WeatherBELL Agriculture Weather Outlook: 2011 versus 2012 and the Grains (Source: CME)
Weather Could Produce Volatility for the Grains Markets
June 2012, New York: For the second year in a row, weather could very well produce significant volatility for the grains markets due to levels of dryness not previously seen in over two decades. Recall that last year, the second strongest La Nina on record caused severe drought in the southern US. Meanwhile, heavy snows and spring rain in the northern areas of the US led to the worst flooding since 1927 in the Ohio, Mississippi, and Missouri River basins. As a result, planting was the latest on record in parts of the Corn Belt and there were serious losses to Hard Red Winter Wheat (HRWW) in the Southern Plains. Dryness in the Southern Plains built up a heat ridge that sent plumes of intense heat into the prime growing areas of the Corn Belt during corn’s critical pollination stages. Although La Nina returned this past winter, it was substantially weaker. The winter and spring of 2012 produced more normal levels of precipitation in the southern states, though much less snow and spring precipitation further north.
DTN Closing Grain Comments 06/27 14:58 : Grains Fizzle While Weather Sizzles (Source: CME)
Grain contracts posted highs early in Wednesday's session before positioning in front of Friday's Quarterly Stocks report and acreage update are released. Additional pressure came from liquidation after CME announced a margin requirement increase that goes into effect following Friday's close. Weather forecasts remain hot and dry for most of the Midwest, with many areas expected to post record high temperatures Wednesday.
Weather Continues Boost of Corn, Soybeans (Source: CME)
Some light long profit taking has grain trade mixed at midday; weather concerns persist.
By David Fiala, DTN Contributing Analyst
The U.S. stock market indices are flat with the Dow index up 5 points. The interest rate products are higher. The dollar index is 5 higher. Energies are mixed with unleaded and ethanol higher, but crude is off $.30. Livestock trade is lower with feeder cattle off sharply again. Precious metals are lower with gold down $15.
General Comments
Corn
Corn trade is 9 to 11 higher this morning with the market thinking no rain makes no grain. Outside markets are quiet this morning. This is a major report week with the acreage and stocks report due out on Friday morning. Trade should remain very active in limit type volatility with corn pollination getting under full swing, plus we will have the trade open during the report releases on Friday. The weather forecast has some rains for later in the week, but we have heard that before. Trade has the next resistance at $6.42, but the prior resistance has not slowed things much at all. Ethanol production is expected to decline 2% to 3% this week, with inventories showing a decline of a similar amount. Ethanol margins are sharply negative, and a continued slide in oil prices could do a lot of damage to ethanol producers.
Soybeans
Soybean trade is 13 to 15 higher this morning, meal is $4 to $6 lower and bean oil is 25 to 35 higher. Beans have bounced back from yesterday's weakness so far. November beans have taken out the $14 mark and resistance is now hard to point to, but the fund length will continue to keep the bean contract vulnerable to bouts of profit taking. The $14.50 area will be the next psychological hurdle. U.S. soybeans effectively remain the cheapest oilseed available for the export market, and will keep the majority of the export business from now until March. The Chinese growing areas have not had the best weather either which will keep the pressure on imports with crush margins working back to positive.
Wheat
Wheat trade is mostly flat this morning with row crop strength providing support, but harvest pressure limiting upside for the moment. The speculative short has been whittled down pretty good at this point. Russia and Ukraine look to be limited factor in the export markets coming forward. The most active wheat contracts are now solidly positive on their charts, and could be set up for a further run in the near term. This could trigger farmer selling on wheat on short term free storage in the elevators in the plains. U.S. origin will remain the cheapest origin for awhile. The Australian crop looks to be in trouble early.
U.S. Farmers Facing Reality Check as Drought Hits Corn, Soybeans (Source: CME)
Springtime optimism has devolved into summertime angst for farmers such as Chris Barron, who’ve been forced to scale back once-lofty expectations for their corn and soybean crops as drought expanded across much of the U.S. Midwest. Barron said his cropland, near Cedar Rapids in northeastern Iowa, received about 0.94 inch of rainfall so far in June, or about 20 percent of the 30-year average for the month. He’s trimmed his harvest outlook accordingly, with his corn and soybean plots likely generating yields 7 percent to 10 percent below what he estimated a few months ago. “We’ve got the potential for an average crop,” said Barron, a member of a farmer partnership that raises crops on about 7,000 acres. “The opportunity to have an above-average crop is gone. That’s just the reality.”
