Are The Grains Stuck In Neutral?

December 2nd, 2014

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Category: Grains, Oilseeds

Weather affecting agriculture(Agriculture.com) – The recent rally in grains seems to have stalled during the month of November, as prices barely moved when all was said and done.  But the rally from October didn’t lose much, either, so the rally reversal higher is still intact as well.  Grains seems to be stuck in neutral for now, and it may be awhile before they get “unstuck”, too.

There are no more crop progress reports nationally this fall as they ended last week, but weekly crop reports from individual states will be out interspersely this winter.  That leaves a void in the markets as only southern hemisphere crops are growing now (think South America or SAM), and that means a slower market change from week to week.  We still get weekly export shipments and sales each week, with weekly export shipments on Monday, Dec. 1 strong soybeans at 1.849 mmt, decent corn at .743 mmt, but poor wheat at only .273 mmt.  Yet wheat rallied strongly Monday in spite of poor export numbers!

It seems that weekly exports of soybeans are very strong this year, with China having an insatiable appetite to import soybeans it seems.  Some have commented that perhaps China would rather have the 450 mb carryout of the US in their soils rather than the US?  If so, that could support soybean prices if the Chinese simply import whatever is available from the US.

The only important weather now is in South America, and so far their weather after a slow start to the planting season has been nearly ideal.  That has kept prices in check during the month of November, and weather in South America continues to cooperate, leaving them with high yield potential after a late start to planting this season.

SAM weather forecasts continue to suggest intermittent rain with moderate temps for the 7 day forecast, with a bit lower than normal precip in northern areas of Brazil while the rest of Brazil has good coverage of rainfall for the next 7 days.  Thereafter, the 8-14 day spreads the moisture out into the northern region and far eastern region, which will be dry the next 7 days. That should keep a high yield potential on the South American crop.

US weather includes precipitation in the HRW wheat belt over the next 14 days that will help winter wheat crops, with the moisture spreading eastward as well.  The rest of the country will be relatively dry for the next 7 days.  Temperatures will slowly warm across most of the US such that we will see temps above normal for most of the US by the end of the week.

Pro Ag recommended catch up sales of soybeans at $10.74 Jan futures on Wednesday, Nov. 12.  We also recommended a storage hedge in corn at $4.05 July futures or better.  With a 2 billion carryout in corn and 450 mb carryout in soybeans still projected, these prices levels are decent considering the level of carryout expected.  Prices may not stray much from current price levels, and its possible prices will stall in current areas for awhile.

Pro Ag looks for grains to languish in the area of $9 to 10.50 the rest of the winter for soybeans, and $3.20-$4 for corn as well.  The upside will remain limited due to the large stocks of corn and soybeans left as we complete harvest of what is a record large crop.  In northern areas, that harvest could extend into next spring as some areas already have a decent amount of snow cover, making harvest this fall difficult to complete.

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