Grains were mixed following the release of the U.S.D.A.’s first report of the year with Friday, January 10th’s W.A.S.D.E. Much of the market was expecting bearish numbers but surprised everyone with some bullish data for corn. The sharp fall that wheat saw from their confirmed bearish status on Friday helped contribute to Egypt buying U.S. wheat for the first time since last year. The 50,000 tonnes of soft red winter wheat that Egypt bought was at a delivered price of around $303 a tonne (F.O.B . price of $265 a tonne and transportation costs of $38 per tonne) and the first official purchase of U.S. wheat by Egypt since February of 2013. The tender comes on the heels of Egypt’s purchase of over half a million tonnes of wheat last week, the purchase of 125,000 tonnes of US wheat last week by Venezuela, and rumours of Brazil buying three-to-six cargoes of hard red winter wheat.
The U.S.D.A. said last Friday that 41.9 million acres of winter wheat was planted in the US this fall, a fall of two percent compared to last year. However, when you break it down by type, hard red winter wheat acres were actually up two percent to 30.1 million acres, with notable increases in Montana, Colorado, and North Dakota (record amount of acres). On the flipside, only 8.44 million acres of soft winter wheat were planted, down 16 per cent from a year ago. Kansas, America’s biggest wheat producer, saw its planted area fall by seven percent to 8.8 million acres. Ultimately, it’s been suggested that the late harvest this fall lead to less total acres being planted as there just wasn’t enough time. Nonetheless, where farmers could get some planting in, conditions were quite optimal.
The U.S.D.A. upped their estimate of this year’s world wheat harvest to a record 712.7 million tonnes, while cutting demand for the for the grain as the $2 per bushel premium that it’s held over corn for the last couple months pushed more livestock producers to the yellow grain. Ultimately, the bearish sentiment continues for wheat as managed money (AKA hedge funds) grew their position to over 73,000 contracts net short (betting that the price will go down). The U.S.D.A. raised their forecast of corn used for livestock feed by 1.9 per cent to 5.3 billion bushels, the highest in six years. Corn for ethanol use was also pegged higher.
As for output, the U.S.D.A. put corn production at 13.925 billion bushels, 74 million bushels below its November estimate and almost 150 million bushels below the average trade estimate of 14.066 billion bushels. This was mostly due to average yields being reduced from 160.4 bushels/acre in November to 158.8 bushels. As for soybeans, U.S. output this year was seen at a record crop of 3.289 billion bushels, above both November’s estimate and the average market guess. 2013/14 U.S. soybean ending stocks were seen at a relatively tight 150 million-bushel level but with another record South American crop close to coming off, the world balance sheet shows a more comfortable carryout. With the January WASDE now out of the way, there’ll be much more focus on harvests in South America, specifically on logistics and weather.
Brennan Turner is originally from Foam Lake, SK, where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, Mr. Turner spent some time working in finance before starting FarmLead.com, a risk-free, transparent online and now mobile grain marketplace (app available for iOS and Android). His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email (b.turner@farmlead.com) or phone (1-855-332-7653).
— FarmLead Breakfast Brief