As farmers and grain traders await updated U.S. Department of Agriculture acreage data June 29, extreme heat and dryness has shifted squarely into market focus. Intensifying weather concern ignited a rally in CME Group grain markets, sending corn futures up over 20 percent since mid-June, and analysts say the market may have further upside if dryness continues. Drought threatens to undercut the benefits of an unusually warm and dry spring that likely led to the largest combined corn and soybean planted acreage on record.
Pro Farmer: After the Bell Wheat Recap (Source: CME)
Wheat futures favored a firmer tone to close mostly between 3 and 9 cents higher at all three exchanges. July Minneapolis wheat ended lower amid liquidation pressure. Wheat continues in a follower's role, watching price action in the corn pit closely. As corn came off its session high, wheat followed suit. Strength in the U.S. dollar index ahead of the euro-zone economic summit also limited buying into the close.
Wheat Market Recap Report (Source: CME)
September Wheat finished up 4 1/4 at 751 1/4, 12 1/4 off the high and 11 3/4 up from the low. December Wheat closed up 6 at 772 1/4. This was 13 1/4 up from the low and 11 off the high. September Chicago wheat settled 4 1/4 cents higher today after posting its 3rd consecutive higher high. Kansas City and Minneapolis wheat gained on Chicago with Minneapolis leading the wheat complex higher after Stats Canada estimated Canadian wheat seeding at 23.8 million acres. This was slightly lower than trade forecasts but exceeded last year's seeded area of 21.5 million acres. Short covering support was noted after corn moved sharply higher on a warmer and drier two week weather forecast. The USDA will release their Grain Stocks and Planted Acreage report on Friday. Traders are expecting June 1 stocks near 720 million bushels vs. 862 million bushels on June 1, 2011. The trade also expects all wheat planted acreage near 56.6 million acres. This would be slightly higher vs. the March forecast of 55.90 million acres. September Oats closed up 8 1/4 at 337 1/2. This was 8 up from the low and 4 off the high.
Pro Farmer: After the Bell Corn Recap (Source: CME)
After enjoying gains in the upper teens to low 20s most of the day, the corn market trimmed gains as the dollar strengthened to end "just" 5 to 10 cents higher through the July 2013 contract. For most of the day, traders focused on building weather premium, as they are concerned about the yield implications of scorching Midwest temps paired with limited precip chances the remainder of this week and into the next.
Corn Market Recap for 6/27/2012 (Source: CME)
September Corn finished up 10 at 629 1/2, 19 3/4 off the high and 17 1/2 up from the low. December Corn closed up 10 at 634. This was 16 3/4 up from the low and 22 3/4 off the high. December corn was trading 10 cents higher heading into the closing bell after trading a 38 cent range today. The early trade penetrated highs made in September of 2011 but gains were erased after traders began taking profits ahead of a CME margin increase this evening and ahead of the USDA reports for Friday. Producer selling was also active. Weather maps show scorching temperatures for the central and southern Midwest to finish out this week. The heat dome is expected to stretch from the panhandle of Oklahoma to the coast of South Carolina. Temperatures in Central Illinois and Indiana are expected to reach 100 degrees by tomorrow which will likely increase stress on corn and diminish yield potential for areas in the southern Midwest and Delta. The USDA will release their Grain Stocks and Planting Intentions report Friday. The trade expects a slight increase in corn acreage, however traders will key off the stocks estimate. The trade expects June 1 stocks of near 3.17 billion bushels with range of estimates as wide as 670 million bushels. Ethanol production for the week ending June 22nd averaged 883,000 barrels per day. This is down 1.9% vs. last week and down 1.1% vs. last year. Total Ethanol production for the week was 6.18 million barrels which is down from 6.30 million barrels last week. Corn used in last week's production is estimated at 94.06 million bushels which is a 9 week low. Corn use needs to average 97.5 million bushels per week to meet the USDA forecast for the season. Stocks were 20.7 million barrels. This is down 2% vs. last week and up 6.5% vs. last year. September Rice finished down 0.02 at 15.01, 0.17 off the high and 0.01 up from the low.
US corn stocks shrink least in three years-trade
CHICAGO, June 26 (Reuters) - U.S. corn stocks likely shrank by the fewest bushels in three years during the three months to June, a Reuters poll found, as demand ebbed due to depressed ethanol margins and stiff export competition.
Inventories probably fell to 3.174 billion bushels as of June 1, nearly a half billion bushels, or 13-1/2 percent, less than a year ago, according to an average estimate of 15 analysts. That would put inventories at their lowest for June 1 since 2004, just as prices have surged anew on fears that the new spring crop will be damaged by weather.
