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Vic Lespinasse on NPR's Nightly Business Report
Vic will be featured on NPR's Nightly Business Report either tonight (January 31) or tomorrow night (February 1).
Click here for the NPR Nightly Business Report website.
Yesterday's Equity Rally Shortlived; May Drag Grains Today
Vic Lespinasse's Pre-Opening Grain Commentary from the floor of the Chicago Board of Trade for January 31, 2008A slightly lower start is likely this am following modest overnight losses in all pits. Crude oil is lower, the dollar is a little higher and the stock market is called lower, a negative combination for the grains. Going home yesterday afternoon one would have thought these outside markets would be supportive this am but they turned around late yesterday and overnight to a negative posture. Traders will be keeping an eye on these outside markets again today for general direction in the grains, especially if these markets move in an extreme manner.
South Korea passed on their tender for 275,000 tonnes of optional origin corn and 55,000 tonnes of optional origin meal due to high prices. Iraq postponed their wheat tender until February 4. Malaysian palm oil gained 8 ringgit today, not enough to impact our bean oil market. The Census Bureau December oil stocks came in at 3.058 billion lbs, about 25 million lbs higher than the preliminary estimate. There is more talk out of China about damage to rapeseed, fruits and vegetables from the severe winter storm they just had. More snow and harsh weather is forecast for the rapeseed area this weekend.
The bean complex has been very strong overall this week compared with wheat and corn, especially in the nearby months. Part of this relative strength is likely due to increased nearby demand, perhaps partly due to this situation in China. Weekly export sales were in line for wheat, 509,000 tonnes. Beans were slow, 488,000 tonnes. The rest were good, 1.888 million tonnes of corn, 226,000 tonnes of meal and 98,000 tonnes of oil. South American weather continues to improve overall. Argentina had light, scattered rain overnight and more of the same is forecast today through Saturday. Southern Brazil benefited from light, scattered rain the last 24 hours with more possible today through Sunday. Northern Brazil had more overnight rain with additional showers forecast the next few days. There is growing concern that too much rain is falling in this area, which could delay early bean harvesting.
Trading May Be Subdued Ahead of FOMC News
Vic Lespinasse's Pre-Opening Grain Commentary from the Floor of the Chicago Board of Trade for January 30, 2008A lower start is indicated this am by overnight losses. The early call is 5 down in wheat with corn off 1 and beans 2-3 weaker. Crude oil is a little higher and Malaysian palm oil gained 24 ringgit, which could lend some support to our bean oil market this am. Volume could be subdued today as some traders wait for the announcement from the Federal Reserve Board on interest rates, expected at 1:15 pm, central time. The Fed is widely expected to cut rates either .25% or .50%. If they do, especially if they cut .50%, this would probably be friendly for the grains.
Jordan postponed its 100,000 tonne optional origin wheat tender from today until Feb 5. China's Agricultural Ministry warned that the severe winter snow storm gripping a large part of the country damaged almost 7 million hectares of crops. (one hectare = 2.471 acres) This might cause more imports of beans and vegetable oils, including bean oil, as the some of the damage occurred in major rapeseed growing areas. Taiwan bought 80,000 tonnes of US wheat, as expected. Brazil will see only light, scattered rain in southern areas the next few days with mainly dry weather this weekend into early next week. Northern Brazil had up to .75" of rain the last 24 hours and more of the same is forecast the next few days. Some analysts think there is too much rain in northern Brazil, delaying early harvest efforts. Argentina will see light, scattered showers today and tomorrow with generally hotter and drier weather Friday into early next week. More rain is needed in much of Argentina soon to keep crop conditions from declining.
Support to Grains Anticipated from FOMC News
Vic Lespinasse's Pre-Opening Grain Commentary from the Floor of the Chicago Board of Trade for January 29, 2008A higher start is expected in all pits with wheat up 10-15, corn 5 and beans 10. Overnight strength and higher energy and equity markets should provide early support. Taiwan tenders tomorrow for 80,000 tonnes of US wheat.
The Federal Reserve Board is likely to cut interest rates again tomorrow afternoon, which could indirectly support the grains.
Malaysian palm oil jumped 50 ringgit today, a friendly sign for our bean oil market. Scattered rain fell overnight in parts of Argentina and more is expected today, which will be welcome. Generally drier weather is forecast later in the week. Brazil had rain in both northern and southern growing areas the last 24 hours and more is likely the next few days, keeping conditions there mostly favorable.
Minneapolis wheat is called sharply higher to limit up again this am, which should lend strong support to Chicago and KC wheat again this am. Not a lot of fresh news otherwise this am. Watch Minneapolis wheat, the equity and energy markets for general market direction today.
