Cents Closing Grain & Soybean Comments November 17th, 2014 Soybeans: The soybeans rode a rash of supportive fundamental news to a higher close, finishing up 12-14 cents on the day. The Jan settled at $10.36 ¼, up 13 ¾ cents after trading as much as 8 cents weaker in the overnight hours. The Nov ’15 was up 10 ½ cents to settle at $10.25. Bigger than expected figures from the USDA (export inspections) and NOPA (October crush) were supportive to the soybean complex. Even with the notably higher trade, the Jan beans barely got back to the middle of last Friday’s range. The soybean spreads also did not lend much credence to the higher flat price action. The Jan-March was unchanged at 7 ¾ cents carry. 12.0 11.9 11.8 11.7 11.6 11.5 11.4 11.3 11.2 11.1 2.00 1.50 1.00 0.50 140 120 100 80 60 40 20 0 Oct-14 Jun-14 Apr-14 Feb-14 Dec-13 Oct-13 Stocks-IA/IL Aug-14 Stocks-Rest of US Aug-13 Jun-13 Apr-13 Feb-13 Dec-12 0.00 Oct-12 Oil Stocks-Billion Lbs 2.50 Oil Yield Weekly Soybean Export Shipments vs. Seasonally-Adjusted Projected Pace '14/15 Projected 9/4 9/11 9/18 9/25 10/2 10/9 10/16 10/23 10/30 11/6 11/13 11/20 11/27 12/4 12/11 12/18 12/25 1/1 Even before the bullish NOPA report, the market had received friendly news on the export front. The USDA announced the sale of 111K tons of soybeans to China (51K were switched from unknown). They followed that up by reporting last week’s soybean export inspections were record large 114.5 million bushels. The prior record of 102.0 million was scored just two weeks ago. The chart at the right shows by just how much weekly inspections have exceeded the seasonal pace implied by the USDA’s 1.72 billion bu export demand projection. Nearly 79% of this week’s loading are destined for Mainland China. US Soyoil Stocks, Yield (NOPA) 3.00 million bushels Soybean crushings in the month of October by NOPA members was 158.0 million bushels, towards the upper end of expectations. That figure was also well above a month ago (100.0 million) and slightly above a year ago (157.1 million). In fact, it was record large crush for October. Even with the large crushings, oil stocks rose only slightly from the very low month ago level to 966 million lbs. The combined oil stocks in IA/IL are lower than last month and the lowest in recent history. The disappointing oil stocks stemmed from the lowest yield (11.42 lbs per bu) in any month since November of 2011. Lbs Per Bu Soybean meal was the better performer of the products, reversing overnight losses to finish $3-$8 per ton higher with the Dec at $387.10. Oil was up just 25 points despite a NOPA oil stocks number that was quite friendly. That left the Dec at 32.61. In other news: The wires are reporting that 25K tons of German rapeseed meal has been traded into the West Coast of the US. This follows reports last week that up to 4 cargoes of Argentine meal had traded into the SE US. The trade was looking for US soybean harvest to be 95% complete as of November 16th. It was reported at 94%. The funds were buyers of 7,000 beans, 3,000 meal, and 1,000 oil on the day. Two separate incidents of bird flu were seen in Europe over the weekend, one in the Netherlands and one in the UK. They follow an incident in Germany last month. Brazilian growing areas received rain over the weekend and are generally seen as being in pretty good shape. Argentine growing areas have seen drier weather over the past 10-14 days. Dry soil conditions are not currently a concern and there is rain in the forecast towards the end of this week and next week. However, if those rains fail to materialize, the weather bulls will climb up on their recently-underutilized soapboxes. Gulf soybean bids were holding flat at +100 F after falling out of bed last week. Midwest soybean basis was mixed on Friday. Locations tributary to the river were weaker following the gulf. Some of the more “interior” soy processors firmed, however. Meal offers held flat. RJO’Brien Service is our trade 1|Page Finally, Dave Toth offered this technical synopsis of the January soybeans…”Fri's shorter-term momentum failure defined 13-Nov's 10.73 high as the…new short-term risk parameter, a failure below 05-Nov's next larger-degree corrective low and our longer-term risk parameter at 9.97 remains required to confirm a bearish divergence…needed to break Oct-Nov's uptrend. In effect we believe the market has defined 10.73 and 9.97 as the key directional triggers