Bears continued to exert their dominance over the grain markets, although a late week rally helped erase most of the losses. On the week soybeans managed a 4-cent gain, corn was fractionally lower and wheat was off 4.
Friday’s trade action helped change a paradigm of heavy selling that has dominated the market. Whether it will lead to a broader trend reversal is yet to be seen. The overarching backdrop continues to be a 2nd consecutive year of record corn yields, ample US and world stockpiles, and weak export demand. This week Informa painted a pessimistic picture for 2018 as they expect farmers to expand corn acres by 1 million to 91.4, while beans would decline 0.6 million to 89.6. All wheat acres are expected to be off 0.4 million acres to 45.6.
On the demand front it was a mediocre week for export deals with total sales at best meeting expectations and in the case of corn coming in below 1 MMT vs expectations of 1.2 to 1.7 MMT. The alarming trend is soybeans where outstanding sales stand at 573 MB compared to 713 MB last year. USDA is projecting soybean exports this year at 2,250 MB on the year versus 2,174 MB last year so an export reduction on the balance sheets is likely unless our trade picks up significantly. NOPA soy crush was also released this week but was inline with expectations so that provided no stimulus to the trade.
In the wheat market, even as futures erode, there is a strong undercurrent of strong basis moves especially for protein. HRW wheat basis is up as much as $1 a bushel since harvest with some areas of the country seeing premiums of 40-cents above where they have been in recent years. If futures begin to turn higher the basis bubble will likely pop. This environment is a great time to try FBN’s Deferred Futures Price Contract, which is a valuable tool to capture the basis now while maintaining optionality in the futures market.
National Cash Market:
For the cash market, basis levels were bolstered this week by improving export basis and a surge in end-user bidding out of harvest lows. On the week corn was up 2 cents on the week while soybeans climbed 4 cents.
Soybeans big lift came from a completing harvest and a sharp climb in export basis with the PNW up 22 and the Gulf basis up 14 on the week. This helped push river terminals to an 8-cent advance on the week. On the Upper Mississippi the shipping season winds down as winter freeze stops barge traffic and basis levels are starting to soften. For crush plants, they were up a solid 3-cent on the week but gains were not universal as some plants continue to hold steady.
For corn, export locations were more subdued but river terminals still managed to climb 4 cents on the week. Ethanol plants as a group were also up 4 on the week but gains were clearly less prominent in the Upper Midwest where fresh supplies continue to flow into the pipeline.
Carry in the futures market continues to widen on the market slump as ample supplies force wide spreads to encourage storage. For corn, the Dec-Jul spread stands at 29-cents, well above the 20-year average of 23 cents for this time of year.
Meanwhile soybeans face an exceptionally large carry as Jan-Jul holds at 28-cents a 4x multiple of the 7-cent norm for this time of year.
With a 20-cent pop in soy futures, the deferred months are now above $10, so using an FBN iHTA™ can help lock in the price and capture the strong carry.
FBN℠ wants to help transform the way you market grain and other crops. We help our members market better by offering access to specialty grain and pulse crop contracts, risk management tools, and cutting-edge market data and technology.
FBN Crop Marketing is offered by FBN CM LLC and is only available where FBN CM LLC is licensed. Contact (844) 200-FARM for more information. *We do not guarantee customers will receive specific benefits or value from participating in FBN Crop Marketing; results will vary.