US corn dips from 9-month top, wheat eases
SINGAPORE, June 27 (Reuters) - Chicago corn slipped as the market took a breather after climbing to a 9-month top and adding more than 12 percent in the last two sessions, sparked by a severe drought in the U.S. Midwest.
"I think the market has done a lot of work to price in the anxiety over weather," said Brett Cooper, a senior manager of markets at FCStone Australia.
US crops to bake in dry heat this week
CHICAGO, June 26 (Reuters) - Searing heat and dry weather across the U.S. Midwest this week will increase stress on corn and soybean plants, already hurt by a lack of rain this month, agricultural meteorologists said on Tuesday.
"With this heat and dryness there certainly will be more damage done," said Don Keeney of Cropcast, a division of MDA EarthSat Weather.
S.Africa's 2012 maize output f'cast steady at 11.056 mln T
JOHANNESBURG, June 26 (Reuters) - The South African government left unchanged its maize output forecast for 2012 at 11.056 million tonnes on Tuesday, in line with market expectations, saying it expects to have a better picture of the crop next month as harvesting continues.
The total maize crop forecast consists of an estimated 6.36 million tonnes of white maize and 4.696 million tonnes of yellow, the government's Crop Estimates Committee (CEC) said.
Fertilizer makers rise as smaller corn crop may lift demand
June 26 (Reuters) - Shares of fertilizer makers including CF Industries Holdings Inc and Terra Nitrogen Co LP rose on Tuesday, as an expected fall in corn production this summer could fuel higher demand for crop nutrients in the next planting season.
Weekly crop data, released by the U.S. Department of Agriculture (USDA) late on Monday, rated U.S. corn as 56 percent good to excellent as of Sunday, down 7 percentage points from a week earlier and well below a 61 percent average estimate in a Reuters poll.
Russia's Novo to cut grain-handling tariff by 5 pct
MOSCOW, June 27 (Reuters) - Russian port Novorossiisk plans to cut grain-handling tariff by as much as 5 percent or 30 roubles ($0.91) per tonne from July 1 to boost grain exports after winterkill and spring drought.
"Our team has managed to reduce the tariff thanks to optimisation of production processes," Rado Antolovich, acting general director of the port, was quoted as saying in the statement on Wednesday.
Rain to push Brazil sugar output to later in year
SAO PAULO, June 26 (Reuters) - Widespread rain during the first few months of Brazil's center-south sugarcane crush has slowed sugar and ethanol production and will push more of that output to the second half of the season, cane industry association Unica said on Tuesday.
Sugar output from the main center-south crush from April through mid-June fell 28 percent, compared with a year ago, to 4.89 million tonnes.
Egypt 2012/13 cotton crop seen down 42 pct-US attache
WASHINGTON, June 26 (Reuters) - Egyptian cotton growers cut plantings by 45 percent because of low prices and will harvest 42 percent less cotton in 2012/13 than in the preceding season, the U.S. agricultural attache in Cairo said in a report released on Tuesday.
"Based on reduced area, total production is forecast at 430,000 bales while exports are expected to drop to 360,000 bales," said the report. "Imports are expected to increase to 530,000 bales."
Monsoon Worst Since 2009 Threatening Sugar, Rice Crops (Source: Bloomberg)
The worst start to the monsoon season in India in three years is threatening crops from rice to sugar cane, stoking concern that the South Asian nation may limit exports to preserve supplies to meet local demand. Rainfall from June to September, which represents 70 percent of annual amount, may be below normal with the main cane-growing regions getting less rain than required, said Michael Ferrari, a commodity director and senior scientist at Falls Church, Virginia-based Computer Sciences Corp. (CSC) Rain is 22 percent below average since the season started on June 1, according to the India Meteorological Department.
Dry weather from the U.S. to Australia has parched fields, pushing up corn and wheat prices by as much as 16 percent this month in Chicago and curbing a decline in global food costs. El Nino weather conditions, which can parch Asia and bring cooler weather to the U.S, may develop some time during July to September, the World Meteorological Organization said June 26. India extended a ban on exports of sugar, rice and wheat in 2009, following the weakest monsoon since 1972.
Oil- Oil falls on Europe anxiety, strike supports
LONDON, June 27 (Reuters) - Brent crude oil fell on mounting concerns that European leaders would fail to solve the region's intractable debt crisis at a key meeting this week, offsetting tighter North Sea oil supply.
"The global supply and demand, or macro concerns on Europe have not really changed, hence it might be difficult to carry on the move of yesterday in crude oil," said Olivier Jakob at Petromatrix in Zug, Switzerland.
