Target Futures
Export Figures as Expected; Weather News Predominates
Vic Lespinasse's Pre Opening Grain Commentary from the Floor of the Chicago Board of Trade for May 30, 2008A lower start is likely this am but probably not as weak as overnight. The early call is steady wheat, 2-3 down corn and off 7-10 in beans. Crude oil is higher, which should lend some support to the grains but the $ is up a little and the Dalian, China grain futures market was lower today, both negative signals for our grain market.
The Argentine government said they will adjust their bean export tax hike slightly, which Argentine farmers immediately rejected as meaningless so the strike goes on. It is currently scheduled to end Monday but the way things are going, a longer strike appears likely, which is bullish for our bean and product export prospects.
Weekly export sales this am were about as expected: a total of 564,000 tonnes of wheat between the old and new crop years; a total of 703,000 tonnes of corn between the two crop years; a total of 503,000 tonnes of beans between the two crop years; a total of 103,000 tonnes of meal between the two crop years; a net reduction of just 300 tonnes of oil due to cancellations and 21,000 tonnes of rice.
The UN's Food and Agriculture Organization is holding a world food summit next week in Rome to address the current food price crisis. The US delegation will be led by Secretary of Agriculture Ed Schafer. Expect at least some scapegoating of speculators for the rise in food prices.
Mostly dry weather is forecast for eastern Australian wheat areas the next week or so, increasing the need for rain there soon.
The southwest US winter wheat belt is hot and more hot weather is forecast the next several days or longer. Light, isolated rain is forecast in central and eastern parts of the belt over the weekend with heavier rain the second half of next week in the forecast. The dry southwestern part of the belt is expected to remain mostly dry, stressing developing wheat there. The 6-10 day calls for more of the same, rain in all areas of the belt except the dry southwestern region. The western corn belt has had way too much rain recently and there is now talk that up to 5% of corn acreage in Iowa and Nebraska will have to either be replanted to corn or planted to beans. If corn is planted, there could well be significant yield loss but beans can generally be planted until mid June without any yield loss. Up to 2.5" of rain fell overnight in parts of the western corn belt, causing some flash flooding of fields, hurting newly planted crops and delaying new planting efforts. The eastern corn belt had isolated rain of up to 1.5" overnight. The forecast calls for mostly dry weather over the weekend in the west after rains end later today with rain continuing until tomorrow in the east. Up to 1.5" could fall today-tomorrow in the east, which will be unwelcome. More rain is forecast across much of the entire belt the first half of next week with up to 1" in the west and up to 1.5" in the east. The 6-10 day calls for above normal rain.
Crude Oil May Continue to Influence Grains Today
Vic Lespinasse's Pre Opening Grain Commentary from the Floor of the Chicago Board of Trade for May 29, 2008A lower start is likely in all pits this am, 5-10 wheat, 3-5 corn and 10 beans. Overnight prices were lower, crude oil is down triple digits this am and the $ is higher, a bearish combination for the grains. Malaysian palm oil is down 22 ringgit while Dalian, China grain futures are mixed. Lately, the Dalian market hasn't seemed to provide much influence for our grain market and this morning's mixed prices will continue that trend.
Indian government officials are considering lifting their ban on wheat exports following a record harvest. India imported around 7 million tonnes of wheat over the last two years due to production shortfalls following poor weather while in the 6 years before that, India had been self sufficient in wheat. The officials said they would keep the ban on rice exports until at least November.
The southwest US winter wheat belt will see hot temperatures the next several days, stressing wheat in the dry western part of the belt. Only isolated, light rain will fall the next several days. The 6-10 day forecast calls for hotter than normal temperatures with below normal rain in the already too dry southwestern part of the belt but above normal rain elsewhere, which will be welcome. The western corn belt will see scattered rain today through Sunday or Monday next week. Up to 1.5" is expected today with lesser amounts in following days. The eastern corn belt will see scattered rain tonight through Saturday, up to 1.5". More is possible Mon-Tue. The 6-10 day calls for below normal rain in the southeast part of the belt with above normal rain elsewhere. All the rain over the next week or so will continue to slow late corn planting and delay bean planting also.
The two forecasts I have seen for Australia's wheat regions are mixed with one calling for mostly dry weather in eastern wheat areas the next 7 days while the other predicts rain in these same areas the next several days. Pay close attention again today to the crude oil market for general direction in the grains.
