By: Dan Hueber –
The see-saw, back and forth pattern continues in the grain and soy markets as prices have been able to snap back higher this morning after all the bullish kids were taken behind the woodshed for a licking yesterday. I am not sure what they did that was so bad, but maybe they had just become a bit too “uppity” (pun intended.) In the larger picture, this does leave us stranded in a sideways pattern as we await the development of another northern hemisphere growing season. If we were to close right now, July corn would be up 2 ½- cents, November beans up 14-cents and July wheat up 8-cent, so by no means would you call this a bad start for the month of May.
The Kansas wheat tour wrapped up, and the participants came up with a potential yield of 46.1 bpa, which is actually a bit better than average for the state. Of course, with acreage projected to be the lowest in over 20 years, we are still staring at a significant reduction in output and of course, the crop in not in the bin just yet. Across the big pond there is obviously less than optimum conditions as well as for the fourth week in a row, FranceAgriMer lowered the rating for crops in that nation. Citing a dry winter and generally dry conditions for the past month they now have soft wheat rated at 74% good/excellent which was down 4% for the week. By no means does that sound critical but the trend is a bit troublesome.
The domestic corn market in China has evidently become interesting as very active sales from government inventories were reported this week via auction. This will sound a bit foreign to the manner in which we trade grain, but it was reported that 1.82 MMT or 90.81% of the what was offered from the 2013 inventories was sold and 73.76% or 370,000 MT from the 2012 inventory offered was sold. This would sound more akin to an auction from a specific vintage of wine, but in the case of corn, I cannot imagine it has become better with age. One last bit of new from China as it would appear that just over a year after it was announced, ChemChina has cleared the final hurdle with the planned purchase of Syngenta. They needed to have at least 67% approval from stockholders via the tendering of shares, and they have now reached 80.7%. The official transaction is set to close on the 18th of this month.
The first trade survey, at least that I have seen, for the May reports have been released by Reuters and breaks down as follows; 2016/17 ending stock for corn at 2.236 billion (+6 mill.) beans at 438 million (-7mill.) and wheat at 1.162 billion (+3mill.). For 2017/18 the average ending stocks number for corn is lowered to 2.120 billion but for beans is expected to be increased to 555 million. Wheat production is pegged at 1.859 billion and ending stocks 1.014 billion.
Last but possibly not least, just when you thought it was safe to return to the water…No, I am not referring to another remake of Jaws, but rather the potential of another El Nino in the making for later this year. A month ago, the U.S. Climate Prediction Center gave 50/50 odds that we would see a return, but since that time, most indicators have strengthened so many believe they will be increasing the probabilities later this month. Granted, there should be no potential impact on Northern Hemisphere crops this season, but the same may not be said about what happens in the Southern Hemisphere later this year and into next.