Grain Analyst Portfolio Performance Review for the week ending 1/25
After following strong bullish trends for several weeks, the Grain Analyst Portfolio correctly went short in some markets. Mid-week saw a significant drop in several agricultural commodities as weighed down by the extreme downside movement in the world equity markets.
Clients in the Portfolio had the opportunity to take profits in some positions on Wednesday before the end of the week saw a move back to the upside. Clients closing positions ahead of the Program's exit signals remain out of the market until the next entry signal. As always, trades are executed with the authorization of the client.
On Friday, the program took profits in corn and oats, took a loss in soybean oil, held profits in soybeans and meal, and held a loss in wheat.
Worldwide Equity Markets Weighing on Grains
A mixed start is expected today with wheat up 6-7 cents but corn off around 4 and beans down about 10. Crude oil and the $ are both lower, sending mixed signals to the grains. Recession worries are growing again this am following the sell off in the stock market Friday and lower markets overseas this am. If these recession fears are fanned during the session by a further fall in the stock market, grains could come under pressure again, as they did last week. Malaysian palm oil fell 105 ringgit today, a negative background influence for our bean oil market. South American weather was generally favorable for crop development over the weekend. Scattered rain fell in southern Brazil and more is forecast in the important state of Parana the next 3 days while Rio Grande state is likely to be mostly dry. Welcome scattered rain is forecast later this week in southern Brazil. Northern Brazil had up to 2" of rain over the weekend with more forecast the next several days. Argentina had up to 2" of rain in the major grain state of Cordoba over the weekend with up to 1" in the other major grain producing states of Santa Fe and Buenos Aires. Scattered rain is expected today and tomorrow before mostly dry weather comes in the second half of the week. Minneapolis wheat remains very strong due to extremely tight supplies and strong demand. Chicago and KC wheat are following Minneapolis, which is expected to be higher again this am.
Absense of Bearish News Projects Higher Opening
Vic Lespinasse's Grain Commentary from the floor of the Chicago Board of Trade for January 25, 2008A higher start is expected in all pits again this am, up roughly 15 in beans and 10 in corn and wheat. Weekly export sales were good, higher than expected in some pits: a total of 670,000 tonnes of wheat between old crop and new; 1.715 million tonnes of corn between old crop and new; 663,000 tonnes of beans; 162,000 tonnes of meal and 59,000 tonnes of oil. Malaysian palm oil gained 44 ringgit today while crude oil is higher and the stock market is higher overnight as well. All of the above is supportive for the grains.
Meteorlogix Weather outlook: Argentina had light, scattered rain overnight in western growing areas, up to .6". Today and tomorrow .25-1" is forecast in the west. Mostly dry weather is forecast next week but not as hot or dry as indicated yesterday. Brazil continues benefiting from widespread rain in the north with up to 1.5" overnight and more moderate to heavy rain forecast there the next 3-4 days. Scattered rain is forecast in southern Brazil the next couple of days before mostly dry weather moves in the first half of next week. Some rain is forecast still in Parana, Brazil's second largest bean growing state during this period. In short, there ain't any bearish news this morning so look for a higher to sharply higher start and keep an eye on the energy and equity markets for early direction this morning.
Grains Climb Along with Equity Rally
Vic Lespinasse's Grain Commentary from the Floor of the Chicago Board of Trade for January 24, 2008Grain prices rebounded sharply overnight, following the rally in the equity markets here and overseas. The crude oil market also rallied, as did Malaysian palm oil, which jumped 96 ringgit. The early call is roughly 10-12 higher in wheat and corn with beans up 15.
There was a fire one floor above the trading floor in the Board of Trade building but this is not expected to delay the opening of the grain market.
The Census Bureau December crush came in a little lower than expected, 162.4 million bushels. Oil stocks were about 50 million lbs below trade ideas, 3.031 billion lbs. Meal stocks were a bit higher than expected, 405,000 short tons. Japan bought 145,000 tonnes of US wheat, as expected. The USDA announced the sale of 296,000 tonnes of US corn to South Korea this am.
Somar, the well known Brazilian weather forecaster, is calling for generally dry weather in southern Brazil now into early February. Somar reports this region has had well below normal rain so far during January, less than half the normal amount in Parana and northern Rio Grand states, Brazil's 2nd and 3rd largest bean producing states, respectively. Meteorlogix, who has been relatively dry in their forecast for Argentina recently vs other forecasters, is still on the dry side. They are calling for mostly dry weather today through Sunday except for some light, scattered rain in the western and southern areas. Meteorlogix expects hot and dry weather in most of Argentina's main crop areas next week. Their forecast for southern Brazil calls for generally dry weather today through Tuesday next week. They predict northern Brazil will continue enjoying wet weather the next several days, keeping conditions favorable there.
Keep an eye on the equity and energy markets today as these could have some influence on the direction of the grain market again today, especially if they move in an extreme manner.
Grains Remain Under Pressure From Bearish Influences
Vic Lespinasse's Daily Grain Commentary from the Floor of the Chicago Board of Trade for January 23, 2008A mostly lower start is likely this morning, down roughly 5 in both corn and beans. New crop wheat (July forward) is called around 15 lower but old crop (March and May) is called 2-4 higher. Fund buying on the close yesterday in July closed the old crop/new crop wheat spreads out of line and they are expected to correct this on the opening today.
The equity markets here in the US are sharply lower again this morning and this is likely to weigh on grain prices again this morning. Crude oil is also under strong pressure while the dollar is higher, a bearish combination for the grains, especially corn and bean oil.
South Korea apparently passed on their tender for 330,000 tonnes of optional origin corn yesterday but supposedly bought 220,000 tonnes today. Pakistan supposedly bought 60,000 tonnes more optional origin wheat, on top of the 500,000 tonnes they bought yesterday and there is talk they will be back in the market soon for more. Malaysian palm oil was closed today for a holiday so there is no price quote.
If you like all the limit or near limit moves in the grains recently, consider this: higher daily price limits are under consideration but any change would need CFTC approval.
South Korea is expected to tender tomorrow for 150,000 tonnes of optional origin, non gm (genetically modified) beans. Southern Brazil is forecast to be mostly dry the rest of this week, especially Rio Grande state. Parana state is expecting light rains early next week, which will be welcome. Northern Brazil had rain over the last 24 hours and more is forecast the next 3-4 days. Argentina still needs rain and there is some forecast in the western areas this weekend. Amounts are currently not expected to be heavy. There is light, scattered rain forecast today through Friday, favoring the southern areas. More rain is needed soon. Stress on corn and beans could be reduced by the lack of heat the next several days but there is some heat in the 6-10 day outlook. All of the above weather comments are from Meteorlogix Weather.
Equity Market Slump Dragging Down Grains
Vic Lespinasse's Pre-Opening Grain Commentary from the floor of the Chicago Board of Trade for January 22, 2008A sharply lower to limit down start is expected across the floor this am following similar losses overnight. A world wide sell off in equity markets, a much lower crude oil market and higher dollar are all pointing the grains sharply lower on growing fears of a recession here in the US, which could impact the entire world. However, the Federal Reserve Board cut interest rates .75% this am, which might help world equity markets recover, thereby possibly lessening pressure on the grains. Keep an eye on the equity markets, especially the Dow Jones industrial average, as well as crude oil this am for opening ideas in the grains. Tentatively, all the grains are still called sharply lower, possibly limit down for now.
In other news, South Korea is in the market for 330,000 tonnes of optional origin corn with results likely before the grains open. Pakistan is thought to have bought roughly 500,000 tonnes of non-US wheat on their 610,000 tender. Malaysian palm oil fell a total of 201 ringgit between yesterday and today, which is bearish for our bean oil market. Japan tenders Thursday for 145,000 tonnes of US wheat. China's government linked think tank, the National Grain and Oils Information Center, estimates bean imports in the crop year starting last Oct 1 will rise 15% vs the previous year due to a poor bean harvest last fall. They put the bean crop at just 14 million tonnes but many Chinese traders think the crop was actually much smaller than that. Temps didn't get cold enough to do any damage to the soft red winter wheat crop over the long holiday weekend, according to Meteorlogix Weather Service. They also say better than expected rain fell in the southern Brazil bean state of Rio Grande. Mostly hot and dry weather is forecast for this area the next 5 days, however. The other main southern Brazil bean state, Parana, will be dry until later this week, when rain is forecast. Northern Brazil saw up to .75" or weekend rain and more is forecast there the next few days, keeping conditions very good overall. Argentina saw some light, scattered rain in the southwest areas over the weekend but dry weather elsewhere. Up to .75" is forecast in the west today with generally dry weather the next couple of days. Scattered rain is forecast in the west again late this week, all according to Meteorlogix. I haven't seen any other forecasters yet but I am hearing other forecasters say more rain fell over the last few days in Argentina than expected. However, South American weather could take a back seat today to the situation in the equity markets so keep a close eye on them.
Slow Day in Grains May End Volatile Week
Vic Lespinasse's Grain Commentary from the floor of the Chicago Board of Trade for January 18, 2008A mostly lower start is likely this morning following overnight losses, off 1-2 in wheat, down 5 in corn and 10 lower beans. Crude oil, gold and equities are all higher, which could provide some underlying support for grain prices.
