Grain Market Reports

Tanner Sheahan
CPS Tangent

I'm still having some issues with the document hosting. So, what I think I'll do is just post the market summary portion of Dan Steiner's report.  Dan does a great job of summarizing what is going on in the world and where the grain markets look like they are headed.  I am guessing most of you have a good source for current pricing in Portland so the overall market outlook is the more valuable part of Dan's market report.  Leave me a comment following this post if this continues to be helpful in it's new form.  As always, you can read Dan's complete report at the Pendleton Grain Growers website here.

By way of summary, SWW prices to Portland have climbed since the holidays.  Prices for Spring 2011 delivery ran in the $7.25-$7.50 range at the end of December and are now bumping up against $7.70.  From what I am hearing from customers, Portland buyers seem to be paying very close attention to protein percentage; there's as much as $1/bu difference if protein levels aren't what they are looking for right now.  If you are still storing some wheat and want to find out what protein level you have, talk to your CPS fieldman.  We can send a sample in to the lab for you so you know what you have to sell.

Here are the last several market summaries from Dan.  This will update you from Christmas Eve through today.  Enjoy.


Futures have traded both sides of the slate this morning in light trade, on a short day. Paris wheat futures hit new highs. Export sales report showed that both corn and wheat easily exceeded what is needed to hit USDA projections: Corn sales were 35.6 myn bu vs. only needing 26 myn bu to hit. Wheat tallied 21.6 myn bu vs. 14.4 needed. Domestically news is slow and scarce….ENJOY the HOLIDAYS!
               International news has almost an exclusively bullish flavor. Argie will get about ½” of rain, where agronomists say about 2” is needed just to maintain crops. Then the next 13 days out of 16 it will be smoking hot with temps 98-105°. Corn is trying to pollinate and this will be very hard on 2nd crop beans. Japan booked 4.9 myn bu of Argie corn…but as they say on TV….but WAIT….theres MORE…Argie unions are on strike. This may be a one day event or much longer…no one knows. But here is what we do know: they are striking because of rampant inflation, and they haven’t had their COLA (Cost Of Living Adjustment). What is at stake is that there are 10 crush plants, that crush 50% of all the Argie beans. 6 of them are already shut down and 4 others are limping along on what little stocks they have. Any prolonged strike will shut down the balance of the main Argie bean crush.
               What is international news without China? They get their own little paragraph this morning. As the Chinese gov’t continues to battle inflation, they sold discounted pork and vegoil into the marketplace. Crushed the margins for the small crushers. But wait, theres MORE. They also sold 1.5 myn mt (55 myn bu) of flour to the largest flour mill in China…resulting in .82/ bu losses for the small mills. This could set the table for some serious consolidation of the crush and flour mill markets in China. Inflation is a major concern for them today.

***Didja Know: Hawaii is the only state in the US where the average life expectancy for a male is over 70 years…in fact average life expectancy male/ female is 73.6 years (I imagine a big % has to do with the pace of life).
NOTE: We rolled, and dropped December.
Futures are a little tepid this morning. Volume is VERY VERY light, with a total of only 4,000 caks trading last night. After punching through overhead resistance, corn has acted a little toppy. We know there will be some re-balancing occurring after the first, but with the weather and S&D on the bull side, there looks like plenty more upside opportunity. Egypt, Malaysia, Mexico, Saudi are all tendering for corn. Rumors have China buying US corn this year, not Argie. The Argie weather situation is not yet dire, but not far off either. They did get some light showers over the weekend, but they were not heavy, nor as general as the market would have liked to see. With corn at or going into pollination, soil profiles dry and the weatherman calling for NO rain and 100° + temps the next 2+ WEEKS is definitely bullish US corn futures. US wheat exports are running about 2x last year’s pace, worldwide ‘milling’ grade wheat is in short supply. Wheat prices on the French Matif exchange hit new highs for the year overnight…so there is a lot to like about this market.
               China raised interest rates a 2nd time in the last 45 days. At this point it is all about inflation control. They will also offer 70.8 myn bu of corn for auction to try to contain domestic food prices which are UP 10% on a month over month basis! The weather in SAM is NOT conducive to good crops, dry areas are growing. Severe heat is on the way. Could the SAM crop be the next one on the world stage to suffer major losses? Even the blizzards in the NE have not translated into precip for the US plains.

