Beans crop strong; so is wheat but held up by Ukraine/Russia risk

July 22, 2014 03:30 AM
Allendale wrap us

Soybean Fundamental Support: The soybean market bears came out of the weekend selling as a bearish forecast left them confident to add to positions. August beans did find some support as an overnight sale of old crop beans provided support to the old crop months. We think this was a shift of origin from Brazil to the United States instead of a “new” sale as there is little incentive to buy old crop beans with new crop harvest right around the corner.

Delta bean harvest should be less than six weeks out. In addition to the old crop sales, the USDA announced the sale of 135,000 tons of new crop meal. We would call the meal sale routine business. Today’s sell off tested the lows scored on July 11th and then bounced and closed off the day’s lows. This sets the market up for a turnaround Tuesday bounce if the weekly ratings don’t come in to bearish.

Some in the trade are talking about dry pockets showing up but with most of the Midwest forecast to see rains by this weekend and early next week it is hard for dryness talk to gain any traction. If the rains do not fall then maybe the dry pocket talk can gain some traction but like I stated earlier, rain is in the forecast.

The trade was looking for ratings to come in unchanged (72% g/e) tonight after the close so that added to today’s negative tone. After the close, however, ratings came in higher than expected at 73% GE.

Fridays CFTC report showed that funds continue to sell beans and are net short 6,000 contracts as of last Tuesdays close. They have been now selling for seven straight weeks. We continue to look for the bean market to sell off as the market continues to price in good weather. The question is the pace of the selloff…Jim McCormick.

Wheat Fundamental Support: Wheat finished the day lower today but fairly off the lows of the day. After what can be described as a volatile few days for this market we are still holding onto the recent lows made in this market which could suggest we are trying to form a double bottom. The volatility in the wheat over the last few days has been more about the political situation between Russia and Ukraine and less to do with fundamentals about the crop size or demand. If we see these tensions continue to arise we could see Russia cut off energy shipments to Ukraine which could adversely affect planting of a winter wheat crop. This isn’t a situation we are going to be talking about yet but could be something to keep an eye on moving forward.

Spring wheat ratings were left at 70% good-to-excellent, winter wheat harvest was reported at 75% complete. Export inspections were good this week. We would think that we could see a small bounce from these levels as tensions in Eastern Europe have escalated a bit and those farmers who are finishing harvest may start to store the remaining bushels of wheat for later delivery points giving us a slight bounce.

  • Export inspections were 515,283 tonnes this week compared to 387,400 tonnes last week
  • Russia expecting to harvest 97-100 million tonnes of grain this year
  • Egyptian buyers to purchase 60,000 tonnes black sea wheat
  • Turkey to buy 165,000 tons of wheat
About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA.