Ohio Ag Net | Ohio's Country Journal Ohio Ag Net | Ohio's Country Journal Prior to the report grains were all 1-2 cents lower. The DOW was 80 lower, and crude oil was 30 cents lower. Following the report corn was unchanged, soybeans were up 1 cent, and wheat was unchanged.
Corn exports were lowered 50 million bushels to 1.65 billion bushels. That is not a surprise. Corn used for ethanol was increased 25 million bushels to 5.225 billion bushels. An increase in ethanol had little traction ahead of the report. However, it is not unrealistic due to weekly grinds the past month continually above the weekly amount needed to reach the yearly goal.
Soybean crush was reduced 10 million bushels to 1.88 billion bushels. That should not be a surprise as domestic crush margins have been below 50 cents in recent weeks. It compares to crush margins last year reaching over $2 a bushel a year ago. Soybean ending stocks were up 10 million bushels. While some had expected soybean exports to be reduced, reducing one component, the crush, is not a surprise.
Corn production in Brazil was up 2.5 million tons from last month’s 81.5 million tons. Argentina corn production was increased 1.4 million tons to 27 million tons. Corn production in South America was expected to remain unchanged. These numbers are somewhat bearish for corn. Don’t be surprised to see US corn exports see additional changes lower in coming months.
Many might suggest that the February USDA report is easily a yawner, paying little attention to its pending release and even less attention once it is published. But after all, it is the USDA. A surprise can appear at any time. During the month of February the US budget office provides acres estimates for 2016. In addition, USDA will have its yearly outlook conference later this month. Then next month on March 31 USDA will publish its annual planting intentions report for the upcoming growing season. This combination of acres estimates will provide lots of fodder for market discussions the next six weeks.
Today’s report did not contain any production changes for the US. The trade had expected soybean production could be reduced in Brazil while increasing in Argentina. The soybean harvest is underway in Brazil. Argentina is not far behind. Corn production in South America was expected to be nearly identical to that last month.
Grains have been sideways to boring for the past month. Rallies have been short-lived, small in size, not meeting expectations for those still holding unsold bushels. Yesterday corn exited its tight trading range, trapped within just nine cents for 13 trading days. Talk about something ready to happen, just as a coiled snake waiting for its unsuspecting prey. In that time corn basis has been steady and in some cases even lower.
Corn exports on Monday were just 17.3 million bushels, below the low of trade expectations. Meanwhile, soybean exports hit 43.1 million bushels, above the high of expectations. Soybean exports continued their trend of exceeding corn exports. US grain exports continue to disappoint as yearly totals slide further and further behind those of a year ago. The Monday reports continued the trend from last fall detailing that US grain exports are declining compared to a year ago. As US exports shrink, it has traders and producers expecting smaller exports and increasing ending stocks for either February or March.
Non-commercial traders are now long corn as they exited the short positions they held for many months. The flip from short to long was a process over many weeks. Last week it was noted that while the non-commercials traders were still short, the much smaller amount of shorts they held was a surprise. Some had suggested it could provide additional corn price volatility in coming weeks due to the reduced need for any potential short covering to take place.
China’s markets are closed all week due for the Lunar New Year. US stocks have taken a beating so far in 2016 due in part to concerns that the economic slowdown in China could reach the US. Keep in mind that in times of uncertainty and especially if it extends for several days, the general mentality can be, “risk off, get me out.” Or even simpler prices go lower. The term “risk off,” is not new. Don’t be surprised to hear it more and more this year.
The market will now go back to focusing on South America weather and upcoming US acres projections for 2016. Farmer selling for old corn will likely not be large in coming weeks unless we see the March CBOT corn reach back above the $3.70-3.75 level. At mid-day today it is $3.62.
