MARCH 31 st REPORTS March 1 Grain Stocks

Transcription

1 MARCH 31 st REPORTS March 1 Grain Stocks March Stocks (mbu) Avg Estimate (mbu) Estimate Range Last Year (mbu) March 31, 2017 % Change vs LY Corn 8,616 8,543 8,280 8,817 7, % Soybeans 1,735 1,676 1,627 1,734 1, % Wheat 1,655 1,627 1,498 1,721 1, % CORN Corn stocks came in above estimates with 8.62 billion bushels reported as of March 1 st. On farm stocks were up 14% vs 2016 while offfarm stocks were up 6%. Feed and residual demand during the 2 nd quarter of the marketing year is implied at 1,526 mbu, up 6.4% from a year ago. Looking at state level data, NE was the only major corn state with fewer off-farm stocks than a year ago. All major corn states showed higher on-farm corn stocks than a year ago. Editor s Note: These numbers tell us a few things: 1) demand for corn is in good shape 2) corn stocks will require the industry to carry corn into 17/18 and 3) a lot of corn needs to find a home in the 3 rd and 4 th quarter, which will have basis implications. SOYBEANS Soybean stocks in all positions as of March 1 st were reported at 1.73 billion bu, up 13.3% from On farm stocks were down 8% from year ago levels while off-farm stocks were up 33%. On the state level, IL, SD, IN, WI, MN, and IA had lower on-farm stocks vs IA was the lone Corn Belt state with fewer soybean stocks (all positions) than 2016, down 18 mbu from a year ago. Editor s Note: The lower on farm stocks isn t a surprise given soybean price performance between harvest and today. With higher stocks than expected and feed usage not an available excuse in soybeans, was last year s crop bigger than currently reported? Unless some South American weather issues develop and our exports are called to save the day, soybean basis looks like it will trend weaker than normal for the balance of 16/17.

2 Planting Intentions (mln acres) USDA - March Avg Estimate Estimate Range 2016 Acres % Change vs LY Corn % Soybeans % Wheat % Sorghum % Cotton 12.2 NA NA % CORN Corn acreage intentions came in at 90.0 mln acres, down 4.3% from The number was near the lower end of pre-report ideas, so a tad friendly in those terms. Total crop area for principal crops is estimated at mln acres vs mln in 2016 (-0.7%). At the state level, many of the key production states are expected to have fewer corn acres this year vs last: NE (-3%), IA (-4%), IL (-3%), MN (-5%), SD (-4%), MO (-11%), and ND (-4%). KS (+2%) was one of the only Corn Belt states with a higher estimate. Editor s Note: Really no surprises here, but maybe a shade lower than what we were expecting. These surveys were conducted in early March, so keep that in mind as you peer through the data. These acreage figures are far from final, as mother nature will certainly have a say in what occurs. The two crop acreage total between corn and soybeans (the GMO crops) sets another record. SOYBEANS Soybean acreage intentions are estimated at a record 89.5 mln acres, up 7.3% from The number was near the high end of expectations and digested as negative to the trade. On the state level, all of the key production states are expected to be at or above 2016 acreage levels: NE (+10%), IA (+6%), IL (+1%), IN (+6%), KS (+23%), SD (+4%), ND (+14%), MO (+1%), and OH (+3%). Editor s Note: Soybean acres come dangerously close to exceeding corn acres for the first time ever! Tighter credit across the Corn Belt, insurance prices, and lower wheat acreage were primary factors in the soybean acreage gains. Will producers stick with these intentions or will Mother Nature precipitate a notable change between now and June 30 th (Planted Acreage final numbers)? In any event, the 17/18 soybean balance sheet will look pretty ugly come May. Lower yields will need to be perceived or real in order to put beans in the $10 bracket for any length of time. WHEAT All wheat planted acreage was estimated at 46.1 mln, down from 50.2 mln in 2016 (8.2%). The figure is the lowest all wheat acreage number in over 100 years as farmers gravitate towards growing corn and soybeans. At the state level, notable cuts were present in KS (-12%), OK (-10%), NE (-19%), and TX (- 4%). Wheat acreage in the Dakotas is forecasted to be down 1.4 mln acres, a major contributor towards expanded soybean acreage there. Editor s Note: With a burdensome carryout and sluggish exports, the market continues to tell producers to plant something besides wheat. The world has plenty of wheat stocks available, with major demand growth present in the oilseed sector (soybeans, canola, palm oil, etc). Wheat prices should be supportive under any US yield concerns this spring.

