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Weekly Cash Comments

Cash Commentary-

Grain basis was mixed again this week with corn basis gaining 1.5 cents a bushel, while soybean basis gave up 4 cents on average across the U.S.

In corn, basis levels were bolstered by strength at river terminals and the Gulf. Gulf corn bids were up 12 cents a bushel this week and surpassed their 5-year historical average for the first time since mid-June. At river terminals, basis levels were up 4 cents a bushel as gains were muted by a slight uptick in barge freight costs.

For soybeans, the premium of spot delivery over new-crop fall delivery continues to erode with harvest likely to start in the next month. Spot bean basis was off 4 cents for the week, but at the Gulf basis levels bucked that trend by posting a 9 cent advance. River terminals, however, failed to follow the Gulf market as losses upstream were about 7 cents a bushel. For soybean plants, double-digit losses were fairly typical this week, although as a group soy plants lost 5 cents a bushel.

Futures Commentary-

This week, the grains traded lower with corn down 7 1/4 cents, soybeans down 35 1/4 cents and wheat down 22 cents. This week's selling was driven primarily by sharp selling out of China which spread into other markets across the Globe. On Monday the Chinese Shanghai index closed down 8.5 percent which plunged soybeans as much as 30 cents lower by mid-morning before paring losses by over half by the close. China then stepped in and lowered their interest rates and bank reserve requirement ratio on Tuesday which was the 5th move since last November. Soybeans were the most affected to the macro selling because China is the main buyer of U.S. soybeans. As a result of the lower prices, soybeans were able to book three reportable sales of new crop soybeans to unknown destinations this week.

Last Friday, Pro Farmer announced its national corn and soybean forecasts after touring the U.S. from Ohio to South Dakota last week. Pro Farmer sees 2015 corn yield at 164.3 bushels per acre compared to the current USDA's August forecast of 168.8 bushels per acre. Pro Farmer's soybean forecast was lower than the USDA by .4 bushels per acre at 46.5 bushels per acre. Pro Farmer pegged 2015 corn production 363 bushels below the current USDA projection at 13.323 billion bushels. Soybean production was estimated at 3.887 billion bushels.

Export sales this week were disappointing for old crop but new crop beat expectations for corn and soybeans. New crop corn booked 986,600 metric tons of sales compared to expectations which ranged between 450,000-650,000 metric tons. New crop soybeans booked 1,457,400 metric tons of sales which was nearly double last week's sales and well outside the estimates which ranged from 600,000- 900,000 metric tons. Despite the strong new crop sales this week both corn and soybeans are still running only 73 percent of the 4 year average sales pace. We will need consecutive weeks of strong sales to catch up to the pace needed to meet existing USDA expectations.

Old crop sales however were disappointing with cancellations of 131,000 metric tons of corn and 131,600 tons of soybeans. Wheat sales beat expectations, booking 572,100 metric tons which is up 68 percent from the previous week. Both old crop corn and soybeans are now behind the pace to meet USDA expectations with corn 1 million metric tons behind pace and soybeans 400,000 metric tons behind pace according to our export sales models.

Ethanol production decreased 13,000 barrels per day this week to 952,000 barrels per day. Despite the decline in production, cumulative ethanol production is still running 4.5 percent ahead of last year's pace. This week's production was 87,000 barrels per day above the four year moving average for this week and 39,000 barrels per day ahead of 2013/14 production during the same week. Ethanol stocks rose by 67,000 barrels this week to 18.63 mission barrels this week.

Weather this week was cooler than normal throughout the Midwest with precipitation Thursday in the northwestern part of the grain belt. The precipitation is expected to move east across the mid-west over the next couple days. The weather outlook then turns drier until late next week when above average precipitation is expected over the northern half of the Midwest. Monday's latest crop conditions report showed 87 percent of the soybean crop is pod setting which is on par with the 4 year average. Corn conditions remained unchanged this week at 69 percent rated good-to-excellent; soybean conditions also remained unchanged. ?

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