653 billion bushels of corn, 403 million bushels of soybeans and 1.113 billion bushels of wheat.  With global grain and oilseed surpluses growing by 3-5%, we could be looking at the very large carryout’s and significantly lower prices.  Last week, Informa Economics have released a corn estimate of 168.7 bpa and a soybean estimate of 47.7 bpa.  Other analysts are estimating the national corn crop to be between 171 and 176 bpa and the soybean crop to be between 48 and 51 bpa.  Almost all estimates result in bigger ending stocks and most likely, lower prices.  It looks like FC Stone wan the prize for most closely predicting the USDA WASDE numbers.

Our annual “Cattle Call”, cattle was Tuesday, August 9th from 5-8:00 pm in the St. Maurus Parish Hall, 10198 State Highway B, Biehle, MO.  We enjoyed an excellent meal with drinks and dinner provided free of charge.  We had some great giveaways and expert talks on forage, reproduction, nutrition, vaccinations, management and markets.  The feedback was great and almost everyone left with a door prize.

The CIF markets are softer for corn and strong for soybeans.  Corn exports have moved up and wheat exports continue to be soft, with the off-spec HRW wheat taking over the damaged wheat and feed-wheat markets.  August corn barges are (53 bid – 56 ask) and September corn barges are (62 bid-67 ask), October corn barges are (67 bid- 72 ask), October soybean barges are (90 bid-92 ask) and SEP wheat barges are (45 bid-56 ask) and OND wheat (60 bid-80 ask).  The drop in October barge freight has increased interior basis bids.  Most CIF elevators are focused on corn and soybean programs with little regard for wheat.

Spec funds made significant changes to their final positions this week.  Significant long increases in soybeans and soybean meal combined pushed the soy complex markets higher, while short-selling pushed corn and wheat markets lower.  Specs added to their long position and added 11,000 contracts to their short corn position to create a short position of 118,000 contracts net short.  Spec funds removed 3,000 contracts from their long bean position to make it 100,000 contracts long.  The Specs removed 0 contracts from their short wheat position of 117,000 contracts short.  The Specs finished the week, long 53,000 contracts of Soybean Meal.  University of Illinois economist, Darrell Good is predicting that we could have a 15-billion-bushel corn crop.  Other analysts feel that we could have a soybean crop above 4 billion bushels.  Both of these production levels are huge and would result in lower prices.  The USDA WASDE report on Friday morning confirmed Darrell Good’s prediction.

Brazil will import 1.5 MMT of corn by the end of January 2017.  This unusual turn of events is due to the fact that the Drought in Brazil seriously damaged the second crop corn and Brazilian exporters had aggressively exported too much corn.  Brazilian soybean plantings will be up about 1.5%.  This is the smallest increase in soybean acres in years, due to tight financial conditions and the inability of many producers to pay off this year’s operating loans.  A leading South American soybean analyst feels that they will plant 33.7 million hectares (83.3 million acres) or roughly the same amount as the US farmers will in 2017.  Brazilian interest rates are very high with the subsidized Government loan rates at 8-12% and the private bank operating loan interest at 20%+.  Due to the tight finances, it appears that there will be only limited increases in corn planting in Brazil even though the central Mato Grosso corn price is above $4.70 and the heavy livestock areas are paying as much as $6.75 per bushel of corn.

Most major foreign currencies were stronger versus the US Dollar.  The Euro finished the week at one Euro per $1.12 US$ (up 0.01).  The Japanese Yen finished the week trading at 101.23 per US Dollar (up 1.24).  The Russian Ruble finished the week trading at 64.82 Rubles per US Dollar (up 0.13).  The Brazilian Real finished at 3.18 per US Dollar (unchanged).  The Argentine Peso closed at 14.66 (up 0.12).  The Canadian Dollar finished at 1.30 per US Dollar (up 0.01), the Mexican Peso at 18.26 per US Dollar (up $0.39) and the Chinese Yuan finished at 6.63 per US Dollar (up 0.03).

Live Cattle futures were lower for the week losing $1.00 to $1.35; Feeder Cattle were $0.37 to $0.86 higher, and Lean Hog futures were $0.05 to $0.30 lower.  August Live Cattle closed at $116.33, down $1.35 and October closed at $114.53, down $1.00.  August Feeder Cattle closed at 149.08, down $0.57 and October Feeder Cattle closed at $144.25, up $0.37.  Lean Hogs were lower.  August closed at $67.15, down $0.30 for the week.  Cash Hogs are called steady to $1 lower on Monday and Cash Cattle are called steady to $2 higher after late week trades at $189-190 in the beef and $119-120 live.  The Pork Cutout finished the week at $74.89, down $2.06 for the week.  Beef Feedlots are asking $119-120 in the South and $190+ in the beef after seeing some offers late week trade at $186-188.  Choice Beef closed at $201.51, up $2.51 and Select Beef at $192.71, up $2.51 for the week.  The Choice:Select spread ($8.80) has narrowed considerably from spring markets that saw the Choice:Select spread trade out to $26.00+.  The conclusion to be drawn from this spread narrowing is that we are having issues with the sale of the higher value middle meats and that we are still moving hamburger and the cheaper cuts fairly well.  The biggest risk to Feeder Cattle prices is the possibility of a summer drought that dramatically increases feed costs.  This perceived risk is rapidly fading away with every rain shower and additional day without extreme heat in the Corn Belt.  After Friday’s blockbuster corn crop estimates by USDA, cattle feed costs should be headed lower.

Please mark your calendar for our annual “Tech Park Field Day”! Wednesday, August 24, 2016 12:00 pm to 2:00 pm and 5:00 pm to 7:00 pm at the I-55 Tech Park. Join us for population studies, herbicide trials, the latest seed varieties, triad pant hormone trials, and much more! You will get the chance to visit and learn from top agronomy experts, seed, fertilizer, and chemical vendors, and implement dealers. Food and drinks will also be provided! RSVP by Friday August 12th by calling 573-547-4569, emailing agri@buchheits.com, or at: http://www.buchheitagri.com/tech-park-field-day-registration/

Be sure to check out our website at www.buchheitagri.com and see the marketing information available.  If you scroll down on the front page you will find our market info page supported by AgriCharts.  If you examine the left hand side of that page you will discover the options that allow you to create price graphs or charts and also to check on historical spread information.

Call us for help with marketing decisions or help in preparing crop programs!  A DP program for those producers wanting to wait for a better day in the markets is available.  Check our website or call us for quotes on DP programs.  We can help develop a marketing plan and a floor price program.  Call Katlyn, Chad, Eric or Dave at 800-622-7937, Shon at 573-667-9921 or 768-0489.