Morning Comments – Monday August 22, 2016

Posted By :
Comments : 0

Buchheit Morning Comments from Dave Danker
Last week’s markets were higher for corn, higher for soybeans and wheat. The energy markets were higher, financial markets lower and the Dollar Index was lower, closing the week at $94.45. The US bond market weaker with the 10 Year Bond yielding 1.58% and the 30-year bond closed at 2.29%. 15-year fixed mortgages at 2.68% and 30-year mortgages at 3.40%. For the week, SEP Corn was 12 cents higher, closing at $3.3425, AUG Soybeans gained 23.75 cents, closing at $10.27 and SEP wheat was 4.5 cents higher, closing at $4.27. For the week, Crude Oil gained $3.76, closing at $48.39. The DOW lost 22 points, closing at 18,553 and the US Dollar Index closed at $94.45, down $1.27. September Heating Oil futures closed at $1.5140, up $0.1032 for the week. CBOT closes in the NOV-DEC contracts were $3.4375, $10.045 and $4.4475 for 2016 DEC Corn, 2016 NOV Soybeans and 2016 DEC Wheat, respectively. SEPTEMBER 2016 soybeans traded 28 cents higher for the week and settled at $10.27. MARCH 2017 corn closed at $3.535, up 10 cents for the week, MAY 2017 corn closed at $3.6025. MARCH 2017 wheat gained 2 cents, closing at $4.64, MAY 2017 wheat closed at $4.7725, JULY 2017 wheat closed at $5.1775. The Baltic Dry Index closed at 682, up 29 points from last week’s 653, 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 42.68% YTD.
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%).
We traveled this weekend for a family function and took in a partial day at the Illinois State Fair. We covered over 350 miles throughout Central Illinois and I must say that I am a believer in their predicted yield estimate of 200 bpa. They had received 5-7 inches of rain over the last week making the corn look very good and the soybeans looked excellent! As we drove over the many viaducts, you could look out over the fields and never see a drowned out spot or any other problem. I am sure that there are some problem areas, but we did not find them from the highway. I picked up some tour data from one of the larger cooperatives in that area and they had recently finished their yield assessments. They concluded that their corn yields would be 6-8 bushels better than their record yields in 2014. I know that soybeans are made in August and early September, but what we saw looked better than any time in my past travels through those areas.
Be sure to mark your calendars for our Annual I-55 Tech Park Tour! The first tour group will begin at noon on Wednesday, August 24th and tours will repeat until 2:00 pm. We will have a short break and repeat tours from 5-7:00 pm. We our serving a BBQ pork lunch with pork chops, brats and sides. Please come and enjoy the tour. If you failed to send an RSVP back, do not let that stop you! We look forward to sharing the past year’s plot data with you and discuss the new genetics, herbicide programs and plant growth regulators. We will have several agronomy folks to educate you and we will offer special pricing on both seed and fertilizer at the tour.
The CIF markets are stronger 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 (58 bid – 61 ask) and September corn barges are (64 bid-68 ask), October corn barges are (68 bid- 70 ask), October soybean barges are (92 bid-94 ask) and SEP wheat barges are (45 bid-56 ask) and OND wheat (60 bid-80 ask). 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 liquidation in soybeans and soybean meal combined failed to push the soy complex markets lower, while short-selling failed to push corn and wheat markets lower. Specs added to their 25,000 contracts to their short corn position to create a short position of 143,000 contracts net short. Spec funds removed 9,000 contracts from their long bean position to make it 91,000 contracts long. The Specs removed 15,000 contracts from their short wheat position of 102,000 contracts short. The Specs finished the week, long 45,000 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. Darrell also authored an article on ear weights and how one should not be too quick to dismiss the USDA WASDE corn yield estimate. You can check his article out at FarmDoc on the University of Illinois Ag Econ website.
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 $1.13 US$ (up 0.01). The Japanese Yen finished the week trading at 100.20 per US Dollar (up 1.03). The Russian Ruble finished the week trading at 63.85 Rubles per US Dollar (up 0.97). The Brazilian Real finished at 3.21 per US Dollar (down 0.03). The Argentine Peso closed at 14.90 (down 0.24). The Canadian Dollar finished at 1.29 per US Dollar (up 0.01), the Mexican Peso at 18.25 per US Dollar (up $0.01) and the Chinese Yuan finished at 6.65 per US Dollar (down 0.02).
Live Cattle futures were lower for the week losing $2.78 to $4.28; Feeder Cattle were $3.00 to $3.05 lower and Lean Hog futures were $1.59 to $2.85 higher. August Live Cattle closed at $113.55, down $2.78 and October closed at $110.25, down $4.28. August Feeder Cattle closed at 146.08, down $3.00 and October Feeder Cattle closed at $141.20, down $3.05. Lean Hogs were higher. October closed at $61.93, up $1.93 for the week. Cash Hogs are called steady on Monday and Cash Cattle are called steady to $1 higher after late week trades at $189-190 in the beef and $119-120 live. The Pork Cutout finished the week at $74.26, down $0.63 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 $201.04, down $0.47 and Select Beef at $193.25, up $0.55 for the week. The Choice:Select spread ($7.78) 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 was 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 last Friday’s blockbuster corn crop estimates by USDA, cattle feed costs should be headed lower.

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.