3 CORN FOUND THE BOTTOM May corn is looking better on the charts following the USDA data and market performance on Friday. Corn made new lows for the move this week before responding positively to Friday s data. The money crowd is net short as we step into April, which puts the market in a good position to respond positively to any spring complications. From a stocks perspective, the highest March number on record should keep us grounded though as a whole bunch of corn needs to find a home in the next 6 months. On the week, May corn added 8 0 cents to settle at $ May Corn Futures ETHANOL Ethanol production remains robust with 1,054k barrels per day reported this past week. That total was up from last week s 1,044k total and a bit of a surprise to the trade. Seasonal maintenance typically shows up this time of year, which reduced the overall grind across the country. Production levels are running 5.0% above last year s pace, which may prompt the USDA to bump their current 5,400 mbu ethanol number up in the April 11 th WASDE report. Ethanol margins are far from impressive though, which correlates somewhat with weaker than normal basis levels. Ethanol stocks continue to grow with production, up another 2.9% week over week and the 2 nd highest stocks number on record. EXPORTS Corn export sales disappointed traders this week with 28.2 mbu reported. The previous two weeks reported sales of 53.1 and 47.6 mbu, respectively, making this week s total feel worse yet. Total sales stand at 1,867 mbu vs 1,246 mbu a year ago (+50%). While outpacing a year ago, the gap between current year sales and 16/17 is shrinking. Weekly sales will need to average 19 mbu through the end of August in order to hit the USDA s 2,225 mbu export target. Corn shipments were strong this past week with 61.3 mbu reported and up from last week s 53.5 mbu total. Cumulative shipments of 1,254 mbu are well ahead of last year s 731 mbu total (+72%). In order to hit the USDA s export target, weekly shipments will need to average 38.3 mbu from now through the end of the marketing year. FUNDS Commitment of traders data showed the funds adding to their net short position through trading this past Tuesday. The managed money sector has grown their net short position to -151k contracts over the past few weeks, which would help support the price action we saw the day of the report. With the selling we ve seen, managed money likely has their belly full of short positions for the time being. Any weather events that pop up would push these guys out resulting in a quick move to the upside. NEW CROP December corn had a good week, adding 8 6 cents to finish at $ Technically, the charts are set up well to keep corn supported as we enter the month of April. The managed money short is such that any adverse spring conditions should encourage them to buy back their positions and push this market higher. Fundamentally, nothing constructive is in the cards as South American supplies are in good

4 shape and getting larger according to private estimates. The top end of this market is likely less than what we saw each of the past two years, putting it in the $4.25-$4.35 range under the right conditions. Each of the past two years we ve been on either side of $4.50, so you get the idea. Current carryout levels reduce the need for a good crop, so weather premium won t be as quick to enter the trade. Producers should be asking how much needs sold by the end of June and make a plan on how to get those sales executed. Be realistic! BASIS Corn basis was steady to firmer this week with limited farmer selling contributing to the tone. Report day didn t produce enough of a bullish move to flood the market with corn. The calendar is moving into a time period where basis typically stays firm. However, as the Stocks report showed, there is a lot of corn that needs to find a home. RECOMMENDATIONS Old crop basis will be something to watch going forward, especially if corn is going to turn around and march higher. With the Stocks report showing us that more bushels are around than what was thought, basis is at risk should the board rally. Visit with your ProEdge rep about how to manage this portion of your risk while still leaving yourself open to hitting your cash price goals. On the new crop end, get your orders in before you hit the field. A run at the recent highs feels like it s in the cards, but a hefty balance sheet concerns us longer term be sure you are taking advantage of good prices when they surface. SOYBEANS SEARCHING FOR A BOTTOM May soybeans had a rough week, losing 29 6 cents and settling near long term support at $9.46 0, also the pre-harvest lows in The outside money continued their liquidation this week, estimated now to be net short following Friday s price action. Large South American crops and few threats have combined with concerns in Washington to pull the length out of soybeans in recent weeks. Friday s numbers were a double whammy with larger than expected stocks and larger than expected acres producing a burdensome S&D situation. Soybeans appear to have a tougher road ahead as fundamental projections have 17/18 farm beans worth something in the mid $8 range. May Soybean Futures EXPORTS Soybean export sales of 25.0 mbu were better than expected this week, though the USDA did lower the previous week s total to mute the impact of the number. Cumulative soybean sales now stand at 2,009 mbu, up 25% from a year ago. Weekly sales will need to average just 3 mbu from now through the end of August in order to hit the USDA s 2,025 mbu export target.