Farmers Rally in Argentina; Higher Start Expected
Vic Lespinasse's Pre Opening Grain Commentary from the Floor of the Chicago Board of Trade for May 27, 2008A higher to sharply higher start is expected this am, up roughly 2-3 in corn, 10 in wheat and 20 in beans. Crude oil is lower this am but the dollar higher while Dalian, China grain futures are mixed and Malaysian palm oil futures are a total of 76 ringgit higher since Friday's close, sending mixed signals to our grain market.
On Sunday, Argentine farmers held a huge rally, reportedly 200,000 people, against the government's bean export tax policy. In response, the government cancelled talks with the farmers unions yesterday. Argentine farmers will meet today to discuss what to do next. A renewed strike is a strong possibility, which is bullish for our bean, oil and meal markets, especially the nearby months. Argentina is the third largest bean producer in the world and the third largest bean exporter after the US and Brazil but they are the largest meal and oil exporter in the world. The longer this situation continues in Argentina, the more export business is likely to be switched from Argentina to the US and Brazil.
Cambodia announced they are resuming rice exports and Viet Nam is expected to do the same by July, if not sooner. This helped push rice limit down in overnight trading so look for a lower to sharply lower start in this pit today.
The forecast for western Australia calls for the possibility of scattered rain over the next week, which will be welcome. Eastern wheat areas are expected to stay dry during this time, stressing already planted wheat and further delaying new planting. Some analysts are starting to cut their wheat production estimates with Rabobank Australia now guessing the crop at 20-24 million tonnes vs their previous guess of 23-26 million.
The southwest US winter wheat belt had beneficial rain over the weekend, up to 1" in the west and up to 2" in the east. Rain is forecast today and tomorrow, up to 1.5", mostly in the eastern half of the belt. The 6-10 day calls for above normal rain in the north, below normal in the south. The midwest saw weekend rains, up to 1.5", scattered across the belt. Light rain is forecast this week in the western half of the belt, up to .75". Eastern areas of the belt will see scattered rain today with much heavier amounts and coverage Fri-Sat, up to 1.5". The 6-10 day calls for wet weather in all areas of the midwest except the southeast, where below normal rain is forecast.
Tonight's weekly planting report is expected to show around 85-90% of the corn planted with 45-50% of the beans planted, both well behind normal.
Bullish Factors and Wetter Weather May Support Grains Today
A higher start is expected in all pits this am, 5-7 wheat, 2-4 corn and around 15 beans. Dalian, China grain futures were mixed but crude oil keeps marching higher while the $ keeps descending, a bullish combination for all the grains.
There is a little export business around with Pakistan in for 75,000 tonnes of optional origin wheat and Bangaladesh in for 100,000 tonnes of the same early next month.
Rain will fall in western Australian wheat areas the next few days but the eastern wheat belt will be generally dry during this time, increasing the growing need for widespread moisture there soon. The US southwest winter wheat belt had isolated rain overnight in western Oklahoma and Texas. Today through Saturday, .3-1.5" is expected in central and eastern areas of the region, along with much warmer temperatures. The 6-10 day calls for above normal rain in the north, below normal in the south. The midwest was mostly dry the last 24 hours. The forecast is somewhat wetter for the next several days in the western corn belt than suggested by yesterday's forecast. Up to 1.5" of rain is likely in the west between today and Monday. The eastern corn belt will be mostly dry the next several days although there is some light rain expected Friday. The 6-10 day calls for wet weather in the west and below normal rain in the east. The increased outlook for rain in the west will slow late season corn planting and keep bean planting slow also.
In my view, over the last few months of choppy trading, one market has stood out, continuing to trend: soybean oil. It seems to be a lot less choppy in bad times and trends more strongly in good times than the other markets I follow.
Slow Planting Progress Supportive for Grains
A higher start is likely in all pits this am, 5-10 in wheat, 3-5 corn and 5 beans. Crude oil is higher and the $ lower, a friendly combination for all the grains. Argentine farmers are ending their strike tomorrow, which is bearish for our bean market. However, this was already discounted by the beans yesterday as they sold off sharply so it is in the market, allowing beans to trade higher overnight.
The weekly crop progress report showed corn planting not as far along as expected, 73% done vs 88% average. Emergence is only 26% vs 56% average, reflecting the cool, wet weather this spring and the slow planting pace thus far. Bean planting is only 27% vs 47% usual for this time of year. Rice is 60% in the ground against 74% average. Winter wheat surprisingly declined in condition with just 45% rated good to excellent vs 47% last week and expectations of around 48-49%. These numbers are supportive for all the grains this am, especially wheat and corn.
Malaysian palm oil fell 16 ringgit today. Viet Nam's Agriculture Minister said they might resume rice exports in early July as supply fears ease with the new harvest. The forecast for the Australian wheat belt remains dry for the next week or so, which is bullish for our wheat market today, as was the case yesterday.
The southwest winter wheat belt here in the US will see light, isolated rain today and tomorrow. Better rain is expected Thursday, up to 1", and more light, scattered rain is likely Fri-Sun, all favoring the east. The 6-10 day outlook calls for above normal rain, which will be welcome. The midwest will benefit from relatively dry weather the rest of this week although some modest, scattered rain will occur in the second half of this week. The 6-10 day outlook calls for wet weather in the west, below normal rain in the east.
Food or Fuel: USDA Press Briefing May Affect Grains Today
Vic Lespinasse's Pre Opening Grain Commentary from the Floor of the Chicago Board of Trade for May 19, 2008A mixed but mostly lower start is expected this am, down roughly 3-4 in corn and about 15-20 in beans but up 2-3 in wheat. Dalian, China grain futures were mixed today. Crude oil is higher and the $ is steady, so the outside markets are providing mixed signals for our grain markets this am.
Weekly planting progress this afternoon should show around 75-80% of the corn planted. Some scattered rain is forecast this week for the midwest but not enough to stop expected good planting progress. The 6-10 day outlook calls for above normal rain in the west, below normal in the east. The southwest winter wheat belt had a mostly dry weekend with more of the same the next couple of days before rain moves into northern and eastern areas mid week. Rain is likely in the dry western part of the belt Thur-Sat, which will be very welcome. The 6-10 day calls for above normal rain, which will also be welcome. The northern plains had a dry weekend with rain expected today and again Wed-Fri. The 6-10 day outlook calls for above normal rain, which will be welcome.
Beans were pressured overnight and will likely be under continuing pressure today after Argentine farm unions leaders moved a meeting to discuss the strike from Wednesday to today and sounded conciliatory regarding talking with the government to resolve the strike. This situation is still subject to change but for now it appears progress will be made to resolve the strike sooner rather than later and this is bearish for our nearby bean prices.
Rain over the weekend in New South Wales, Australia's largest wheat growing state, was disappointing but in other areas beneficial rain of up to .8" fell, greatly benefiting the crop. New South Wales produces around 30% of Australia's wheat crop with the western Australia region accounting for 40%, Victoria state 10%, Queenlands 5% and southern Australia 15%. Most areas are now in fairly good shape moisture-wise with the major exception of New South Wales and little rain is forecast for Australian wheat areas the next 7-10 days. This situation still needs to be watched closely.
Remember, the USDA press briefing on the food/fuel debate will take place today at 10 am, US Central time. The Agriculture Secretary and the chief USDA economist will participate at this briefing and they possibly could say something that would move the grain market so traders will monitor it.
Argentine Strike Continues
Vic Lespinasse's Pre Opening Grain Commentary from the floor of the CBOT for May 16, 2008A higher start is expected in all pits this am, 3-5 wheat, 3-4 corn and 15 beans following overnight gains. Argentine farmers have extended their strike until next Wednesday, May 21, which is bullish for our bean market, especially the nearby months. Dalian, China grain futures were mixed today but crude oil is sharply higher this am and the $ is a bit lower, a bullish combination for the grains, especially corn and bean oil due to their bio fuel links.
Malaysian palm oil gained 46 ringgit today. Pakistan is in the market June 7 for a total of 250,000 tonnes of optional origin wheat.
Meteorlogix Weather isn't available yet this am and I don't see any other forecasts until later in the am so I will have the weather forecast later, hopefully in my next email.
Weather Factors Bearish for Coming Days
Vic Lespinasse's Pre Opening Grain Commentary from the Floor of the CBOT for May 15, 2008A lower start is indicated this am, down around 3-5 wheat, 2-4 corn and 10-12 beans. Weather remains the main bearish ingredient for corn this am with favorable planting weather forecast to continue in much of the corn belt the next several days. Some light, scattered rain is forecast in parts of the eastern half of the belt, less than 1", but not enough to stop planting. The 6-10 day calls for below normal rain, which should further speed late season planting progress.
The southwest winter wheat belt had scattered, light rain yesterday with more of the same likely today before dry weather moves in Fri-Tue, along with hotter temps. The 6-10 day forecast calls for below normal rain, which is supportive for wheat prices as more rain, not less, is desired currently, especially in the dry western part of the belt.
Meteorlogix Weather is still forecasting good rain in New South Wales in Australia, which produces roughly 30% of the Australian wheat crop. However, they are now seeing a diminished chance of good rains in dry areas of Victoria state and southeast Australia compared with previous forecasts. There is a growing need for rain in these areas soon as dry conditions have prevailed there for the last couple of months. Nevertheless, wheat prices were lower overnight and are called lower this am, which is a bit surprising given the world wheat weather picture currently.