***Didja Know: Beef was originally IMPORTED by the Spanish in the 16th century. Originally they were only considered beasts of burden, not a food source. The lungfish can survive out of water in a state of suspended animation for up to 3 years.

As we turn the page on the calendar, the markets continue to work. Wheat markets surged higher and have never really backed off. The weather in Aussie is the main driver. Heavy flooding in Queensland/ NSW. For the month of Dec, Toowoomba received about 13.5” of rain. That is 4 times normal and over half of the ANNUAL rainfall. Pics of the flood look eerily similar to the Midwest floods of ’93. And oh by the way, weather man is calling for 3 more days of rain. Areas flooded is estimated to be larger than Texas. Argie is due for some rains, but only small patches will receive more than what the evaporation rate is. Markets are starting to factor in yield cuts in earnest. FWIW: Argie is the world’s #3 bean exporter, and in the top 5 wheat exporters. China is complaining (may be doing more than complaining shortly) about the US dumping DDG’s on the market. Well, I suppose if the ethanol is subsidized the DDG’s get produced at a discount….by the way, China is the world’s #3 DDG importer. More FYI: Oct the US produced a record 37 myn gal of ethanol/ day for over 1.15 byn gallons on the month. At that pace the US would grind through 4.9 byn bu of corn per year….DDG’s have to go somewhere.
               Indonesia, Malaysia, Oman, Bangladesh all in kicking tires on wheat. Russia will offer 18.4 myn bu of intervention stocks to ‘cool’ prices. China sold 34 myn bu of 165 myn bu offered in their state sale. The Argie harvest is rated about 75% complete, with an estimated production of still about 24 myn mt. Last estimate had about 10 myn mt of it rated ‘feed’.
               US: COT report was not a surprise and showed very little change. The volume the last week or so has been pretty light. Specs are long 160 myn bu of Chic, while the funds are still holding 915 myn bu. It will be interesting to see what their position is after the ‘rebalancing’. In corn the specs are a HUGE 1.9 byn bu long, while the funds are a relatively small 1.6 byn.  Corn futures seem to be taking a day of ‘consolidation’ today, and are little changed with wheat futures up 20+.There is increased concern about winterkill in the S. Plains. We went into the winter with dry soils. Bitter cold weather will test the winterhardiness of the plant. We have not heard anything about winterkill in the Black Sea region, but we will.

