Weekly Market Review 2/6/2015

Sean K. Treasure

Corn, soybeans and all three wheat contracts finished the week higher for virtually every month. Given the somewhat better demand prospects for corn and wheat and the fact that everything has probably reached a point where its oversold a rally seems due. Short term trends are somewhat positive but the longer term direction is still pointed lower. For the week, March contracts all closed higher with Corn finishing up 15 , soybeans up 12 , Chicago wheat up 24 , KC up 21 and Minneapolis closed up 20 cents.

The wheat and soybean markets are sending some clear signals to cash wheat traders that I hope you dont ignore. First off, look at the calendar spreads; corn is the only crop that is paying longs to carry their positions. Given the size of the corn crop, its no surprise to see the market attempt to ration demand in this way. Wheat and soybeans however are much flatter. This is a signal to the market to pay attention. Second, if we turn our attention to the cash market we see that basis levels continue to move higher as end users do their best to pull grain through the supply chain. What is a physical trader/farmer need to do? Sell the front end. When cash prices flatten out or invert, in theory the basis should compress as more nearby grain is sold. That hasnt happened yet so there may be opportunities for basis traders to get ahead of this thing.

The export sales report didnt carry any surprises this week; neither bearish nor bullish in my opinion. Corn posted a respectable total of 844,900 MT and wheat & soybeans were within market expectations. Sorghum remains on a tear coming in at 223,600 MT. I still dont believe it can keep that pace for very much longer but Ive been wrong before.

Interesting news out of Egypt this week as GASC indicated that they have the option to tap a special credit line sometime this summer should they decide to purchase US wheat. For the most part the Europeans are dominating the Middle Eastern trade. Still, this is something to keep an eye on as it could make the difference if the US and European values are ever valued at even money.

Basis levels for all wheat classes are firmer again though the port situation will continue to cause logistical problems for specialty crops and other containerized grain that will result in some wild fluctuations as buyers are forced into uncomfortable spots. Spot bids as follows:

Chicago Gulf PNW

Soybeans -.05H .84 H 1.05 H

Corn. 10 H .59 H 1.05 H

SRW. 30 H .85 H N/A

HRW: N/A 1.05 H (12 pro) 1.23 H (11.5 pro)

DNS 14 pro: 1.10 H N/A 2.80 H

SWW: N/A N/A 1.58 H

Here are some highlights from the international grain trade:

Bangladesh tendered for 100,000 MT of optional origin milling wheat.

Iraq announced a tender for 50,000 MT of hard wheat though they will likely purchase more than that.

Jordan announced a tender for 100,000 MT of milling wheat for August shipment.

South Korea purchased 55,000 MT of optional origin feed wheat for FH June shipment.

Japan announced a tender for 120,000 MT of feed wheat for July 1-31.

The Philippines is looking for 80,000 MT of feed wheat for June/July.

Taiwan bought 86,280 MT of US wheat for Mar/Apr at $321.99/MT FOB for 14.5% DNS, $305.48/MT for 14% pro DNS and $256.81/MT for 13% HRW

Egypts GASC tendered for Mar 1-10

Japan bought 112,920 MT of US and Canadian wheat for Mar/April shipment.

Please dont hesitate to contact me with any questions or comments. sean@busheldirect.com

Happy trading!

Disclaimer: Commodity trading involves substantial risk and may not be suitable for everyone. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this wire and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.