Weekly Market Analysis with Miller Risk Management

Eventful week for grain markets in terms of price movement and news with various reports on harvest pace out of South America, significant outside market activity and the release of a bevy of information from the annual Ag Outlook meeting.  Technically speaking, soybeans made some headway to the upside, although the late week close was back below resistance.  Wheat, however, suffered early in the week on some poor tender news and confusion with Egypt and never looked back.

  • NOPA crush numbers of 162.7 mmt were right in line with pre-report estimates, although down from the Dec usage.  That’s seasonally pretty normal and in any event, the number exceeded the Jan 2014 crush, which was somewhere just over 159 mbu.


  • Export shipments Tuesday were pretty ho hum, and likely why wheat saw it as negative when it was within expectations.  The U.S. simply not able to attract a lot of buyers right now, although if the U.S. dollar tops out, it would help considerably (more on that below).  On the flip side, soybeans were viewed as positive even when within expectations simply as the number is quite attractive for movement in February.
  • On a related note, Sales this week were mixed. Wheat sales were awful, corn was great, and soybeans were down from recent levels but solid considering we are at the end of the major shipping season


  • Some private analysts are claiming the large soybean harvest in South America is tripping over itself, with the sheer size gumming up farmers harvesting abilities, logistically capabilities, etc.  Probably true, not new (we see it almost every year), and the soybeans are still there.  Estimates Wednesday reported harvest running around 3-4% behind average.


  • Interesting article today noting that world wheat production is unlikely to drop considerably as the U.S. is the only major producer seeing sharply lower prices compared to last year.  Doesn’t give a lot of opportunity for rallies.


  • Busy and depressing week for wheat tenders. Algeria and Iraq both issued wheat tenders, but no good for U.S. wheat.  Aussies were the lowest in to Iraq at $280/mt c&f.  Algeria rarely purchases U.S..  Bangladesh may be an opportunity, but the tender was cancelled and reissued citing the bids not compliant with required values.   The big news came in the Tuesday Egyptian GASC tender.  Previously, we mentioned a loan the U.S. had provided to the Egyptian government.  As a condition of the loan, the proceeds were to be used to purchase U.S. originated wheat bushels.  Accordingly, Egypt issued a tender for U.S. SRW or SWW wheat, no amount specified only to turn around Tuesday morning and cancel the entire tender citing high prices, reissue the tender for all originations, and purchase French wheat.  No word on what will happen to the “loan” they were given, but how bad does the market have to be when you pay someone to take your wheat and they turn you down?


  • Winter wheat areas have seen some severely low temperatures in the past week and there is concern about winter wheat conditions.  As always, very difficult to tell until we break dormancy, but the unusually warm temps we saw at the beginning of the month followed by temps in the teens all the way down to Texas do create some concern.


  • Little early to discuss weather, but NOAA released an updated drought forecast this week. Major note is the growth of abnormally dry conditions in the upper Midwest.  Obviously, this is of little consequence in the winter, but the forecast runs through May 31st.  Don’t expect market reaction yet, but traders will be watching:


 Drought forecast

Ag Outlook Meeting
Lots of data, lots of numbers, and in the end it’s simply a starting place for discussion.  These numbers will change dramatically, but a couple of highlights:

  • Farm Income:

Farm Income


  • Planted Acres: The Office of the Chief Economist reported an estimated 89 million acres of corn and 83.5 million acres of soybeans will go in the ground this year. That number was on the light side of expectations for soybeans, suggesting that while anecdotal evidence suggests a switch to beans, the economics aren’t there
  • These numbers are typically low and quite conservative.  However, corn export projections were pretty decent and in fact, all major usages of corn were increased.  Accordingly, USDA is estimating a reduction in carryout from the 2014/2015 season to 1.687 bbu.
  • Soybean balance sheets remain heavy. OCE projections are estimating a 2015 year end carryout of 430 mbu, up from the 395 mbu estimated currently for the 2014 crop.  This comes despite increases in every major category of usage.  Not a surprise, but a trend that has been noted
  • No good news here.  OCE is estimated a carryout of 763 mbu, which is the highest since 2010/2011 and represents a stocks to use ratio of a whopping 34.6%.  Worse, the increase comes despite a projected decline in production of 54 mbu.  Big reasons: loss of feed demand to more competitive corn prices than we’ve seen and reduced exports, presumably as the U.S. dollar remains strong and other major growers remain lower priced
  • Estimated on farm prices: $3.50/bu for corn, $5.10 for wheat (all classes, no breakdown), $9.00 for soybeans

Dec corn put in an admirable performance this week, although the Friday close left something to be desired.  Prices remained within a pretty tight 6 cent range, repeatedly hitting resistance at $4.21 before backing off and closing near the bottom of said range.  Friday’s close was below the 9 day moving average, but given the condition of soybeans (discussed below), a friendly balance sheet from the Ag Outlook meeting, and seasonal tendencies, we have to lean more to the higher side.  Still, the close is a warning sign that needs to be watched.  Resistance marks aren’t much different than previous: 9 day at 4.17 ¼ , 50 day at $4.20 3/8 (very close to that $4.21 area we tested so much), 100 day ma at $4.12 ½ .  All three moving averages are converging on each other, which we haven’t seen for some time, indicating a decision by the market is in the near future.
Soybean futures broke through all resistance this week only to sell of Friday.  Still, prices remained well above the 9 day moving average and it’s not uncommon to take a few tries to go through the 50 or 100 day averages.  In November soybeans, those levels are 9 day ma at $9.71 ½ , 50 day at $9.89 1/5, and 100 day at $9.90.  The March contract was able to stay right around that $10.00 mark.  By Friday’s close, it appears we will have more work to do to make any major headway, but the short term trend is up.  Still, and we can’t stress this enough, even bear markets have uptrends within them.
What can we say about wheat?  It made an excellent attempt to break out late last week and early this week but that Egyptian tender failure and the sharp rally in the U.S. dollar knocked prices for a loop.  By Fri, Sept MW was well below all major resistance and approaching support at the previous low around $5.75.  Carry in the Minneapolis market widened out considerably after being nearly flat last week and basis levels have softened.
Crop Insurance Prices-Spring Planted, Midwestern crops
Corn: $4.16                  Soybeans: $9.66                      Spring Wheat: $5.89               Durum: $6.36
Sunflowers: $16.90/cwt           Canola: $16.00/cwt
Miller Risk Management is a subsidiary of Clayton Pope Commodities of Champaign, IL.  If you have any questions on these comments, please call Katie Miller at 701-730-3352
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