Published: May 29, 2008 03:32 pm            

Grain Outlook: Midwest planting getting caught up

Originally published in the May 30, 2008, print edition.

The following market analysis is for the week ending May 23.

SOYBEANS — Soybeans started the week out with an easier tone, but rallied mid-week as the energy market surged higher.

At this writing (mid-session Friday) July beans were down 15 cents for the week while November beans were up three-quarter cents. The gains seen in the energy sector were a source of inspiration to the soy complex, with strength also coming from gains in the U.S. dollar. Crude oil rocketed to over $135 per barrel during the week. Grain trading was relatively thin as we headed into the Memorial Day weekend.

Planting was going well in the majority of the Midwest as farmers switched from corn to beans. In fact, in some areas of the western belt growers stated they would welcome a shot of rain as they finished planting. By Memorial Day traders are estimating that bean planting will reach the halfway point versus 27 percent complete last week and 67 percent on average.

On the Argentine front, the farmers’ unions called off the strike so the government would return to the negotiating table. The situation doesn’t look like it’s improving as the government still seems unwilling to negotiate on the export tax issue, which was what started it all in the first place.

We also heard of the possibility that the government may limit the amount of corn and wheat that companies may export to roughly 520,000 metric tons of each commodity from each exporter. This has not become an official regulation as yet. Individual exporters reportedly shipped over 3 million tons of corn and over 1 million tons of wheat last year.

The July-November soybean spread had been trading at a significant inverse ($1.35 3/4 on April 24), but collapsed this week to trade at an 8 1/4-cent carry at one point.

Basis levels were mostly weaker as the spread moved to a carry. Many markets had already rolled their bids to either the August or the November, and reflected that move in their basis. In some areas, bids were rolled back to the July.

Weekly export sales were 14 million bushels, bringing total cumulative sales to 1.08 billion bushels. This equates to 99 percent of the projected total sales. New crop sales were an impressive 17.9 million bushels. We now have 73.7 million bushels on the books for new crop while last year we had already sold 123.2 million bushels.

The Census Crush for April was slightly disappointing at 149.25 million bushels and the March crush was revised from 153 million bushels to 156 million bushels. Oil stocks were a little larger than expected at just over 3 billion pounds.

In other news, the Commodity Futures Trading Commission announced they plan to introduce several initiatives that may be implemented in the near future. Their intention is to allow for better transparency and efficiency in the energy and agricultural markets, in particular oversight of large hedge funds.

OUTLOOK: The soy complex was influenced by the crude oil market this week and developments in Argentina. Weather will become a bigger issue in coming weeks. We’ll look to follow the leader (energy) for the time being.

CORN — Corn followed a similar pattern to soybeans, but with gains on the week of 6 cents in the July corn and 7 1/2 cents in December corn as of mid-session on Friday.

Planting as of May 19 was 73 percent complete in the United States versus the five-year average of 88 percent. By Memorial Day it’s anticipated that corn planting will reach 90 percent complete, putting us about a week behind average. Emergence will now become the issue since we didn’t get off to an ideal start and the crop needs some heat to get established.

Corn basis was flat to slightly weaker even as movement dropped to a trickle with growers occupied with fieldwork. Ethanol margins have been improving on the huge energy rally. Nearby ethanol closed at a record discount to RBOB (gasoline) which should promote full use of blending.

The farm bill that was sent to President Bush this week was missing 34 pages on the first presentation, but the president vetoed the bill. Congress had the votes to override the veto, which they did before the holiday weekend.

Export sales were decent this week at 20 million bushels. This brings total sales commitments to nearly 2.3 billion bushels. The U.S. Department of Agriculture’s export forecast is 2.5 billion bushels.

There were also 10.6 million bushels of new crop sales reported. This brings 2008-09 sales to almost 110 million bushels or 9 percent of the USDA’s current 2008-09 export forecast.

For the eighth week in a row, poultry numbers were under last year’s. Broiler egg sets were 99 percent of last year and chick placements were 97 percent.

OUTLOOK: Corn has not gotten off to an ideal start, and we can’t afford problems. December corn has been in a $5.90 to $6.55 1/2 (contract high) range since the first of April. At this time, I don’t see anything on the horizon to push us out of this “comfort” zone.

Nystrom’s notes: The June crude oil contract set yet another all-time high price of $135.09 per barrel. Gasoline and heating oil also soared to record highs of $3.4380 and $4.0153 respectively.

        

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