heading forward.” Inside of that $9.97-$10.73 range, beans have been incredibly choppy with the bears touting big supplies and the bulls touting big demand. Corn: Grains lacked the fundamental firepower of the soybean complex and were weighed down by another strong performance by the US dollar. Corn traded lower for the entirety of the “day session” and finished 2-4 cents weaker. The nearby December contract dropped the hardest, down 4 ¼ cents to settle at $3.77 ½. The Dec ’15 contract was down 2 ½ cents on the day to $4.21 ½. Obviously the corn spreads were weaker on the day after firming up over the 2nd half of last week. 50 million bushels Weekly Corn Export Shipments vs. SeasonallyAdjusted Projected Pace '14/15 Projected 40 30 20 10 0 9/5 9/12 9/19 9/26 10/3 10/10 10/17 10/24 10/31 11/7 11/14 11/21 11/28 12/5 12/12 12/19 12/26 1/2 Weekly corn inspections were disappointing at 15.8 million bushels. The chart at the right shows how corn inspections have been below the seasonal pace implied by the USDA’s 1.75 billion bu export estimate for 5 straight weeks. The last three have been particularly poor. At least some of the slowness should be attributed to the record soybean loadings seen in the same time. There is simply only so much capacity at US ports. Still, corn exports have some catching up to do after a poor start to the marketing year. Other news was scarce. The US was expected to be 87% done on corn harvest as of 11/16. The actual number came in at 89%, even ahead of the 5 year average pace. Cold and dry weather in the US should allow for harvest completion. Israel tendered for 170K tons of corn and 25K tons of feed wheat, both optional-origin. Their recent grain purchases have come off the Black Sea. China and Australia signed a free trade agreement that will over time eliminate tariffs on Aussie dairy and beef imports. Tyson forecasted better than expected 2015 profits, supported by high beef prices and their recent acquisition of the Hillshire brand. Like the soybeans, gulf corn bids fell notably over the 2nd half of last week but seemed to stabilize this morning around +77 Z. Midwest corn basis on Friday was a mixed bag with river markets and destination markets tending to soften their bids while ethanol plants (especially in the Western Corn Belt) firmed theirs. The funds sold 7,000 contracts of corn. Look for corn to find initial support and resistance at 5 cents lower and 5 cents higher during the overnight session. Wheat: The wheat suffered worse losses than the corn. SRW and HRW futures were down 7-9 cents while HRS futures were down 4-6 cents. The losses followed five days of higher trade as cold temperatures became an increasing concern both in the US and FSU. The Dec futures settled at $5.51 ¾ on the SRW, $5.83 ½ on the HRS, and $5.96 ½ on the HRW. The wheat spreads showed a softer tone (particularly the HRW spreads). Daily Q.DXY 6/17/2014 - 11/20/2014 (NYC) Price 87.921 USD US Dollar Index 87 86 85 84 83 82 US winter wheat conditions were unchanged in the last week. The trade had been looking for a slight decline. 81 80 Like corn, wheat export inspections have 01 16 01 18 01 16 01 16 03 17 been limited in recent weeks by the huge Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 soybean inspections. Last week’s figure was just 5.1 million bushels, well below the 18 million bu weekly pace “needed” to reach the USDA’s export RJO’Brien Service is our trade 2|Page projection. On the bright side, Taiwan did tender to buy 82K tons of US wheat. Ukraine’s government said winter wheat plantings were larger than expected at 15.4 million acres. The “extra” acres could help offset some of the cold temperature risk that exists on many acres which were planted later than is ideal. Wheat prices in Ukraine and Russia firmed in the last week. The funds sold 4,000 contracts of SRW futures. Look for initial support tonight in WZ4 at 5.45, in KWZ4 at 5.86. THOMAS MEIEROTTO Commodity Risk Manager tmeierotto@rjobrien.com d (515) 221-3818 // m (312) 320-2721 // tf (800) 283-5132 // f (515) 221-9559 RJO 'Brien 939 Office Park Road, Suite 225 West Des Moines, IA 50265 www.rjobrien.com This material has been prepared by a sales or trading employee or agent of R.J. O’Brien and is, or is in the nature of, a solicitation. This material is not a research report prepared by R.J. O’Brien’s Research Department. 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