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Weekly Cash Comments

Cash Commentary-

Basis levels for corn were off 1 cent for the week adding to the previous week's losses, while soybean basis managed a 2-cent advance thanks to a sharply lower week on the futures market.

For corn, there was modest weakness along the river markets this week with a 3-cent loss at the Gulf providing the biggest catalyst of change to upstream facilities. Corn buyers along the East Coast and Plains saw relatively more strength this week, but ethanol plants as a group were off 2-cents a bushel. Areas of Iowa and Minnesota were especially prone to losses this week with 5-cent a bushel losses being fairly typical at some key end users.

In soybeans, basis levels improved on average by 2-cents a bushel this week, although there was a distinct dichotomy between end-user groups. For export sensitive areas, losses of 5-cents a bushel at the Gulf kept river terminals mostly weaker. Although soybean export business has been winding down this week's sales of 165,500 metric tons was a 21 percent improvement week over week. For soybean plants, crushing facilities raised their basis by 2 cents a bushel for the week, but Eastern Cornbelt plants saw more impressive gains with some facilities up 5 to 10 cents a bushel.

Futures Commentary-

This week the grains were mixed with wheat trading up 7 3/4 cents, soybeans down 18 1/2 cents and corn down 3 cents for the week ending Thursday, May 21st. The wheat market continues to move higher on short covering, triggered by heavy rains throughout the southern plains giving rise to wheat quality concerns. Wheat traders are also following the Russian wheat crop which is forecast to experience hot dry weather over the next couple weeks and is beginning to come under stress. Chicago wheat open interest fell 18,617 to 261,576 showing that traders during this week's rally are exiting existing positions instead of adding bullish bets.

Corn and soybeans continue to be pressured by bearish news this week. The climate prediction center is expecting to see El Nino continue throughout the summer in the northern hemisphere which may point to another year of optimal growing conditions. They estimated that there is a 90 percent chance that El Nino will continue through the summer and an 80 percent chance that El Nino will last through the end of the year. El Nino typically brings cooler wetter growing conditions to the northern hemisphere and often leads to above average yields. Also pressuring the grains is the Informa economics announcement that it forecasts corn planted acreage at 88.737 million acres which is below the recent USDA most recent estimate of 89.199 million. Informa pegs its soybean acreage at 87.185 million acres which is 2.55 million acres over the USDA.

On Monday, Russia announced that they will remove the wheat export duty until a new formula can be introduced on July 1st. By removing the export duty, it is estimated that the country's exports will increase by 1 million metric tons this marketing year.

Export sales this week showed that wheat, corn and soybeans all met expectations. Wheat booked 74,400 metric tons of old crop sales and 128,200 metric tons of new crop. With analysts expecting to see as much as 200,000 metric tons of cancellations, this week's sales were relatively positive. Old crop corn sales jumped 12 percent from the previous week with 812,600 metric tons booked above the 400,000-600,000 metric tons expected by traders. Soybeans also showed positive export sales this week with 165,500 metric tons of old crop sales which was a 21 percent improvement week over week. Soybeans continue to outperform sales expectations late in its export season.

On Wednesday, the EIA weekly ethanol report showed a sharp jump in production by 46,000 barrels per day to a total of 958,000 barrels per day. This decisively ends the two week slump in ethanol production that brought weekly totals below 2013 levels. However, routine facility maintenance played a big role in the early may production slump and it appears production is picking back up again as we move into driving season. Ethanol production year-to-date is up 4.8 percent compared to the USDA's expectations which only show a 1.3 percent increase YOY. Ethanol stocks also climbed by 135,000 barrels to 20.43 million barrels this week.

The drought monitor has shown improvement over last week with the last of the severe and extreme drought in the southern Plains disappearing after four weeks of substantial rains. The rains have acted as a double edged sword providing moisture relief to parched soil, but causing quality concerns to a wheat crop late in its growing season. As a result of the heavy rains the western half of Kansas and Oklahoma and parts of Texas have been reduced to mostly moderate drought to abnormally dry from ratings like severe and extreme drought just weeks ago.

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