***Didja Know: When ordering coffee, usually on the east coast ‘Regular’ means with milk and sugar, on the west coast means ‘Black’. An average Bee Hive has about 30,000-60,000 bees in it, and is maintained by 1 queen bee laying 1,000 to 3,000 eggs per day.    
Corn lost 9 yesterday, down another 11 today. Wheat futures traded up 20+ yesterday then gave up half of it in the close to finish up about 9, today are down 3-4. European prices are lower and the $$ is stronger again. Specs have near record long positions in corn and beans making the market ripe for a sell off or consolidation. Steady end use demand is needed at these levels to maintain upward price momentum. There are a number of ‘tire kickers’ in tendering for corn, but let’s not forget that the USDA will release its next S&D next Wednesday. Today, I would expect ethanol usage stronger (more later), corn exports basically unch’d, feed usage unch’d to higher, and production perhaps tweaked lower (a number of reasons). River closure: Almost as soon as they closed the river, they extended the down time 2 weeks. Sounds as if they have made up 1 week, but they say that the other week will just have to be added to the opening…so The Dalles is looking at 3/23. KCBOT and MGE showed HUGE increases in volumes. KCBOT was up 8% vs. previous record in ’06, and up 51% vs. ’09. MGE was up 40% vs. ’09.
Aussie floods are well calculated into the S&D’s and although its making big news now, those following the markets knew it was coming 2+ weeks ago. Mostly the crop is harvested, save for the southern regions. WA is done and will have 4 myn mt less than lyr. The markets will closely watch the weather systems that are expected to hit Argie this weekend. There is at least a good chance for significant precip in some areas….but who knows? Could be much more general, or might not happen at all. This weather event is seen as critical for corn/ bean S&D’s. It is being called a ‘make or break’ weather event for their crops. SOI is in the top 5% it has ever been at +26, (anything over +8 is considered La Nina). SK gov’t has destroyed about 20% of the herd due to Foot and Mouth disease. This will of course reduce some corn usage there.
               Gavilon (ConAgra) purchased DeBruce Grain, adding 300 myn bu of storage space and making them the US’s #3 Grain company (consolidation of the grain industry continues). Anderson Grain purch 3 more Neb elevators adding 3 myn bu more space.
               Ethanol: A trade group representing Oil Refiners is also suing EPA on their decision to allow 15% blend on newer cars…by the way the final EPA verdict on E 15 for vehicles ’01 to -06 is due out within a couple weeks. We mentioned record ethanol production the other day. Consider, ‘Ave’ margins for a ‘typical’ Midwest plant is about .45/ bu or .15/ gallon. The extended blenders credit was for .45/ gal. And you can see how the stroke of pen can change the economics and also the S&D’s. But, wait there’s more! Inventories of ethanol are up 15% vs. lyr. Or if you prefer, inventory as in days of use are nearly a record 22 days (record was 24 but usage was MUCH smaller). Imports were a record SMALL at only 1,000 bbls for October. Current ethanol usage implies that the usage on S&D’s might be 150-200 myn bu too LOW.               

Interesting morning already. Futures started off by working lower as the consolidation/ profit taking continued. We are also working through the ‘re-balancing’ of the index funds. It won’t be quick, but longer term it is price friendly, PLUS the S&D’s and fundamentals are on our side. Biggest thing working against us is the economy. Futures have given up .30 in corn from the previous highs, while beans have given up .40 and wheats have coughed up 40-50. Futures are back in the black as of this writing. As we mentioned earlier, S&D’s and fundamentals are on our side.
Egyptian imports could climb to 10 myn mt as Aussie wheat down grades continue to hit the market. The flooding isn’t over and more wet weather is coming especially in Queensland. Kansas wheat crop ratings are REALLY weak: overall G-Ex is down 11% to 27%. 22% of the crop is rated ‘poor’, with 40% rated ‘fair’. Corn exports are actually ahead of last years numbers with 569 myn bu shipped vs. 550 myn this time last year. The Fed announced that even with ‘reports’ of better economics, they will proceed with $600 byn QE2. This SHOULD weaken the $$ and be price positive. But remember the recent strength in the $$ is not really tied to an improved ‘economic outlook’ as much as a ‘weaker’ Euro.
The FAO said in a recent report that they expect world food prices to be much higher in ’11. The food price index is at or near record levels. If we start to see more weather calamities hit major production areas, prices will climb steeply. As we discussed the other day, part of this is tied to political decisions (ethanol). Pacific Ethanol fired up their Stockton plant, and only their Madeira plant is idle. The same situation is playing out across the US as margins are good and will remain in play as long as corn is available and the subsidies remain in place (now through the end of the year). Point here is that the USDA reports the facts as they see them…they do not forecast. So as more plants come on line, that means that corn usage for ethanol will increase….further tightening supplies.
Argie Ag Sec. says that they are taking est. corn production down to 20 myn mt (vs previous guess of 20 myn mt). Argie is world’s #2 corn exporter. They also took bean production estimates down 3 myn mt. Also an update from the other day, the weather man now says that 1 model suggests that this weekend rain systems may not have as much precip as originally thought.