5 Soybean shipments of 20.4 mbu were reported this past week, the lowest weekly tally since last September. Soybean inspections typically slow this time of year as South American supplies hit the marketplace. The pace of weekly shipments will need to average 11.4 mbu from now through the end of August in order to hit the 2,025 mbu estimate. INFORMA Informa raised their crop estimates for Brazil and Argentina on Friday. Brazil s soybean crop reached to new heights, going from 108 MMT to 111 MMT. Corn was also bumped, going from 91.0 MMT to 95.0 MMT. Argentine production wasn t left out, with soybean production raised 2.5 MMT to 57.5 MMT. Corn production went from 35.2 MMT to 38.2 MMT. Editor s Note: Big crops get bigger, right? It was this time a year ago that excessive rains started falling in Argentina, leading to the massive bean rally that lasted through June. Should these crops make it to the finish line (Brazil 2 nd crop corn most at risk) they will have big implications on our balance sheet. US export business in 17/18 will likely be reduced the first look at the 17/18 balance sheet doesn t take place until May 10 th. FUNDS The Commitment of Traders report showed managed money liquidating some longs and adding new shorts through trading this past Tuesday. The net length in the soybean market likely came out completely by the end of the week, but through Tuesday managed money was still net long 37k contracts. Price action on Friday would suggest that there was additional length to pitch and likely the movement to a net short position. Consider the managed money sector out of the bean market. Like corn, but to a lesser degree, expect headline events to push beans to the upside, potentially in quick fashion. NEW CROP November soybeans lost 23 0 cents this week, finishing at $ The combined bearish information in the stocks and acreage numbers will no doubt make it difficult for soybeans over the next several months. The USDA will reveal their 17/18 projections in May, so we ll have to stew on carryout ideas for a little over a month yet. Rough ideas will peg the 17/18 soybean carryout at over 500 mbu and a stock-to-use ratio over 12%! Fundamentally this shouldn t surprise anyone as the trade has been throwing these numbers around for the past 3 months. The difference now is that the Nov Soybean Futures numbers are more real with the Planting Intentions behind us. The funds have also left the party, making the market feel pretty vulnerable. The saving grace here is that the US producer hasn t planted a seed yet. Any impacts (real or perceived) to the yield component and soybeans can find some legs. If you missed the boat on $9+ new crop sales, put some orders in at those levels to take advantage of a retracement higher. Weather premium is zero today, keep that in mind. BASIS Soybean basis was steady this week as crush margins remain somewhat questionable and plants get into a maintenance period. Farmer selling has been light with the drop in the board. The Stocks report showed us that on-farm beans are actually less than they were a year ago and the carryout is projected

6 to be larger. Expect soybean basis values to be weaker than average the rest of the way. Keep that in mind as you look to lay off basis risk for any old crop soybeans. RECOMMENDATIONS Producers should be in wait-and-see mode after an 80 cent drop during the month of March. The price performance in 2017 was the exact opposite of what we saw in March of South American weather and the fund position being 180 degrees different this year vs last has a lot to do with that. No two years are the same, which provides us a lesson in consistency. Marketing in a similar fashion year in and year out typically produces the best results, regardless of method. Early sales a year ago didn t feel so good, but producers who stuck to that method feel pretty good about having $9+ harvest beans sold. Look for this soybean market to provide us with an opportunity again. Have your orders ready and waiting in case that opportunity happens when you are in the field!

7 WEATHER DRIER DAYS AHEAD The past week has brought on some nice moisture for much of the country, with wheat making rains taking place across the Wheat Belt. The Dakota s and MN saw lower than average precip for the two week time period, but no drought concerns or dry pockets are of concern there. 14 Day Precip - % of Normal Looking ahead, rain dots the forecast for the weekend and early next week. Temperatures look to be above normal as we get into the 6-10 day while drier conditions will accompany it. Risk Disclosure -The risk of loss in trading commodities can be substantial and past performance is not necessarily indicative of future results. Therefore, you should carefully consider whether such trading is suitable for you or your organization in light of your financial condition. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. Neither the information, nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts.