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FCStone Grain Recap
October 20, 2014
CORN:
The futures market erased early weakness as trade speculated on the crop progress report to be
released this afternoon. Some of the ECB has been notably delayed by light and variable
showers. The forecast for the rest of the CB is mostly dry until Wednesday. A section of the
producers are letting their corn field dry in order to save money against a “too low” bid at the
elevator which has led to some of the delays in harvest. Average trade guess for corn harvest
this evening is around the mid 30% level. The Soy/Corn ratio is slowly readjusting and by some
models the slide from 2.86 on Oct 1 to the 2.72 of today would imply that only 2 mln acres of corn
switch over to soybeans. By the same models it would require a shift to the 2.6 level by late
November in order keep the corn acres at the same level to next year.
In the 2004 and 2009 experience with “big” yields the market retained a sufficient soy/corn ratio to
retain acres for next year despite having a large corn yield. That does not mean that corn has to
do all the work, it could be put on the back of soybeans as they will be the beneficiary of all extra
acres.
I have included a table below that assumes the 2 mln acre switch and then looks at the carryout
the USDA is projecting for next year’s carryin and then what an FCStone style yield and
subsequent carryin for next year would translate to.
---------------------------------------------------------------------------------------------------------------------------------This material should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to
refer to any particular trading strategy, promotional element or quality of service provided by FCStone, LLC. FCStone, LLC is not responsible for any
redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. Information contained herein was
obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Contact FCStone designated personnel for specific trading advice to
meet your trading preferences. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading
strategies employed by FCStone, LLC.
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FCStone Grain Recap
October 20, 2014
US Corn: 15-16
-2 mln year over year due to ratio relationship
USDA Oct Carryin
FCStone Carryin with '14 178.4 yield
Plant
Harvest
88.9
81.4
88.9
81.4
88.9
81.4
88.9
81.4
88.9
81.4
88.9
81.4
88.9
81.4
88.9
81.4
Yield
158
164
Trend
170
176
158
164
Trend
170
176
Carryin
Production
2081 2081 2081 2081 2400 2400 2400 2400
12861 13350 13838 14326 12861 13350 13838 14326
Available
14977 15467 15956 16445 15296 15786 16275 16764
Feed
Industrial
Ethanol
Exports
5300
6530
5125
1800
Total
13630 13630 13630 13630 13630 13630 13630 13630
Carryout
1347
5300
6530
5125
1800
1837
5300
6530
5125
1800
2326
5300
6530
5125
1800
2815
5300
6530
5125
1800
1666
5300
6530
5125
1800
2156
5300
6530
5125
1800
2645
5300
6530
5125
1800
3134
In both scenarios the market would retain a healthy carryout/use ratio short of a moderate to
severe drought.
Argentina is expected to edge up to 40% planted in its corn crop this week. Rains in the
northwestern areas of Brazil are expected to aid corn planting this week as well. Funds bought
2000 contracts today, moving their futures only position up to an estimated 73,000 long. Export
inspections fell below expectations today with only 717.6 tmt shipped versus the low estimate of
875 tmt. Export volume for this week was well inside the normal range.
SOYBEANS:
Soybean futures trimmed their losses but still finished on the negative side as trade debated how
the recent good weather impacted crop progress. Soybeans were also noted as being the back
end of the Soy/Corn ratio spread which garnered interest today. As noted in the corn section the
recent big yield years have seen a propensity to adjust the soy/corn relationship in order to keep a
balance of acres for the following year despite the large carryouts. This could support corn and
push soybeans much lower to push corn higher and peg soybeans around the 950 level or
another variance. Right now the trade is more focused on next year with some confidence they
have the current crop guessed. Acreage guesses are sliding away from further surprises from the
FSA and the current October adjusted number is being imbedded into private analysts numbers.
The FSA/USDA did say they would adjust further if there is enough data in later reports (CYA
statement). Some rain forecasted for northern Brazil is expected this week with the western areas
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FCStone Grain Recap
October 20, 2014
and southern areas likely the beneficiaries. Majority of the weather models say eastern areas in
the north which account for 15% of production will remain light if any recipients of the system
crossing this week.
To further the concept of corn losing 2 instead of 3 mln acres as models would have forecasted
earlier in October I have provided a table with various yields and a couple different carryins based
on the USDA and FCStone yield outcomes.
US Soybeans 15/16
USDA Oct Carryin
Planted
Harvested
Yield
FCStone Carryin using '14 yield
86.2 86.2 86.2 86.2 86.2 86.2 86.2 86.2 86.2
85.2 85.2 85.2 85.2 85.2 85.2 85.2 85.2 85.2
38
41
Trend
44
47
50
38
41
Trend
44
47
86.2
85.2
50
Carryin
450 450 450 450 450 560 560 560 560
Production 3238 3493 3749 4004 4260 3238 3493 3749 4004
Available
3688 3958 4215 4484 4741 3798 4068 4325 4594
560
4260
4851
Total Use
3683
Carryout
3683 3683 3683 3683 3683 3683 3683 3683 3683
5
275
532
801 1058 115
385
642
911
1168
As you can see in both carryin scenarios the US soybean table has a comfortable carryout even
in a 7% below trend year. It would require a 14% below trend year in order to create a rationing
situation.
Export inspections were well above the trade guess’s range with a 1.99 mmt shipment compared
to the high end of the guesses at 1.3 mmt. Soybeans are tracking just short of last year’s pace
but should with China expected to take 5 mmt over last year’s 69 mmt. Funds sold 4000
contracts to reduce their estimated futures only position to 19,000 long. They were small sellers
in meal and oil on the day with 1000 and 2000 contracts respectively. Factoid: The Managed
money crowd has never gotten short in the futures only position despite a 3+ dollar break in
soybeans and 2 dollar break in corn. Is their position a barometer to be watched anymore????
WHEAT:
Futures climbed out of the hole they dug for themselves overnight but still finished negative.
Warm weather forecasts persist but trade is worried the slow bean harvest is delaying winter
wheat seeding. Double crop states have been lagging and will likely continue to lag but the
national planting rate will likely remain on track with normal averages. Export inspections were
published today and the 481.9 tmt was right down the middle of the guess. So far inspections are
tracking well with the 5 year average seasonal and pace. Egypt issued a tender this evening.
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FCStone Grain Recap
October 20, 2014
ECBOT
HIGH
LOW
CLOSE
CHANGE
Dec Corn
Mar Corn
3.49
3.6225
3.42
3.55
3.4825
3.6175
+ 1/4
+ 1/2
Nov Beans
Jan Beans
9.5075
9.5825
9.36
9.435
9.4425
9.5225
- 7 1/2
- 7 1/2
Dec wheat
5.1575
5.0725
5.135
- 2 1/2
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