Malaysian palm oil fell 44 ringgit today, a negative background influence for bean oil. India's Farm Minister says there are no plans to import wheat now nor to cut the import tax on edible oils, such as bean oil, for now. Indian wheat planting reached 27.44 million acres vs 28.02 million last year. Oilseed acreage hit 8.55 million against 9.49 million last year and rapeseed, India's largest oilseed crop, is done on 5.88 million acres compared with 6.65 million last year at this time.
The soft red winter wheat belt in the eastern midwest will see very cold temps the next several days. No winterkill damage is expected but the situation bears watching. Cold temps in the hard red winter wheat belt of the southwest early next week are not expected to be cold enough to do any damage there either. Weekend rains are expected in southern Brazil, up to 1.5", favoring the northern part of the region. Northern Brazil will see light, scattered rain the next several days, keeping conditions favorable. Argentina had very light, low coverage showers yesterday. Dry weather is likely over the weekend but light, scattered rain is expected early next week in southern growing areas. Much more rain is needed the sooner the better in most Argentine corn and bean areas but not in the forecast. Not much other news so far this morning. It has been a very volatile week but today could be relatively slow given the early lack of market moving news.
Grains Showing Strength After Slight Downturn
Vic Lespinasse's Grain Commentary from the floor of the Chicago Board of Trade for January 17, 2008Are happy days here again? Overnight trading suggests as much with prices sharply higher overall. The early call is 10-15 higher wheat, 5-7 up in corn and 20 better beans. Crude oil and gold are higher this am while the dollar is lower and Malaysian palm oil is 97 ringgit better, a bullish combination for the grains, especially corn and bean oil. Egypt is tendering for wheat this am and results should be out before the opening, which could influence wheat's opening. Weekly export sales were in line for wheat, 405,000 tonnes, and meal, 94,000 tonnes. The rest were very good, better than expected: 2.369 million tonnes of corn; 965,000 tonnes of beans and 36,000 tonnes of oil. There were also small sales for next year of 89,000 tonnes of wheat, 120,000 tonnes of corn and 26,000 tonnes of meal. Remember, Informa supposedly is going to put out new acreage guesses tomorrow at 10:30 am, central time. Traders expect lower wheat and higher corn and bean estimates compared with Informa's previous guesses.
A well known Iowa State climatologist warned again yesterday that La Nina could hurt US corn production this summer with hotter and drier than normal weather. This won't have any impact on prices today but it is something to keep in mind for the future. There is the possibility of winterkill in the soft red wheat areas of the eastern corn belt this weekend into early next week with very cold temps forecast and snowcover generally lacking. Brazilian weather remains favorable overall with ample rain except in the southern state of Rio Grande, Brazil's 3rd largest bean producing state. Argentine rains the last 24 hours were disappointing compared with the forecast. Mostly dry weather is now forecast today through Sunday. Only light, scattered rain is indicated early next week. There was a lot of talk about a recession in the US yesterday which contributed to the grains selloff but this morning the equity markets are higher, taking pressure off the grains.
Bearish Influences Starting to Touch Grains Markets
Vic Lespinasse's Pre-Opening Grain Commentary from the floor of the Chicago Board of Trade for January 16, 2008A lower start is expected in all pits following overnight losses, down 5 in wheat and corn with beans off around 15. Crude oil and gold are continuing their sell off from yesterday while the dollar is a little higher and Malaysian palm oil fell 57 ringgit, a bearish combination for all the grains, especially corn and bean oil.
China has started implementing a price control policy for many food commodities under which prices can not be raised without government permission. This could have a negative impact on Chinese imports of beans and vegetable oil, including bean oil. Yesterday I mentioned how the Baltic Exchange in London had its biggest and second biggest one day drops in their ocean freight index since records began in 1985, occurring last Friday and yesterday, respectively. Today this index fell even further, down 5.74%, hitting a 5 month low. This index reflects demand for ships to move various commodities such as grain, ore and crude oil around the world. Could it be signaling a slowing world economy? If so, it is bearish for US grain export demand, which would be bearish for prices. One could argue, of course, that cheaper ocean freights will enhance grain export demand due to cheaper transportation costs. The jury is still out on this question. Pakistan keeps changing the date they are tendering for 610,000 tonnes of optional origin wheat, now moving it up to Jan 18 from Jan 21. South Korea bought 110,000 tonnes of optional origin corn today.
Very cold temps will occur in the eastern Midwest this weekend into early next week. There is the possibility of some damage to the soft red winter wheat crop due to a lack of snow cover in much of the area so this situation will need to be watched. Brazil continues to enjoy favorably wet weather in their main growing areas with more to come over the next several days. Argentina has light, scattered rain the last 24 hours with more today and tomorrow. Dry weather is forecast this weekend into early next week. This situation also needs watching as more rain is needed now, especially in the corn belt. Argentine corn is currently undergoing pollination, its most weather sensitive stage. Remember, Informa is expected to put out new acreage estimates later this week. Some traders think they will cut their wheat acreage guess and increase their corn and bean acreage estimates, incorporating the much lower than expected USDA winter wheat acreage numbers in last Friday's report.
Bullish Tone Persists Despite Possible "Turn-Around Tuesday"
Vic Lespinasse's Pre-Opening Grain Commentary from the floor of the Chicago Board of Trade for January 15, 2008A lower start is expected this am, down roughly 5 in wheat and 1-3 in beans and corn, following overnight losses. Crude oil is lower also but gold is higher and the $ is lower, sending mixed signals to the grains. Malaysian palm oil fell 64 ringgit but bean oil was higher overnight anyway, the only pit to end the night session higher. Argentina will remain hot and dry today but scattered rain is forecast Wed-Thur with low coverage. Mostly dry weather is forecast Friday through the weekend, keeping corn and beans under stress. Brazilian corn and beans remain in good shape overall with more rain forecast the next several days in both northern and southern growing areas. Pakistan delayed their 610,000 wheat tender again, this time from Jan 16 to Jan 21. Japan will be in Thursday for 105,000 tonnes of US wheat. Turkey tenders Jan 22 for 200,000 tonnes of milling wheat and 125,000 tonnes of corn, both optional origin. Jordan will be in Jan 30 for 100,000 tonnes of optional origin wheat. Chart-wise, the markets still look bullish.
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More Big Gains in Grains Expected Today
Vic Lespinasse's Pre-Opening Grain Commentary from the Floor of the Chicago Board of Trade for January 14, 2008Another sharply higher start is likely this morning, up roughly 10-20 cents or more in corn, beans and new crop wheat. Gold and crude oil are sharply higher this am while the dollar is lower, a bullish combination for all the grains, especially corn and bean oil. Malaysian palm oil rocketed 134 ringgit this morning, a strong bullish signal for the bean oil market. The NOPA (National Oilseed Processors Association) December crush was 155.9 million bushels, almost 4 million higher than expected, which is friendly for beans. Oil stocks were only 2.712 billion lbs, 30 million less than expected. Given the higher than expected crush, oil stocks should have been even higher than the expected 2.742 billion so this report is bullish for oil.
Terry Francl, economist with the 6 million member American Farm Bureau Federation, said beans will rally to $14-15 per bushel this year. He was speaking at the annual convention of the Federation in New Orleans. Informa is going to re-estimate wheat, corn and bean acreage sometime this week following the surprisingly low wheat acreage estimate by the USDA Friday. Informa will probably cut their wheat acreage guess and raise their corn and bean acres estimates. Argentine crop areas were generally dry over the weekend with hot and dry weather forecast the next couple of days, stressing corn and beans. Scattered rain is forecast the second half of the week, .25-1", before dry weather returns for the weekend. Southern Brazil's state of Rio Grande will be dry until Thursday-Saturday, when .25-1" rains are forecast. Parana and Mato Grasso, the 2nd and 1st largest bean producing states in Brazil, respectively, will see more rain this week, especially in Mato Grasso, where up to 2" could fall. This moisture will keep conditions very favorable overall in Brazil for corn and beans.
Corn & Soybeans Called Much Higher in Wake of USDA Report
Vic Lespinasse's Pre-Opening Grain Commentary from the floor of the Chicago Board of Trade for January 11, 2008A higher to sharply higher start is expected this morning, led by corn. The early, tentative calls are 10 or more higher corn and 5 higher wheat and beans. The USDA reports were very bullish for corn and KC wheat, neutral beans and bearish Chicago wheat. The market didn't wait until this am to rally, moving sharply higher overnight, which is unusual ahead of a major USDA report. This suggests very good underlying strength in the grains.
Final corn production for 2007 was 13.074 billion bushels and beans were 2.585 billion. The corn carryover was put at 1.438 billion bushels, beans 175 million and wheat 292 million. The corn carryover was a real bullish shocker. December 1st stocks were 10.269 billion bushels for corn, another real bullish number, 2.329 billion beans and 1.128 billion wheat. All winter wheat acreage was just 46.61 million with hard red winter wheat only 32.5 million. This is the type of wheat traded in KC. Soft red winter, the type traded in Chicago, was 10.5 million and white wheat was 3.7 million. Brazil's bean crop estimate was cut to 60.5 million tonnes from 62 million while Argentina's bean estimate was unchanged at 47 million tonnes. World ending bean stocks were cut 1 million tonnes to 46.24 million, corn was cut very sharply, 101.3 million vs the December guess of 109.1 million and wheat was put at 110.93 vs 110.1 in Dec.
