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Today’s Prices
Grain prices to sharply higher today as South American crop losses appear to be mounting adding some premium to US value.
Grain Market News
U.S. Corn Supply & Demand
January crop report, keeping in mind February crop report comes out next Wednesday, USDA was projecting ending stock at 1,540 billion bushels. That is above last years stocks 1235 but it is the second lowest going all the way back to 2013-2014. When we talk about reduced end stock, if corn use for ethanol starts to approach 5.4 billion bushels, which we think it will and if us exports late in the season get a big surge due to loss of South American production. We could lose 2-3 hundred million bushels of corn stock and that could pull this 1.54 much closer to the levels we had last year at 1.235 million bushels.
U.S. Soybean Supply & Demand
In the January crop report USDA projected ending stocks at 350 million bushels, that is up from 256 last year. Like corn, if lost South American production results in stronger US demand later in the spring and into summer, Crush could increase somewhat from 2.19 and exports could end up larger as well. We start to take a 100-200 million bushels out of the 350 and you end up with stocks at or even tighter than last year.
U.S. Wheat Supply & Demand
Wheat stocks are already projected to be relatively tight at 628 million bushels, that would be the tightest going back to 2013-2014. So, there is not a lot of room for wheat to make up for lost ground. Wheat prices are above corn, so it doesn’t work very well for feeding. Tighter ending stocks could require larger acreage and we need excellent yields next year to prevent stocks from becoming even tighter.
Grain Market News
Observed Surface High Temps
Ideal weather could maybe trim losses a little bit, but additional threatening weather could cause even more significant losses. Most of Argentina’s growing area saw pretty good weather over last couple of weeks, good rains and temperatures in mostly the 80’s. Exception for the far north Argentina where it has had some highs in the 100’s but that’s not in the heart of Argentina’s growing area. Brazil’s temperatures are also mostly favorable recently with temperatures in the 80’s and low 90’s. But we do need more rain in southern Brazil.
South America 2-week Precipitation Forecast
The 2-week forecast shows relatively dry conditions over the next 8 days in Argentina and only light showers based on today’s forecast in the 2nd week of the forecast. That does leave Argentina’s growing area dryer than desired. Keep in mind the calendar February 1st is equivalent to early August here in the US. So certainly, a critical time in Argentina right now. Southern Brazil and Paraguay we do see better rains in the forecast in the first week with lighter rains in the second week. These rains are going to be very important, especially if it gets warmer and dryer as we move towards mid-February. Today’s forecast just a little dyer and little warmer than yesterday. But that has added some concern regarding South American crop prospects over the next couple weeks.
Temperature Anomaly
Temperatures across most of southern Brazil, Argentina, and Paraguay are going to be a little bit below normal to slightly above normal, especially in central, northern Argentina into southern Paraguay. The temps do not look extreme but above normal temperatures would not be good if they get another dry spell over the next couple weeks. Again, weather is important, and it may be losing its impact, but still very important.
3-Day Snowfall Forecast
Here in the US the weather model still projecting some good snows. The darkest greens are 4-6 inches of snow across much of Kansas into eastern Colorado as well as western and northern Oklahoma. That moisture would certainly be beneficial. Heavier snows of a foot to a foot and a half are possible in Illinois, Indiana, Ohio, and into southern Michigan.
7-Day Precipitation Forecast
The moisture with this snowfall leaves melted precipitation from anywhere form a quarter to a half inch in southwest Kansas. Heavier rains of 2-4 inches could be seen in the northern delta and into the southern Ohio valley. Keep in mind this map is showing total melted precipitation including snow, rain, freezing rain, sleet, etc.
RMA Feb Insurance Averages ($/bu)
Today is the first day of the revenue insurance averages that will take place throughout February. These numbers were put out yesterday, yesterday’s new crop was at 5.73 and today at 5.77. Significantly above last year’s new crop numbers for the February average. New crop soybeans yesterday were at 13.67 and today at 13.82, about 2 dollars above where we were last year and clearly the highest, we’ve seen over the past 7 years. Spring wheat is no exception, the highest level we’ve seen over the last 7-8 years. Spring wheat for September Minneapolis futures trading at 8.80 in today’s trade which is over 2 dollars where they were last year for the February average. The marketplace is certainly pricing in relatively tight stock in an acreage battle to try to encourage maximum aces. The problem is the acres were likely maxed out last year so there isn’t enough to go around. Again, we will make the comment that this is the acreage battle that hasn’t hit full stride.
March Corn Chart
Corn prices did shoot higher today although we did not take out yesterday’s high at 6.42, but that would be the next subjective if the market continues to try to push higher. The market closed at 6.34 which was about 8 cents below the contract highs posted yesterday. If the market fails to follow through to the upside chart support comes in the low 6-dollar range.
March Soybean Chart
Beans continue to explode to the upside; we are up nearly $2 in 2 weeks form 13.49 to todays high of 15.39. In fact, since we took out the contract’s highs at 14.45 just a few days ago, the market has rallied nearly a dollar from that level. Technical indicators are over bought, but there are no indicators of topping, at least not yet on the chart or in the technical.
March KC Wheat Chart
KC wheat prices did close higher today but the overall trend on the chart is a downtrend with the technicals still pointed down as well. Wheat would like to push a little bit further to the downside, and we will see if corn and beans have enough strength to keep the wheat market from testing chart support around the 7.60-7.65 levels.
Questions or Comments
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