Crude oil is sharply higher and the $ is lower this am, a bullish combination for the grains, especially corn and bean oil.
Argentina's president made a conciliatory speech last night regarding the farmers strike, leading to hope some progress might be made today to end the strike. This weighed on nearby bean prices overnight and will continue to do so this am. Ukraine's president wants to end grain export restrictions this week and is urging Parliament to go along, which would allow more Ukrainian grain exports back into the world market.
The USDA announced the sale of 60,000 tonnes of US beans to China for the 2007-08 crop year and 66,000 tonnes for the 2008-09 crop year. Weekly export sales were good for wheat, 121,000 tonnes of old crop and 443,000 tonnes of new crop; corn, 547,000 tonnes old crop and 139,000 tonnes new crop; oil, 11,000 tonnes; and rice, 84,000 tonnes of rice. Bean sales were in line, 201,000 tonnes as was meal, 116,000 tonnes.
April Crush Below Expectations; Stocks Higher
Vic Lespinasse's Pre Opening Grain Commentary from the Floor of the Chicago Board of Trade for May 14, 2008A mostly lower start is indicated this am, down roughly 3-5 in wheat and corn with beans off 1-2. Crude oil is a little lower and the $ a little higher, a slightly negative combination for the grains. Dalian, China grain futures were mostly higher except corn, which ended a bit lower.
The April NOPA (National Oilseed Processors Association) crush was 140 million bushels, about 2.5 million less than expected. Oil stocks were 2.409 billion lbs, about 60 million lbs more than expected. This report is negative for beans and oil.
Today is the last trading day for the May futures contracts, which expire at noon, central time. No news out of Argentina this am with farmers expected to decide tomorrow on whether or not to continue their strike. If they do, it will be bullish for beans, especially the nearby months.
Meteorlogix Weather is calling for rain in the dry areas of Australia's wheat belt the next few days but they are unsure how much rain will fall -- just scattered showers or large amounts? Australian forecasters seem to be taking a more sanguine view, calling for good rains Fri-Sun in the dry areas. A lot is riding on this rain event: following two years of severe drought, good rains fell at the end of last year and the first two months of this year but for the last 10 weeks, very little rain has been seen in the Murray-Darling River Basin, the food basket of Australia. Some farmers fear a third straight year of drought if this expected rain event falters.
Sichuan province in China is where the earthquake was centered and it is the largest pig producing province in China. Fears that there will be a temporary interruption in pig production weighed on corn futures the last couple of days in the Dalian grain futures market. The southwest winter wheat belt had scattered rain the last 24 hours. Rain is forecast in the southern part of the belt today and tomorrow, up to .75", Dry weather is forecast over the weekend. The 6-10 day calls for below normal rain. The midwest saw rain in the east the last 24 hours but mostly dry weather in the west, allowing for more corn and bean planting progress. Mostly dry weather is likely in the western half of the belt the rest of the week. The east will see scattered rain the next couple of days, up to 1". The 6-10 calls for below normal rain in the west, above normal in the east, which should allow rapid planting progress in the west.
Planting Progress May Be Improving
Vic Lespinasse's Pre Opening Grain Commentary from the Floor of the Chicago Board of Trade for May 13, 2008A mixed start is expected this am, up 5 in beans but down 1-2 in wheat and off 4 in corn. The weekly crop progress report showed corn planting at 51%, in line with trade expectations but way behind the normal pace of 77%. This was up from just 27% planted the week before, a jump of 24% in one week. The forecast is favorable for rapid planting progress this week through next week so next Monday's report could show a jump of close to 30% in planting, which would put the crop at about 80% done and mimimize yield loss potential. Bean planting is only 11% complete vs 29% average but spring wheat is 81% done against 78% average. The cool spring has slowed emergence with just 11% of the corn emerged vs 33% average. Winter wheat was rated 47% good to excellent, unchanged from last week. Traders had expected a 1-2% improvement in the condition of the crop. Rice planting reached 74% vs 80% average. Emergence is behind, just 48% vs 63% average.
The Dalian, China grain futures market is mixed this am, offering no sense of direction for our grain market today. Crude oil is slightly higher this am but the $ is stronger while Malaysian palm oil fell 38 ringgit, sending more mixed signals to our grain market. Argentine farmers are supposed to decide whether to continue their bean strike Thursday. If they do, this will be bullish for our bean market, especially the nearby months.