Argentina only had .25-.5" of rain the last 24 hours, much less than indicated yesterday. Mostly hot and dry weather is forecast today through Tuesday before scattered rain returns Wednesday. This La Nina induced hot and dry pattern is stressing beans and pollinating corn in Argentina and was probably behind overnight gains. Brazil continues enjoying widespread rain, especially in the north. Indian wheat and rapeseed, which is their main oilseed crop, remain behind schedule. The Farm Ministry says 27 million hectares were planted to wheat so far this season vs 27.75 million last year at this time. Rapeseed planting reached 5.87 million hectares vs 6.64 million a year ago. Indian government officials will meet next week to consider resuming wheat imports to build a buffer stock.
I think corn and beans will race each other higher today as they continue their acreage race to secure adequate acreage this spring.---Vic Lespinasse
Slow Day in Grains Expected Ahead of USDA Report
Vic Lespinasse's Pre-Opening Grains Commentary for January 10, 2008A lower start is expected this morning, roughly 5 down in wheat, 1-2 off in corn and 3-4 lower beans following overnight losses. Today could be a relatively slow day as many traders even up, adjusting their positions for the big USDA reports tomorrow am. Crude oil is lower this am, a bearish signal for corn and bean oil.
Pakistan delayed their 610,000 tonne wheat tender from Jan 12 to Jan 16. They also changed the mix of wheat they are seeking, from 300,000 tonnes of white wheat and 310,000 tonnes of winter wheat to 150,000 tonnes of white wheat and 450,000 tonnes of winter wheat. Japan bought 95,000 tonnes of US wheat at their weekly tender. There is no Malaysian palm oil quote this am due to a holiday there.
Weekly export sales were higher than expected for oil, 28,000 tonnes. Meal sales were in line, 78,000 tonnes but the rest were slow, just 191,000 tonnes of wheat, 670,000 tonnes of corn and only 118,000 tonnes of beans. Around 500 beans keep circulating on delivery this am, along with 1200 meal and almost 1400 oil. There were no sizeable commercial stoppers again this am.
Brazilian weather is forecast to remain generally favorable the next week or so with scattered rain especially in northern growing areas. Argentina had scattered overnight rain and more is forecast today, up to 1". Mostly dry weather is then likely Fri-Mon but scattered showers are forecast to return by mid next week bringing up to 1" of additional rain. More rain is still needed in many Argentine corn and bean areas soon. Expect tentative trading today as traders await the USDA tomorrow.
Vic Lespinasse Discusses China's New Tax on Grain Exports
with Bob Moon of National Public Radio's Marketplace
China levies new tax on grain exportsListen to Bob Moon's interview with Vic Lespinasse as it was broadcast on NPR TEXT OF STORY
KAI RYSSDAL: The Chinese government is ringing in the New Year by ringing up some new taxes on grain exports. As of January 1st, Beijing Standard Time, wheat growers looking to export their crops have to pony up a 20 percent tax. The duty on corn and rice has been set at 5 percent. Until not too long ago Beijing was giving farmers sizable tax rebates for their grain exports. But food prices in China have been soaring -- not a good thing for a government that's keen to avoid social unrest. And it bodes none too well for the rest of us when demand for grain around the world is rapidly outpacing supply. Marketplace's Bob Moon has the story.
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BOB MOON: China is the world's biggest grain producer, and its harvest over the past year grew -- quite literally -- to more than 500 million tons. But it seems there still isn't enough to go around for the country's ever-growing population. So Beijing hopes to keep supplies at home and control rising inflation. Tighter global supplies could put upward pressure on prices, but industry analyst
Vic Lespinasse of Illinois Grain says that could be good news for American farmers:
Vic LESPINASSE: The Chinese, especially in corn, were a big competitor with the U.S. They would export millions of tons of corn every year, taking away some traditional U.S. markets. And to that extent, it will encourage U.S. corn exports. So, U.S. farmers welcome this move.On the other hand, Argentina and Russia are already moving to restrict their grain exports, while other countries have been buying up grain aggressively. Linn Group analyst Roy Huckabay says it all points to what he calls dangerously short supplies:
ROY HUCKABAY: If you look at wheat, corn and rice -- and that covers most of your edible grains in the world -- we've got about two months of supply at the end of the year.
And just like the scramble for oil, a tax on food exports from China now ripples throughout the the global economy.
HUCKABAY: I don't think we ever go back to the cheap prices we had in the '80s and '90s. I think that turning food into fuel has started this. I mean, we saw that tightness coming. So we continue to see this tug of higher prices until we get comfortable with supplies again. And I think that comfort level is probably a couple years away.
Huckabay says with only so much farm land left, achieving that will require the use of new genetic technologies to produce bigger crop yields.
In Los Angeles, I'm Bob Moon for Marketplace.
