Monday, January 4th 2016

Monday, January 4th

10:19 AM

 

As the calendar year 2015 has now ended, the Chinese year of the sheep will be coming to a close over the next month. Unfortunately, it looks like the grain market is content doing just what the Chinese calendar is suggesting and slowly fading away to lows as the grain markets struggle to find new demand for our large U.S. stocks. 2015 was filled with a surprisingly larger crop with the onset of an El Nino event across the corn belt, and much of the eastern corn belt struggled to keep the water out of their fields while the western corn belt struggled to find space in bins for the abundance of their best crop in years.

Many central Illinois farms had varied results, with many having record yields in some fields, and too much standing water in other fields throughout June and July to squeak out a meager crop. The corn balance sheet is showing a 1.785 billion bushel (bbu) carryout, and much of that hinges on our demand remaining at current USDA projections. Right now our corn exports have been lagging behind and ethanol margins are much lower than last year and will give just a few things to look at going into 2016.

Soybeans have shown an increase in demand since harvest has concluded, however we still see fluctuations in weekly demand which are worrisome as we get to finishing out the South American crop. The USDA has current soybean exports at 1.715 bbu, or 43% of our 2015 crop. Right now, crush levels have remained high enough to warrant demand for domestic meal, but the drop in Argentinian peso has crushers down there looking to export meal (and at much cheaper levels than our domestic meal) rather than face their current high export tax on soybeans.

 

Current market: corn down 4c, beans off 7c

The Chinese stock market has fallen 7% in the overnight markets, leading to a halt for the trading day - not a great way to get the new year started. The Chinese economy has not had a great 2015, and as such a large importer of our soybeans, the market is currently weighing that against the dryness in South America quickly becoming a non-issue as they have received several thunderstorms and warm weather, with many of the northern soybean areas receiving 3"+ over the last 10 days.

Locally, the rains of the last week will delay barge loadings up and down the Mississippi and Illinois Rivers for the next week, so exports might be slow over the next week as the high water levels work their way out into the Gulf. The corn market will be battling domestic demand infringements from other grains: the abundance of off-quality wheat that worked its way into the southwestern feed markets, also battling milo demand to China falling off; domestic meal is looking for a home as exports have slowed battling South American increase in exports; ethanol margins are weaker than last year, leaving some plants to scale back crushing, as well.

Look for the trade this week to position itself for next week's USDA reports: Tuesday January 12th will have the monthly S&D report, as well as the annual crop production report and the quarterly stocks report from December 2015. The quarterly stocks report should show the amount of feed demand for corn, and a decrease there puts even more corn back on the balance sheet for 2016.

 

AG

 

Disclaimer: This commentary does not represent the views of Tremont Cooperative Grain Company, but rather one author's opinions. Data used in this commentary is taken from sources believed to be accurate, and is intended for informational purposes only and should not be solely used to conduct any type of trading strategy. For more information, please contact Tremont Cooperative Grain Company at 309-925-4981, or email info@tremont.coo