Wheat was the leader to the upside this week with Kansas City up 20 and Chicago up 6. This helped support corn which ended the week 5 cents higher. But in soybeans the weight of maintaining $10 futures in the face of burgeoning supplies was too much, causing early gains in the week to be erased leaving the soy board down 6.
The wheat market got a renewed round of buying enthusiasm following Monday’s release of state crop conditions. Key growing areas of KS and OK are showing dire drought conditions as only 14% and 4% of the crop is in good-to-excellent condition, respectively. Meanwhile in the Northern Plains SD/ND/MT have seen conditions ratchet higher in the last months thanks to frequent winter storms bringing needed moisture. While poor January conditions are helping fuel the rally, there is little correlation between conditions in January and final yields. Mar/Apr/May rains can save a dismal crop.
Corn continued to find modest strength tied to short-covering, dryness in Argentina and an uptick in export sales. Export sales were quite strong for corn for a third week running. Net new corn sales of 1,850,600 MT for 17/18 were up 28% from the prior week. That brings YTD commitments to 32.25 MMT versus 40.25 MMT last year, which is a 20% shortfall. USDA expects only a 16% cut for year-on-year exports.
In soybeans, all eyes are on the dry and hot weather in Argentina. This week the Buenos Aires exchange pegged the soy crop there at 51 MMT versus their previous forecast of 54 and USDA at 56. However, late week weather models showed better chances of rain into next week for Argentina which spooked the soy complex. USDA census crush for December came in at 176.4 MB I line with expectations, but soy oil stocks at 1.588 bln lbs vs. 1.740 bln lbs avg. trade guess were substantially lower. Soymeal stocks on the other hand ballooned 498,000 MT from 362,000 last month. Soybean sales were anemic at 410,000 MT, off 59%from the 1,000,000 mark of business in the recent 4-week average.
National Cash Market:
In the cash market basis levels stagnated this week showing no broad trends in the market thanks to the recent lift in flat prices. On the week US average corn and soybean basis was unchanged.
End buyers were mostly steady to weaker this week as pipeline supplies continue to be well stoked thanks to the recent run in futures. However, buyers in the KS/TX/NE region have held pretty firm during the futures rally. Strong cattle feed demand thanks to bigger numbers and poor winter wheat grazing conditions has helped support a stronger pull on cash basis in this area. For soy plants, baring the exception of a few East Coast Plants, the majority of processors were weaker with the 45-plant average down 2 cents on the week.
At river terminals the basis was mostly steady this week with export points and barge freight keeping the status quo from last week.
With futures taking it lower into the weekend and cold/snowy weather making a return to the Western Cornbelt early next week, basis levels could start to turn higher.
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