Index Funds May Affect Grains Again Today
Vic Lespinasse's Pre-Opening Grains Commentary for January 9, 2008Overnight prices were higher and that is the tentative call this morning, up roughly 1-3 in wheat, 2-4 corn and 5-7 beans. However, crude oil and gold are a bit lower while the dollar is higher, a bearish combination for the grains, especially bean oil and corn. Index funds rallied corn late yesterday, buying several thousand contracts. At the same time, late selling by index funds in wheat, beans and oil trimmed the big gains in these pits sharply, especially wheat. Meal was least affected since index funds do not trade meal. The same type of index fund activity is likely late in the session today through Monday. Open interest jumped 20,000 lots in corn yesterday, reflecting new longs in this pit, some of which are likely index funds. Interestingly, open interest in wheat and beans was up several thousand lots, suggesting fresh speculative buying more than offset index fund selling. The CRB index hit a new record high yesterday, 369.42, reflecting the broad sweep higher of a wide range of commodities, not just grains.
Malaysian palm oil jumped 40 ringgit today, which is supportive for our bean oil market. South Korea passed on their tender for 165,000 tonnes of optional origin corn. Argentine weather is now forecast a little wetter than yesterday with .3- 1.5" of rain expected tonight-tomorrow before dry weather returns Fri-Mon. The forecast for next week calls for alternating periods of dry and wet weather, painting a confusing picture for the longer range outlook. Brazil continues enjoying favorable weather overall with more rain forecast the next several days or longer, especially in northern areas. Deliveries were 660 lots in beans and 1400 each in meal and oil with no commercial stoppers of any size. Crude oil will be influenced by the weekly oil stocks report this morning from the US Dep't of Energy and this could influence our bean oil and corn markets as well. Traders are looking for crude oil stocks to fall 1.3 million barrels. This report will be out at 9:30 am, central time, the same time the grains open.
Just for your information, CNN reported this morning that the decline over the first 5 trading days in the Dow Jones industrials was the worst first 5 trading days in the new year since 1932! One newswire reported this am that it was the worst start ever for the equity market! Either way, the equity market is off to a terrible start - what does this mean for the grain market? It probably is bearish if equities keep selling off as a slow down in the world economy, especially in China and the US, could lessen demand for many commodities, including grains.
The trade averages are out for Friday's big USDA reports. Final 2007 production is estimated at 13.109 billion bushels for corn and 2.584 billion for beans. Winter wheat seedings are guessed 48.657 million acres for all winter wheat, 34.88 million hard red winter, 9.99 million soft red winter and 3.84 million white winter. December 1st grain stocks are estimated 10.550 billion bushels for corn, 2.268 billion beans and 1.116 billion wheat. Ending stocks are guessed 1.698 billion bushels for corn, 170 million beans and 274 million wheat.
Turn-Around Tuesday Could Bring Grains Rally Today
Vic Lespinasse's Pre-Opening Grains Commentary from the Floor of the Chicago Board of Trade
A mostly higher start is expected this morning, up roughly 7-10 in beans, 5 in corn and steady wheat. Egypt is in the market for wheat and this pit will react to news of any Egyptian wheat purchases, which should be announced before the opening.
The same items that broke the grains yesterday could rally them today: crude oil was lower yesterday but it is higher this morning; Argentina had good rain in the forecast for Thursday but today's outlook is not as wet. There is still rain in the picture for Thursday but amounts have been cut, .25- 1.0" vs yesterday's forecast of .5-1.5". This might seem like a minor difference but the market is very sensitive to any weather changes in South America currently, especially Argentina, which has been on the dry side much of this season. Brazil, in contrast, continues to benefit from ample rainfall with more forecast nearly every day in the north for the next 7 days while the south will see more rain later this week into early next week. In other news, Taiwan bought 80,000 tonnes of US wheat for Feb-March shipment. Malaysian palm oil fell 27 ringgit today.
Deliveries totaled 555 beans, 1200 meal and 1500 oil. ADM was the only sizeable commercial, putting out 164 beans on delivery. The cash market for beans was very weak yesterday at the gulf, contributing to the break in the old crop beans and encouraging spreading of new crop/old crop. New crop beans ended higher yesterday, gaining sharply on the old crop. New crop beans also gained sharply on new crop corn as the acreage race between beans and corn continues. In the old crop months, corn gained sharply on beans ahead of the start of index fund rebalancing, with index funds expected to be big sellers of old crop beans and wheat, big buyers of old crop corn over the next 5 days or so.