The midwest is expecting mostly dry weather this week through the weekend in the west, which should allow for rapid corn and bean planting progress. The eastern half of the belt will see some scattered rain this week, favoring the southeast but some good planting progress is likely anyway. The 6-10 day calls for below normal rain in the west and above normal rain in the east. The delta will see heavy rain of 1-3" today through Thursday, slowing planting there. The southwest winter wheat belt will see beneficial rain tonight through Thursday, up to 1.5" in some areas, before dry weather moves in Fri-Sun. The 6-10 day calls for below normal rain in the west and above normal in the east. We could be in for another relatively dull, drifting market today, given the mixed news.
USDA Supply/Demand Report
Vic Lespinasse's Pre Opening Grain Commentary from the floor of the Chicago Board of Trade for May 9, 2008A higher to sharply higher start is likely this am, led by beans, which are called 25-30 higher. Corn could be 7-10 up with wheat up about 5.
The USDA winter wheat production numbers this am were mostly higher than expected, which is bearish, but with big gains expected in the other pits and the possibility of a freeze in Kansas over the weekend, wheat is still called higher. Usually, the night before a USDA report the market doesn't do much but that wasn't the case this time as prices were sharply higher last night, up about 15 in wheat and beans with corn up about 9. In the case of wheat, overnight gains were partly a reflection of the threat of winterkill damage from the freeze forecast, although some forecasters think the crop is too immature to be damaged very much by any cold temperatures at this time.
The USDA Supply-Demand numbers this am were very bullish beans, projecting a carryover this year of only 145 million bushels and next year, 2008-09 of just 185 million, well below trade guesses of about 272 million. The corn carryover estimates were a bit higher than expected, 1.383 billion bushels this crop year, 2007-08, and 763 million next crop year, 2008-09. However, the USDA is using a record corn yield of 153.9 bushels per acre to achieve this higher than expected carryover next year, an optomistic assumption given the slow pace of planting so far this season. If this slow planting pace continues, lower yields would typically result, not record ones. The USDA mostly left world production estimates unchanged. This report will influence the market this am but who will be talking about it Monday? Answer - no one. We will be right back to focusing on the weather and all the other factors currently in play so many traders will probably overlook this morning's report, at least as far as wheat and corn are concerned, and concentrate on these other factors, which are: sharply higher crude oil prices and a lower $, a potent bullish combination for the grains.
Malaysian palm oil gained 38 ringgit and Dalian, China grain futures were higher except for bean oil, which was lower. No word yet on when the USDA news briefing on food/fuel will be held after it was cancelled yesterday afternoon so USDA officials could keep working on the new farm bill before Congress. India is considering export restrictions on meal, which would be friendly for our meal export prospects. The head of Australia's national climate center at the Bureau of Meteorology said the southern half of the Murray Darling River basin had one of the driest Feb-April periods on record and the rest of the year isn't likely to improve much. This area is a major grain producing region so drought there would be bullish for wheat. Meteorologix Weather is nevertheless forecasting significant rain in south central and southeast Australia the second half of next week with rain also forecast in western Australia during the next 7 days, all of which will be very welcome.
The southwest US wheat belt had up to 1" of rain in Kansas yesterday. Rain is forecast today in northern and eastern areas of the belt and again the first half of next week, up to 1.5" in the southern half of the belt. The 6-10 day calls for above normal rain, which will be welcome. The midwest will see scattered weekend rain carryover into next week with up to 1.5" forecast. The 6-10 day outlook calls for above normal rain.
Overall, it appears the market will run with the bullish aspects of the USDA numbers this am but ignore the bearish aspects due to the other news, most of which is bullish. We are watching the situation in Argentina, which remains a question mark at this time. The strike is supposed to end May 15 but who knows what will happen after that?
Program Note---Vic Lespinasse will be interviewed live on Fox Business News at 10:50am US Central Time today.
Watch for Vic's video update from the floor later today on
Agriculture.com
Export Figures Good Ahead of USDA Report
Vic Lespinasse's Pre Opening Grain Commentary from the floor of the Chicago Board of TradeA mixed start is likely this am. Argentine farmers are back on strike but only until May 15, just one week. If the strike ends then, it won't cause much bean export business to be switched from Argentina to the US. No one knows what will happen after May 15 so the market will want to keep some risk premium in place at least until then.
