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Weekly Cash Comments

Cash Comments-

The futures market slide 12 ¼ cents for soybeans and 8 ½ cents for corn but despite the sharp slide in prices, basis remained for the most part steady increasing only a penny for soybeans and 1 ½ cents for corn.

Basis along the river declined more than the rest of the U.S. declining an average of 2 cents despite barge rates declining across all five major river regions. Basis along the gulf slipped 4 cents over the last week helping explain the relative weakness along the river. Soybean basis along the river held steady in the face of declining futures prices, improving 1 ¼ cents this week. Soybeans moved by barge over the past week was down 35 percent below the same week in 2014. Year to date barge movement of soybeans is 174,000 tons behind where we were at this time last year, while corn moved by barge is ahead of last year's pace by 143,000 tons.

Ethanol basis was in line with the national average increasing 1 ¾ cents on average across the U.S., while soybean plant basis only improved ¾ of a cent over the past week. Ethanol production continues to maintain above forecasted production up 5.6 percent over the year compared to a USDA forecasted increase of only .8 percent. Strong DDG prices have helped support crush margins as ethanol values have declined over the last month.

Futures Comments-

The grains fell this week with wheat leading the grains lower in a 26 cent decline. Corn prices shed 12 ¼ cents and soybean prices slipped by 8 ½ cents. Open interest declined for all grains as well with corn open interest falling 31,576 contracts from 580,177 on the 22nd. Export inspections for corn and soybeans beat analyst expectations with 886,825 metric tons, and 1.5 million metric tons inspected respectively.  Wheat inspections were weak again with only 263,035 inspected to leave the country. On Thursday, the export sales report showed that the price declines over the last few weeks have helped improve sales. Wheat sales picked up 19 percent from last week booking 544,400 metric tons and beating analyst expectations of between 250,000-450,000 metric tons. Although the last few weeks have showed improvement still larger export sales will be needed to halt the slide in prices.

Corn export sales were booked at 1,068,200 metric tons which was on the high side of analyst expectations but only half of last week's sales which came in at a marketing year high. Despite the week over week decline in sales, corn has now booked 70.6 percent of expected export sales and is ahead of the seasonally adjusted pace expected to be able to meet the current USDA expectations by nearly 2.8 million metric tons. Soybean sales booked 888,200 metric tons up from the mere 14,000 metric tons booked last week and well above analyst expectations which ranged between 200,000-400,000 metric tons. This week 93.5% of export sales expected by the USDA have already been booked this year. The market will be sensitive to any announcement of cancellations as South American harvest begins to pick up pace.

Wednesday marked the first day newly harvested Brazilian soybeans arrived into crushing plants and northern ports and began loading the first vessel at the port of Paranagua. As harvest pace picks up analysts will keep a close watch on logistics and any congestion that develops as producers move the crop to export facilities. This year the delays in planting due to dry weather in the fall could mean the crop comes out of the field at the same time and put increased pressure on the transportation system. On Tuesday it was announced that the Tiete River, a key waterway in Brazil will be closed for the start of the season due to the low draft caused by a much drier than average January. Closure of this waterway may have more of a local effect than a national one as it was already partially closed last year and grain can also be moved down the Maritituba which is expected to move 4 million metric tons this year.

On Wednesday the EIA ethanol report showed that weekly production declined 1,000 barrels per day to 978,000 bpd keeping ethanol production running 5.6 percent ahead of last year's pace. Ethanol production continues to show strength as DDG prices have rallied sharply since China approved the GMO grain variety MIR-162. Currently, the USDA has accounted for only a .8 percent increase in ethanol production which could leave room for them to make further revisions higher in coming reports. Ethanol stocks have also lifted to a 5 year high for this time of the year, improving 244,000 barrels last week to 20.63 million barrels of ethanol.

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