Free Commentary

By: Dan Hueber –

After a very promising start to this new month, grain and soy prices have dropped sail and are once again floundering for direction.  This most encouraging action has been in the wheat, which not only is the commodity being most directly impacted by the recent adverse weather but is also the market that suffered under the largest short speculative positive and evidently has weeded a few more of them out than in the other markets.  We are at the point that weather disruptions need to remain front and center or find something from the demand side that could instill additional buying interest and gauging from the exports sales, there is little to become excited about at this time.

For the week ending April 27th, we sold an additional 771,600 MT or 30.38 million bushels of corn.  By no means a disastrous figure but we 22% below the previous week and 15% under the 4-week average.  Top sales went to our three most dependable buyers.  Japan purchased 184.8k MT, Mexico 153.1k and South Korea was in for 123.6k.  Of course, we recognize that we are already above the target for the year for bean but sales this last week were down 57% coming in at 318,500 MT or 11.70 million bushels.  Here again, it is tough to call this bad per se, but lower number still cast a negative psychological pall over trade.  Top sales were made to the Netherlands at 144.8k MT, followed by Indonesia at 88.2 and then China with 69.6k.  There were cancelations last week of 129.9k.  Wheat actually enjoyed a nice rebound from last week’s terrible figure, but at 258,400 MT or 9.49 million bushels, it was still 30% lower than the 4-week average.  The top three purchasers this week were the Philippines at 66.9k MT, followed by Thailand with 52k and Nigeria for 32.6k.  Note though that sales for the 2017/18 crop year were 563.4k MT.

Earlier this week I had reported that ADM released first quarter earnings that were 43% higher than the previous year primarily attributed to increased volume and margins in oilseed processing.  It is interesting to note though that at $.59 per share this was slightly disappointing compared with expectations and their stock took a bit of a shellacking.  It would appear it is now Bunge’s turn under the spotlight and yesterday they released first quarter numbers that were down a dramatic 80% from the same period last year, coming in at $47 million or $.31 per share.  They are projecting an overall rebound and more optimistic outlook for the balance of 2017, but it is interesting to note that CEO Soren Schroder spoke of the need and/or likelihood that there will be more consolidation “in whichever form” in the industry to improve returns.  He stated that “We’re certainly open to look at anything that creates value for shareholders and makes us more efficient,” which sounds an awful lot like an open invitation for a takeover, buyout or merger.  Keep in mind that Bunge y Born was founded in Amsterdam in 1818, making it I believe the oldest existing of the major grain companies around the globe.  Call me old fashioned, and I understand the efficiencies of size as well as the demands of appeasing the quarterly return gods, but I generally would not view fewer competitors in the grain business as something we should look forward to.

As I mentioned initially, grain and soy markets appear to have shifted back into neutral.  I continue to believe that we can post additional strength between now and the release of the USDA reports next week, but unless there are additional weather related problems to accompany the reports, upside should remain somewhat limited for now.