The $ is slightly lower and crude a little higher. Dalian, China grain futures are mixed, not providing any direction for our grain market this am. Malaysian palm oil jumped 102 ringgit today, supportive for our bean oil market. Conab, the Brazilian USDA, cut its bean production guess from 60 million tonnes in April to 59.5 million. They raised their corn crop guess from 56.2 million tonnes last month to 57.9 million now. One weather forecaster predicts no significant rain in Australia's wheat areas for the next 7 days but another forecasts beneficial rain in the dry areas of Australia: parts of New South Wales, Victoria and southern Australia about 1 week from now.
Malaysia bought 500,000 tonnes of Thai rice. Our rice market is called limit up today on follow through buying from yesterday's limit gains.
The Kansas wheat tour forecast a yield of 40.9 bushels in the dry southwest part of the state vs 43.2 last year. Combined with the rest of the state, the yield guess is 43.3 vs 41.6 last year. Oklahoma is looking at a yield of 31.7 and a crop of 149 million bushels vs a guess last year at this time of 34.7 yield with a crop of 164 million bushels, according to wheat tour participants in that state.
Weekly export sales were good for wheat, 492,000 tonnes between the old and new crop years. Corn was slow, just 400,000 tonnes between the two crop years. Beans were in line, 281,000 tonnes between the two crop years but only 41,000 tonnes was for this crop year. Meal was in line, 122,000 tonnes, as was oil, 12,000 tonnes. Rice was strong, 102,000 tonnes.
Remember, the big USDA May crop report is out tomorrow am. The southwest winter wheat belt had up to 1.5" of rain yesterday from southern Kansas southward and today up to .75" is likely from Kansas northward. More rain is likely the second half of next week with the 6-10 day outlook calling for above normal rain. The midwest had up to 2" in the east yesterday. More rain is forecast this weekend in both the western and eastern halfs of the belt with yet more rain the second half of next week. The weather forecast is bearish wheat and beans, bullish corn.
Program Note---Vic Lespinasse previews the USDA Crop Report for Agriculture.com.
Watch the video now!
Soybeans Rebound Overnight After Conflicting Reports From Argentina
Vic Lespinasse's Pre Opening Grain Commentary from the Floor of the Chicago Board of Trade for May 7, 2008A higher start is expected this am, up 3-4 in corn, 3 in beans and 1 in wheat. Crude oil is a little lower and the $ is higher, a bearish combination for the grains. Dalian, China grain futures were higher except bean oil, which was a bit lower. Malaysian palm oil fell 32 ringgit.
The Kansas wheat tour viewed 190 fields so far this week, estimating yield at 45.4 bushels per acre vs 40 last year. The tour is moving into southwestern parts of the state today and tomorrow, where yields have been hurt by dry weather. A final estimate will be put out tomorrow when the tour concludes.
There are conflicting reports coming from the Argentine talks with the farmer unions saying the government is willing to modify their higher bean export tax while the government says it isn't willing to do this. The talks will continue today but only technical issues will be discussed and the chief government negotiator will not be there, so little progress is expected. A late rumor yesterday that an announcement would be made later in the day weighed heavily on our bean market as many traders assumed an end to the impasse over higher bean export taxes was at hand. This apparently isn't the case, which helped beans rebound a bit overnight.
The USDA confirmed talk from earlier this week: Iraq bought 300,000 tonnes of US hard red winter wheat for 2008-09 shipment. Meteorlogix Weather forecasts no significant rain in Australia's wheat areas the next 7 days, which will increase the need for rain there soon. The midwest US will see off and on the next week or so with up to 1.5" in the west and up to 2" in the east the next few days followed by more rain next week. The 6-10 day forecast calls for above normal moisture and all this rain will likely keep corn planting slow. The southwest winter wheat belt saw beneficial rain yesterday with up to 1", favoring the east. More is forecast today, up to 1.5", favoring southern and eastern areas, with yet more rain tomorrow. The 6-10 day outlook calls for above normal rain, which will be welcome.
All the Stats Canada March 31 stocks numbers were in line with trade ideas this am: 10.8 million tonnes all wheat, 2.1 million tonnes durum wheat, 2 million tonnes of oats, 4.5 million tonnes of barley and 3.7 million tonnes of canola. It has been a very choppy week so far and more of the same is likely today.
Planting Progress Figures; Weather Should Push Grains Higher Today
Prices should start higher this am in most pits, judging by overnight trading. The early call is steady/1 better wheat, 2-4 up in corn and 10-15 higher beans. Dalian, China grain futures were higher except corn, which ended lower. The $ is lower this am but so is crude oil, at least slightly at this time.
