Farm Futures - Afternoon Recap

Afternoon Recap - December 8, 2016

Dec. 8, 2016

Corn lower; wheat recovers with modest gains

Soybeans tumbled on Thursday to close at a one-week low following lower Asian markets and talk that President-elect Trump may relax biofuel-use requirements.

Corn moved lower amid weakness in the ethanol markets. The three wheat markets posted modest gains after the latest Drought Monitor increased the amount of U.S. wheat in drought areas.

Traders may be moving to the sidelines ahead of Friday’s USDA crop report. The trade, on average, expects minor changes in U.S. crop tables in that report.

The selling in crops came despite better-than-expected weekly export sales and daily sales of optional-origin corn to South Korea and U.S. soybeans to unknown destinations.

Crude oil rebounded from the previous day’s drop and was up about a $1 a barrel when the crops close. The dollar was higher to recover what it lost in the past three sessions. Equities were higher again with the Dow Jones industrials up 62 points when the crops closed.

In the weather, the weekly forecast shows little or rain in Argentina’s soybean areas, but light rain should arrive in two weeks. Brazil continues to get decent showers. In the U.S., the far southern Plains should have rain and snow today, while the rest of the central and eastern areas are dry.  On Saturday, rain and snow develop in the Midwest and in the Delta regions.

Cold weather will blanket much of the country in the 6- to 10-day period, while the northern half should have above-normal precipitation then.

Exports – USDA, Reuters

- South Korea bought 13.1 million bushels of optional-origin 2016/2017 corn. The corn can be from the U.S. or other suppliers.

- South Korea also bought 20,000 metric tons of 2016/2017 U.S. soybean oil.

- Unknown destinations bought 5 million bushels of 2016/2017 soybeans.

- USDA’s weekly export sales: corn 58.9 million bushels, up 96% from prior week; soybeans 53.7 million, up 10%; and wheat 18.5 million, up 4%.

- Results are awaited on Japan’s weekly tender to buy 123,354 metric tons of wheat. From the U.S. it seeks 11,980 of western white, 20,970 of hard red winter and 34,830 of dark northern spring. Loading is Jan. 16 to Feb. 15. It also seeks spring wheat from Canada.

- Saudi Arabia seeks to buy 715,000 metric tons of hard wheat for Feb. 1-April 10 shipment.  The report did not specify the wheat’s origin. The deadline for bids is Friday with results expected on Monday.

- India has discontinued a 10% import duty on wheat to aid buying by private traders. Typically a major wheat producer, two years of drought have reduced India’s production.

Corn

Corn closed about 4 cents lower, with the actively traded March holding above the 20-day moving average.

Ethanol futures were a little lower after Trump selected Scott Pruitt to head the EPA. Pruitt is said to be a skeptic of climate change, which has raised talk he may ease the rules for biofuel use. Ethanol had been trending higher since the EPA in November raised the blending target for 2017 to allow 19.28 billion gallons of biofuel in fuel supplies.

The CBOT estimated Thursday’s futures volume at 253,131 compared with Wednesday’s actual of 172,807. Open interest on Wednesday increased by 371 in the weak market. That included decreases of 1,345 in December and 674 in March.

December corn closed down 4 cents at $3.46-1/2 per bushel and March dropped 4-1/2 to $3.53-1/2.

What to Look For: The trade, on average, expects a slight increase in ending stocks in Friday’s USDA report, while Farm Futures favors a small decrease from November’s 2.403 billion bushels. In South America, the trade expects USDA to trim Argentina’s corn production a little, but raise Brazil’s, while Farm Futures expects USDA to stay with November’s numbers.

Soybeans

Soybeans finished with double-digit losses after recent strong gains. Soybean oil and soybean meal also finished lower.

The Asian markets were lower with palm oil correcting a little after its recent four-year high.

Soybeans had a good run following a number of export sales, many of which went to China. Old- and new-crop months remain above $10 a bushel. As in corn, traders may have moved to the sidelines today ahead of Friday’s report.

The weekly export sales on Thursday were better than expected and well above the pace needed to meet USDA’s annual forecast. 

The CBOT reported 292 soyoil deliveries against the December contract and three deliveries in the soybean meal.

Brazil’s soybean harvest starts in about a month and Argentina’s in about three months. A USDA attache report this week put Brazil’s harvest at 101 million metric tons, which trails USDA’s latest forecast of 102 million. U.S. analysts, on average, expect USDA on Friday to raise that to 102.1 million, while Farm Futures expects a slightly lower number.

Other oilseed markets also were lower with Canadian canola for January down about 11 cents at the equivalent of $8.99 a bushel and European rapeseed for February down about 6 cents $9.85. The prices are after conversions for unit of measure and currency exchange rates.

The CBOT estimated soybean futures volume for Thursday at 298,466 compared with Wednesday’s actual volume of 246,189. Open interest on Wednesday decreased by 285 in the firm market and included a decrease of 18,919 in January and increase of 15,661 in March.

January soybeans settled down 22 at $10.27 per bushel and March down 21-3/4 at $10.37-3/4.

What to Look For: On Friday, the trade, on average, expects USDA to lower 2016/2017 USDA soybean ending stocks from November 480 million. Thursday’s weekly export sales are expected to down from the prior week.

Wheat

Wheat markets finished higher, with winter wheat recovering from some contract lows on Wednesday.

The weekly export sales were better-than-expected and topped the pace needed to meet USDA’s annual forecast. Also, forecasts keep dry weather in the southern Plains.

The National Weather Service’s Drought Monitor released on Thursday said 30% of the U.S. wheat is in a drought area. That is up from 23% in the previous report. Much of the affected wheat is in the Southeast and western Kansas.

Wheat continues to be pressured by abundant supplies. Australia is harvesting and has a record crop. Statistics Canada this week put that country’s harvest at 31.7 million metric tons, up 15% from a year ago and up from an average trade forecast.

The CBOT said 35 soft red winter and 33 hard red winter December contracts were delivered.

CBOT estimated Thursday’s soft red winter wheat volume at 96,092 compared with Wednesday’s actual of 79,269. Open interest in Wednesday’s market increased by 2,092 in the lower market, which included a decrease of 241 in December and increase of 551 in March.                                            

Chicago’s lightly traded December soft red winter wheat closed up 4-1/2 at $3.90-3/4 per bushel while March rose 7-1/4 to $4.08-1/4. Kansas City’s December hard red winter rose 5 to $3.87 and March gained 4-3/4 to $4.04-3/4. Spring wheat for December was up 1-3/4 at $5.35-3/4 and March  rose 2 to $5.31.

What to Look For – Few changes are expected in U.S. wheat numbers in Friday’s USDA report. Weekly export sales on Thursday are expected to be similar to or down from the previous week.


More from Farm Futures:
Weekly Corn Review
Weekly Soybean Review
Weekly Wheat Review


Afternoon Recap by Bob Burgdorfer

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This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to the accuracy, and is not to be construed as representation. The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.

 
 
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