Norway won't halt oil worker strike for now
TRONDHEIM, Norway, June 27 (Reuters) - Norway does not plan to halt a strike by the country's oil workers and may change its stance should the strike escalate, labour minister Hanne Bjurstroem said on Wednesday.
"We are not at all at a point where intervention is on the agenda," Bjurstroem told Reuters. "My responsibility is to ensure this strike does not have large consequences for society. If it did, that would give us cause for intervention."
Oil supply surge could risk price collapse-Harvard analysis
WASHINGTON, June 26 (Reuters) - Global oil supplies are growing so fast that they could outstrip demand and lead to a collapse in world prices, a former energy executive who is now a Harvard research fellow said on Tuesday.
"Most analyses today are still marked by this obsession with oil running out," Leonardo Maugeri, formerly a senior manager at Italy-based oil and gas giant Eni SpA , said at a discussion at the Center for Strategic and International Studies think tank in Washington.
Oil Climbs a Third Day on Economic Outlook, Norway Strike (Source: Bloomberg)
Oil gained for a third day in New York after reports signaled fuel demand is increasing amid an economic recovery in the U.S., the world’s biggest crude user. Futures climbed as much as 0.4 percent after closing at the highest price in a week yesterday. U.S. home sales and durable- goods orders beat forecasts, government data showed, easing concerns the world’s largest economy is faltering. Gasoline demand rose last week, according to the Energy Department. Brent crude advanced a fourth day in London as a strike by Norwegian energy workers over pensions halted about 15 percent of the country’s oil output. Crude for August delivery increased as much as 35 cents to $80.56 a barrel in electronic trading on the New York Mercantile Exchange, and was at $80.41 at 9:42 a.m. Sydney time. The contract yesterday gained 1.1 percent to $80.21, the highest close since June 20. Prices are down 22 percent this quarter, the biggest drop since the final three months of 2008.
Brent oil for August settlement rose 48 cents, or 0.5 percent, to $93.50 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark’s premium to West Texas Intermediate closed at $13.29. U.S. orders for goods meant to last at least three years rose 1.1 percent in May, the first increase since February, a Commerce Department report showed yesterday in Washington. Pending home sales climbed 5.9 percent after slumping 5.5 percent in April, according to the National Association of Realtors.
Oil Over $100 Seen on Iran After Worst Quarter Since ’08 (Source: Bloomberg)
Brent crude is set to recover from its worst quarter since 2008 as a European Union ban on Iranian oil takes effect, central banks act to protect growth and on speculation OPEC will curb some of its excess supply. Brent, the second-worst performer between April and June in the Standard & Poor’s GSCI commodity index, is forecast to rebound to an average $114.50 a barrel in the third quarter, according to the median estimate of 32 analysts tracked by Bloomberg. BNP Paribas SA, Deutsche Bank AG and Barclays Plc predict $110, $115 and $121 a barrel, respectively. Prices slipped as low as $88.49 last week. “We do look for a rebound and feel that the oil price has gone beyond economic fundamentals,” Michael Lewis, Deutsche Bank’s head of commodities research in London, said by phone on June 26. “We are in quite an extreme level of investor pessimism, which would only seem to us justified if the U.S. was going back into a recession.”
The prospect of a rebound in prices driven by sanctions on Iran illustrates the readiness of the U.S., Europe and their allies to suffer higher fuel costs in order to curb the Islamic republic’s nuclear program. The EU, Iran’s biggest buyer after China, stops importing the nation’s oil July 1. While reflecting an improvement in demand as major economies tackle the impact of Europe’s sovereign debt crisis, rising prices may also pose headwinds to a recovery.
Gold Falls on Concern Europe’s Crisis Will Boost Dollar (Source: Bloomberg)
Gold in New York advanced for the second time in three days on speculation that China may take more steps to boost economic growth. China may introduce “more proactive” policies to ensure stable growth, the China Securities Journal said in a commentary today. The Asian country will topple India this year as the world’s largest consumer because rising incomes will bolster demand, the World Gold Council has forecast. European leaders will meet tomorrow in another attempt to find a solution to the region’s debt crisis. “The Chinese news is positive for gold,” Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “The gains will be limited as some investors are waiting for some kind of statement from the European leaders.”
Gold futures for August delivery rose 0.2 percent to settle at $1,578.40 an ounce at 1:47 p.m. on the Comex in New York. The precious metal has fallen 5.6 percent this quarter, heading for the biggest such decline since 2004, as the dollar gained and the Federal Reserve refrained from announcing further debt purchases. Prices surged 70 percent from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of so-called quantitative easing.
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