Corn planting was just 27% done vs the average pace of 59%. Emergence is also well behind normal, 4% vs 17%. Bean planting is 5% complete vs 14% average. Spring wheat is 58% done vs 62% average but emergence is way behind, 11% vs 25% usually for this time of year. Winter wheat's condition rating improved 1% in the good to excellent catagories to 47%. Winter wheat heading reached 26% vs 38% average. The still very slow corn planting pace should lend support to this pit today. However, if Washington politicians keep blaming ethanol for the sharp rise in food prices, corn could continue to sell off, as was the case yesterday.
Viet Nam is considering imposing an export tax on rice starting in July to conserve domestic supplies and combat inflationary forces. Thailand rice prices fell from just under $1000 a tonne last week to $900-920 this week due to slowing demand and rising supplies. Bunge stopped 327 of the 965 meal on delivery this am. Only 4 beans were delivered today.
Meteorlogix forecasts no significant rain in any of the Australian wheat areas the next 7 days, increasing the need for moisture there soon. The US southwest winter wheat belt will enjoy fairly widespread rain today and tomorrow, .3-1.5", favoring the south and east. Overnight, up to 2" of rain fell in central and eastern Kansas. The 6-10 day calls for above normal rain, all of which is welcome. The northern plains will see light, scattered rain today with more the second half of the week. The midwest will see rain today and tomorrow in the west with rain Wed-Thur in the east. Up to 1.5" will fall in the west with up to 2" in the east. More rain is likely across much of the belt this week with up to 1.5" expected. The 6-10 day calls for above normal rain. All this moisture will keep corn and bean planting slow, which is bullish for corn.
Stats Canada is out with their March 31 stocks numbers this am but I haven't seen them yet.
Weather and Negative Ethanol Sentiment Affecting Grains
Vic Lespinasse's Pre Opening Grains Commentary from the Floor of the Chicago Board of Trade for May 5, 2008A mostly lower start is likely this am, down roughly 10 in beans and 3 in corn but up 2 in wheat. Weather is still a problem with more rain in the corn belt Friday, up to 1.5" in the west and up to 1" in the east. Dry weather prevailed over the weekend but rain is forecast in the western corn belt tomorrow through Wednesday and in the eastern belt Wed and Thur, .5-2". More rain is forecast this coming weekend, up to 1" in both the eastern and western halves of the belt. The 6-10 day calls for above normal rain.
All this moisture should keep corn planting slow, which increases the chances farmers will be forced to switch acreage out of corn and into beans, which is bullish corn. However, corn has been acting poorly lately, ending lower Friday and trading lower last night. I suspect this is due to the growing sentiment in Washington against ethanol. Two dozen Republican senators, including Arizona Senator John McCain, are asking the Environmental Protection Agency to change the government's ethanol policy, which means they want it reduced. This would be very bearish for corn.
The southwest winter wheat belt had very cold temperatures over the weekend but no damage is thought to have resulted as the crop isn't far enough along to be sensitive to temperatures yet. Rain is forecast in the wheat belt tomorrow and Wednesday, .3-1.5", favoring the east. More rain is expected this weekend, up to .75". All this rain will be welcome. The 6-10 day calls for below normal rain in the dry western half of the belt with above normal in the east. Some damage might have resulted in the northern plains spring wheat belt from weekend cold but it is too early to tell.
Last night there was a 5 minute period of extreme volatility in wheat, corn and beans with a huge rally followed by a huge selloff. Some think a fund might have put orders in the wrong way but no one knows for sure. Japan bought 106,000 tonnes of US corn for 2007-08 and 57,000 tonnes for 2008-09 shipment today.
Remember, the USDA supply/demand report and world production report will be out Friday am. They will take their first look at the 2008-09 crop year in this report so it could impact the market that morning. Dalian, China grain futures were mostly higher today while the $ is lower and crude oil is higher, a bullish combination for the grains. Malaysian palm oil gained 49 ringgit today. Traders are watching the situation in Argentina, where talks to avert another farmers strike restart tomorrow. The Phillipines cancelled their 675,000 tonne rice tender.
Corn planting progress this afternoon in the weekly crop progress report is likely to be around 25-35% done vs about 60% average for this time of year. Bean planting should be about 5%. There is a growing need for rain in Australia's wheat belt, where little moisture is forecast the next 7 days. This could provide some support for our wheat market today.
