The following market analysis is for the week ending March 28.
SOYBEANS — Traders came back from the Easter holiday with their buying shoes on as July beans locked up their 50 cent per bushel limit the first two days of the week.
The rally cooled slightly as margin requirements were substantially increased, some fund liquidation occurred, as we headed into the weekend. For the week, July beans were up 63 cents and November beans were 19 1/2 cents higher. Bean basis has been rebounding as the lower board prices have slowed country selling.
The farmer strike in Argentina may have caused up to 300,000 to 500,000 metric tons of beans for China to be switched to the United States. Force majeure was declared by some grain export companies on soy shipments to China, who then switched business to the United States to assure supplies. This new export business is tightening the noose on the soybean carryout number for this year.
We have heard estimates that ending stocks by Aug. 31 could drop below 100 million bushels. The U.S. Department of Agriculture’s March estimate was 140 million bushels.
There have been reports of road blockades, altercations between truckers and farmers and spot food shortages in the cities attributed to the three-week old strike. As of this writing, there may have been an agreement between the government and farmers concerning dairy products, fruits and vegetables. Late Friday afternoon, the farmers in Argentina called a halt to their strike to ease negotiations with the government over the weekend, but stated they would remain “alert and mobilized.” The government thus far is standing firm to increase export taxes.
The Census Soybean Crush report was released this week showing 146.3 million bushels of beans were crushed in February and soyoil stocks were 2.681 billion pounds. The day of the release it was announced that the soybean oil figure would be revised.
This should not have surprised the market since the Census number was smaller than the National Oilseed Processors Association stocks estimate, which never happens since NOPA only polls its members, while the Census includes all crushers. NOPA numbers usually run 80 to 85 percent of the Census figures. The revised soyoil stocks were 3.101 billion pounds.
Exports for the week were considered neutral at 13.6 million bushels. This brings total export commitments to 988.6 million bushels or 98.4 percent of the USDA export projection for this year. The marketing year ends Aug. 31. There were also 6 million bushels of new crop bean sales reported.
We currently have 34 million bushels on the books for new crop versus only 12.4 million bushels last year at this time. Meal sales were outstanding at almost 157,000 tons. The United States is running 7 percent ahead of last year’s sales and has committed 61 percent of the total export forecast. Oil sales at 42,000 tons continue to impress the trade. We are at 127 percent of last year’s sales at this time in the marketing year, but are only at 42 percent of the projected total sales.
OUTLOOK: The trade is waiting for the Planting Intentions report and Grain Stocks report that will already have been released by the time this is published.
The next direction will be greatly influenced by these numbers, as well as outside influences including the U.S. weather, the Argentine farmer strike and the value of the U.S. dollar.
CORN — Corn mimicked the soybean activity early in the week, but diverged late in the week to continue their upward trek.
December corn traded from a low of $5.13 1/4 on Monday to a high of $5.78 by Friday. Volatility has not slackened. For the week, July corn gained 54 1/2 cents and the December contract 55 1/2 cents.
While we haven’t seen the huge increase in corn export business as we’ve seen in the soybeans, the corn has been pulled upward to keep acreage and in conjunction with overall commodity strength.
Wet conditions over much of the Midwest have dampened ideas of any significant early planting. Early planting usually is reflected in anticipated higher yields. Georgia reported that 19 percent of their corn was planted as of March 24 versus 16 percent on average and Louisiana was 43 percent planted versus 39 percent on average. No planting was reported in the major corn growing states. U.S. corn is normally 25 percent planted by April 23 and 50 percent completed by May 1.
Export sales were nearly 25 million bushels and almost 4 million bushels for new crop. Old crop sales are close to 85 percent of the USDA’s projected exports of 2.45 billion bushels. In comparison, China’s corn exports in February were down 96 percent versus last year.
Broiler egg-sets were up less than 1 percent this week versus a year ago, but chick placements were up almost 3 percent.
OUTLOOK: Weather will be taking center stage as soon as we absorb the planting intentions and grain stocks numbers. We usually get at least one weather scare, the question is where we begin that rally.
Other observations: Effective March 28 the Chicago Mercantile Exchange increased normal trading ranges for corn from 20 cents to 30 cents per bushel, soybeans from 50 cents to 70 cents per bushel, and bean oil from 2 cents to 2.5 cents per pound.
Phyllis Nystrom is a market analyst with Country Hedging in St. Paul.