Brazil's Agriculture Ministry estimated Brazil's upcoming bean crop at 58.16 million tonnes vs their previous guess of 58.11 million. The current USDA guess is 62 million. The USDA will update their world grain production estimates this Friday am. I should have trade averages for all the numbers in this report later today. The latest monthly estimates for the condition of the hard red winter wheat crop are all lower than they were in November: Kansas wheat rated 47% good to excellent vs 62% in Nov. Oklahoma was 35% vs 43% in Nov, Texas came in at 14% vs 29% in Nov and Nebraska was 60% against 70%. However, the weather has improved overall so the crop should be improving now. What really counts for the hard red winter wheat crop is the weather in the spring when the crop comes out of dormancy. ---Vic Lespinasse
Illinois Grain analyst Vic Lespinasse Predicts Higher Grain Prices in Sun Times Interview
Illinois Grain analyst Vic Lespinasse Discusses Grain Prices in the Chicago Sun TimesCommodities expected to soarThe Curious Investor
Although the experts can't agree on the specifics, all see bushels of money being made January 6, 2008
BY DAVID ROEDER Sun-Times Columnist
Somehow, sometime this year, crop prices will hit a peak. Most agricultural analysts and traders can agree on that once they look up from their charts and tune out the noise of the pits.Asking when the market will get there provokes clattering discord, but there's striking agreement on this: There are still bushels of money to be made by going long on commodities.
Oil and gold take most of the bows when commodities rally, but 2007 was a great year to own contracts on Chicago Board of Trade staples such as wheat, soybeans and corn. Wheat prices doubled during the year, soybeans nearly so. Corn's gains during 2007 were modest, but the prices are up 40 percent from lows attained during the summer. And all are trading near their highest levels in years.
The wheat move was so great that it caused farmers to shift acreage from corn, previously untouchable because of demand by every source from China to ethanol plants. As a result, analysts see a contraction in U.S. corn acreage that will support further price hikes in 2008.
Bill Biedermann, senior vice president at the McHenry brokerage and researcher Allendale Inc., sees corn hitting $5.30 a bushel. (The March contract closed Friday at the Board of Trade at $4.6675) But he said bad weather could send it to $7. He also said soybeans should have room to grow from Friday's January contract close of $12.4950.Many factors are behind what Biedermann said could be the fourth great "grain robbery" in recent years. The first three were the years of Russian buying in the 1970s, the "gasohol" craze of the late '70s (sound similar to ethanol?) and the great Chinese-led market of the 1990s.As the year wears on, the market will produce opportunities for short sellers, he said. "But right now, the trend is up. You can see the orders in the pits to buy on breaks."
Vic Lespinasse, analyst for the Illinois Grain division of Cytrade Financial, said high oil prices make biofuels more attractive, thus helping crop prices. He also sees index funds stepping up investments in commodities. Wheat has the greatest risk of a price drop, but crops overall "certainly have the potential to go higher, maybe a lot higher."Last week, Purdue University economist Chris Hurt said ethanol's appetite will put a strain on corn availability for 2008 and 2009. In addition, Goldman Sachs Group and Deutsche Bank are advising clients to keep buying corn and soybeans despite near-record prices.
Goldman said it expects soybeans to rise 29 percent in 2008, predicting it will be the best investment in commodities.It all could be one of those rock-hard assurances that the fates delight in cracking. Biedermann said higher grain prices are causing a hardship for meat processors, pushing some to close. In time, that could point to reduced demand.
Also, weather is the great unknown. Currently, dry conditions in South America are adding to the support for soybeans. Look for more traders to short the market when spring hits the Northern Hemisphere, but they'll take a long hard look at a weather map before they do.
Grains to Start Sharply Higher as Traders Return
A higher to sharply higher start is expected today with beans up around 20-30, corn 5-8 and wheat 12-20, following very strong overnight gains. Crude oil is sharply higher this am, gold is sharply higher too but the $ is also a bit better. Malaysian palm oil is 32 ringgit higher also this am. Traders will respond bullishly in the grains to the very strong rally in crude oil this am, especially corn and bean oil, since higher crude oil encourages more demand for bio fuels such as ethanol from corn and bio diesel fuel from bean oil.
Support for wheat is likely from Pakistan's tender for a total of 610,000 tonnes of optional origin wheat Jan 12. Deliveries for beans totaled 429 this am with Dreyfus putting out 335 and ADM 42. There were no commercial stoppers. Oil deliveries totaled 6400 and meal was 1600, both without commercial stoppers of large size.
One forecaster sees mostly dry weather for Brazil the next few days but others expect scattered rain across much of the corn and bean areas today through Sunday. This follows rain over the last 48 hours, keeping weather conditions in Brazil very favorable. Argentina was mostly dry the last 48 hours. Generally dry weather is likely the next couple of days in the north with scattered rain Friday and dry weather again this weekend. Southern Argentina will enjoy scattered rain the next couple of days before mostly dry conditions move in Fri-Sat. Traders will keep an eye on crude oil today for general market guidance. ---Vic Lespinasse