Weather Predominates Worldwide
Vic Lespinasse's Pre Opening Grain Commentary from the Floor of the Chicago Board of Trade for May 2, 2008A mixed start is likely this am, if we follow overnight trends, something the market hasn't done as often as usual this week. Crude oil is higher but so is the $. There has been a lot of talk recently about the rebounding $, which hit a 5 week high yesterday vs the euro. Many traders are convinced the huge rally in commodities over the last year or so is partly due to the collapse of the $ and now that the $ is recovering, commodities are headed lower, or so the theory goes. There does appear to be some validity in this view with wheat down almost 40% in the last 6 weeks, beans off over 20% in the last month, rice down 12% in just the last week, crude oil down several dollars from its $120 a barrel high and gold off roughly $175 an ounce from its high. I still think the weather situation is more important as far as the grains are concerned since the weather has been bullish for corn, which is still near its all time highs while this same weather is bearish beans if farmers switch acreage from corn to beans and beans are off well over $3 a bushel from their all time highs.
Furthermore, weather is looking favorable for wheat in India, with a record crop being harvested, in China, with the official news agency predicting a bumper crop, and Australia, with current expectations for a record crop, twice the size of last year's drought ravaged crop. Thus, at least here in the US, the market reflects the weather very well, both current and forecast, regardless of any other considerations. All this is not to say other factors aren't important, just that the weather is the single most important influence on grains.
Argentine farmers might stage a partial strike starting over the weekend even though talks with the government to avert another strike are scheduled to resume Tuesday. The bean market doesn't seem to be worried about this as July was 2 cents lower overnight. My attitude is that if the market isn't worried about it, I'm not worried about it.
Commercials put out over half the 220 rice on delivery this am but there was almost no commercial participation in any of the other deliveries in other pits today.
The forecast calls for widespread rain in the corn belt the next 2-3 days with more rain Tuesday-Wednesday. Between .3-1.5" of rain is forecast in the corn belt the next few days. The 6-10 day forecast calls for above normal rain and below normal temperatures, a bullish combination for corn and a bearish one for beans as this could cause farmers to plant less corn and more beans. The northern plains spring wheat and the southwest winter wheat belts both face the threat of a freeze over the weekend but forecasters don't think it will be cold enough to do much, if any, damage to the crop. Still, the threat could keep support in this market today.
Weekly Export Sales and Argentina Strike News May Impact Grains Today
Vic Lespinasse's Pre Opening Grains Commentary from the Floor of the Chicago Board of Trade for May 1, 2008A higher start is likely in all pits, up 3-5 corn and 5-7 wheat and beans. Crude oil is lower and the $ is higher, a bearish combination for the grains. The Malaysian palm oil and Dalian, China grain futures markets are closed for the May Day holiday.
Weekly export sales were good for wheat, 176,000 tonnes of old crop and 323,000 tonnes of new crop. Corn was slow, 551,000 tonnes, beans were in line, 311,000 tonnes and oil was in line, 9000 tonnes. Meal sales were slow, 59,000 tonnes old crop and 56,000 tonnes new crop. Rice sales were good, 83,000 tonnes. There were no commercial stoppers again today of any of the deliveries in wheat, corn, beans, meal or oil.
Negotiators are reporting a partial accord in talks between Argentine farmers unions and the government to avert another farmers strike with the deadline tentatively tomorrow. It now appears likely farmers will not go back on strike tomorrow despite yesterday's rumor the government’s chief negotiator had resigned, which he denied. Instead, it appears likely the "truce" between the two sides will be extended, putting off any immediate strike threat for at least a couple of weeks. This is bearish for nearby bean months.
Wet, cool weather is forecast for the corn belt the next couple of days with up to 1.5" of rain expected across much of the area. The 6-10 day calls for more wet and cool conditions, which is bullish corn, especially new crop months such as December, and bearish beans, especially new crop months such as November. Keep in mind the new crop ratio, December/November, is already below 2-1 vs the usual 2.25-1 to 2.40-1. Below 2-1, farmers continue to have a strong economic incentive to plant corn rather than beans if the weather allows. The southwest winter wheat belt will see scattered, light precipitation the next couple of days in eastern areas but very little, if any, in the dry western part of the belt. The 6-10 day predicts more of the same, moisture in the east but below normal rain in the west. There is a threat of freezing temps in the southwest winter wheat belt this weekend, which could do some damage to the crop and needs to be watched.
Rice has been sharply lower this week but this am a higher start is likely due to a technical correction that started overnight. The American Farm Bureau (AFB) says 15-20% of the rise in food prices is due to the growing use of bio fuels but 44% of the price rise is due to higher energy costs. The president of the AFB says food prices would have risen even more without the use of bio fuels. Some senators, such as Kennedy, Lieberman and Schumer, are looking into the rising price of food and what could be done about it. This could eventually have a bearish impact on the grain market if Congress decides to cut back on the government mandated growth in the use of bio fuels.
