(Farm Futures) – While traders typically like to get out of Dodge well before the Thanksgiving holiday, the market as usual had a mind of its own. Weather and demand issues kept the pot boiling.
Soybeans rallied despite signs that began to hint at a seasonal top. Export inspections, while huge, were down from the previous week. Inspections typically begin to fall off after Thanksgiving, though they remain at record levels this year. There’s usually a lull in the export market while traders assess the crop in South America. Shipments can pick up again during the winter if logistics snarl traffic out of Brazilian ports, an ongoing issue for that country.
China is the world’s biggest soybean importer, and processors there went on a buying spree after a slow start to purchases from the U.S. this fall. But the economy remains a concern in the world’s largest country, which moved to ease credit in a bid to stabilize property values and stimulate growth. Soybean imports historically track growth, and processors have a long history of buying too much. Crush margins in China for imported U.S. soybeans are down 25% from highs earlier in the fall waving another red flag.
Weather also threatened to turn bearish for beans. After a slow start to planting in Brazil the pace picked up, with farmers running around average now. In Argentina heavy rains could force some growers to switch corn fields to soybeans, just as they do in the U.S. The prospect of another record crop in South America continues to hang over the market because it would increase global supplies burdensome levels after mammoth U.S. production.
Charts were also threatening a bearish turn, showing potential for a head-and-shoulders top if January futures can’t rally above $10.60 soon.
Demand for wheat isn’t great, but appears to be improving modestly after a slow start in the first half of the marketing year. But after a record world crop, boosting sales a lot will be difficult. Nonetheless, buyers are starting to watch weather more seriously.
Wet conditions for harvest in Argentina, southern Brazil and Australia could trim supplies of quality wheat, which are already tight for some classes. The U.S. Plains remain dry, while soft red winter wheat suffered lower than average emergence in Michigan and Illinois due to the early winter and late harvest.
The biggest concern may be the Black Sea region, which is an export powerhouse but also suffers from notoriously volatile weather. Some fields in Ukraine and parts of Russia germinated poorly and are vulnerable to winterkill without adequate snow cover.
While hard wheat futures moved to new 11-week highs, corn remained stuck in its trading range. That’s not all bad; ability to hold well above October lows is encouraging. Fewer acres and losses from late-harvested corn decrease potential for the crop to get bigger in USDA’s Jan. 12 estimate. Ethanol demand remains strong, feed usage is good too. Still, the biggest hope for a rally in 2015 comes from ideas farmers will plant less ground to corn.
Overall while prices weren’t great, farmers had something to be thankful for: Markets could be a whole lot worse.
Corn prices have been trying to advance as harvest winds down. The lead month has finished the month of December higher than November in three of the past four years, with 2012 the exception. This year supportive factors include the snow-delayed harvest in Michigan and Wisconsin and strong ethanol production.
CBOT December is in delivery with 40 contracts coming out on first notice day, which was within expectations.
Soybeans continue to be supported by processors and exporters needing supplies from farmers, who have been somewhat slow to sell.
The amount of soybeans going down river has been huge, although that may slow as ice caused an early shut down of the Mississippi River in the north. In the latest week, 102 million bushels were shipped, down from the market-year high of 113 million the week before.
Strong usage has driven soymeal higher the past two months. As expected no deliveries were posted on first notice day against December, but there were a larger-than-expected 844 first-day notices for soyoil.
Soymeal exports have been up and down in recent weeks with cancellations exceeding sales in USDA’s latest weekly report.
Wheat prices have been the most consistent gainers with prices near a four-month high in Chicago’s soft red winter and a three-month highs for Kansas City’s hard red winter and Minneapolis’s spring.. Support has come from the late emergence in parts of the Midwest and the poor start in the Black Sea crop.
As expected no deliveries were posted on first notice day against December.
Prices got a boost recently when a Russian minister said the country is considering, as a last resort, a tariff on grain exports in 2015 to protect domestic supplies. Russia is a key supplier of wheat to the Middle East and North Africa. Next year’s grain crop is expected to be smaller.
