Cattle and hog herds are increasing. Cattle placed on feed increased to the highest level in 2 years.
Cattle prices are up $5. Livestock herds are still low but feed demand is increasing as herds size grows. Beef exports for February were 28 percent larger than last year. Pork exports during February were 6 percent above last year. Broiler chick placements were 4 percent above a year ago.
Demand for soy meal, corn, wheat and cotton seed meal is growing.
Bullish news: USDA reported weekly export sales of 281,200 bales. The old crop total was at the upper end of trade estimates that had ranged from 200,000 to 300,000 bales.
USDA cut the U.S. and global carryover estimates. Chinese cotton production is down 15 percent in 2009 to 29.4 million bales. U.S. cotton production estimates of 12.4 million bales are the lowest in 19 years. Speculators have added to long positions near 40,000 bales. Carryover estimates remain near 3 million bales. That will be a 14-year low and down nearly 53 percent.
USDA reported only 6 percent of the U.S. crop planted; 9 percent is average for this date. Texas is normally 14 percent finished but the actual completion is 9 percent.
Bearish news: Cotton is trading lower. One reason may be the absence of 2010-11 sales reported. May cotton prices corrected down to a two-month low from last month’s two-year high. The weekly report shows long market positions down to only 12 percent of the open interest.
Global supply is expected to increase 19 percent to 51 million bales. United States cotton acreage is now estimated to reach 10.5 million, up 15 percent from 2009. That is the first increase in four years. Chinese imports dropped 27 percent in one month. That is the first decline in three months. The U.S. deficit for February was $39.7 billion. The deficit with China was $16.5 billion.
China indicated that it had signed a deal to import 100,000 tons of cotton from India during a recent trade visit. India has imposed an export duty of 2500 rupees per ton on cotton exports. The goal is to keep more land in food production so that food inflation will be held in check. Indian cotton exports are expected to double during this year.
Bearish news: Corn market profit-taking is encouraged with a stronger dollar. Gains are being limited by excellent planting conditions. Ethanol futures gain strength as debate about E-85 and discretionary blending continues.
USDA weekly export inspections were 31.975 million bushels. The first crop condition report of the year for corn, with planting 11 percent done The five-year average for this date is 12 percent. The lag is not statistically significant.
China sold 852,074 million tons of reserve corn at auction last week and another million tons this week. World carryover is now expected to reach 13.13billion bushels. That is an 8.6 percent increase over last year. U.S. carryover is predicted to reach 1.9 billion bushels this season. The estimate of 88.798 million corn acres to be planted is 2.7 percent higher than a year ago and the most since 2007.
Speculators increased their net short corn position. This week’s reduction of 24,871 contracts means the net non-commercial position is now short nearly 65,000 contracts. Expect a short covering rally if any adverse weather in the Corn Belt delay’s planting progress.
Bullish news: Ethanol futures are up. The expected flood of out-of-condition 2009 crop corn didn’t happen. Some ethanol plants are short of inventory. Corn exports for February were stronger than inspections would indicate over 141 million bushels. Weekly export sales were 1.147 million tons. That is above the upper end market estimates. Japan and South Korea were the largest buyers.
February distillers grain exports from the U.S. were 12 percent larger than January at 618,000 million tons. Mexico was the largest buyer at 145,000 million tons, but China took 111,000 million.
Open interest data shows new buying, up 5,731 contracts. U.S. ethanol production in January was up 30 percent in one year.
Bearish news: Soybean export inspections continue to slow down. It is normal for exports to slow during the spring season. Brazil is 80 percent harvested. Brazilian soybean export quotes are higher than U.S. prices. Argentina is 30 percent harvested. Their prices are complicated by their high inflation rate. Soybeans in the bin are a natural inflation hedge for Argentine farmers.
Chinese officials claim that no Argentine soy oil vessel has been turned away from unloading despite the ongoing dispute about hexane in Argentine bean oil. The rumor is China will seek to increase the level of internal soybean crushing rather than importing soy oil due to employment issues. Chinese soy oil supplies are rumored to be larger than current estimates accounting for reduced demand.
Congress delayed a vote on the bill with the biodiesel tax credit. Soy oil supply declined to 2.74 billion pounds from 2.85 billion last month but supply remains higher than 2.59 billion tons in 2009.
USDA Quarterly Grain Stocks report precipitated an increase of short positions in the soybeans market. Speculators added 20,000 sell positions. Buy positions declined by 25,000 contracts.
Bullish news: The soybean crush was slightly bullish. The markets expected 148 million bushels but the actual was 149 million. Meal exports were also strong at 910,765 tons. Soy oil supply is tight and China is buying soy oil in record quantities. China is anticipating record soybean imports through June near 5 million tons per month. China’s GDP is expanding at the fastest rate three years. Export demand for U.S. soybeans had increased 32 percent since the marketing year started last September.
The dispute with Argentina over soy oil quality has not been resolved. Soybean open interest has increased in the July and November contracts reflecting continued demand from China. The Chinese government is projecting April soybean imports from all sources will be 16 percent larger than April last year.
Weekly soybean export sales were 431,700 tons, in the middle of market anticipations. China bought over 66,000 tons of old crop beans, and booked 288,500 tons of new crop soybeans. Export sales this year are less than 4 million bushels per week below last year.
On the Chicago soybean market a 29,000-contract buy position resulted in a shift from a net short of 17,000 contracts to net long 11,568 contracts. The shift to net buy positions corresponded with a positive price move. Traders are concerned over tightening U.S. inventories. A lack of grower selling encouraged trader buying. Soybean prices reached their highest level since January.
Bearish news: Wheat export sales for the week were expected to be 450,000 to 600,000 million tons. The USDA reported 411,900 million tons, near the low end of expectations. A French analytical firm Strategy Grains reduced their projected European Union soft wheat ending stocks to 14.6 million tons. The downward revision was 1.7 million tons. Exports are expected to increase for less expensive European grain.
The Saudis bought 550,000 tons of wheat from Kazakhstan, Canada and Europe. Indian sources are indicating that much above normal temps are forcing rapid wheat maturity and that production could be down a million tons from the prior 82 million ton forecast. USDA’s weekly export sales total was below expectations. Wheat exports are down 20 percent from last year.
Bullish news: Japan bought 90,000 MT of U.S. wheat at the weekly MOA tender. Year to date export shipments are 726.6 million bushels. USDA says that 65 percent of the crop is in good to excellent condition.
The USDA cut both U.S. and global carryover estimates for wheat. The U.S. carryover is expected to be 950 million bushels. That is up 45 percent in a year and still the highest in 22 years. Global carryover is estimated to reach 196 million tons up 18 percent in a year. Wheat acres in the United States are down 10 percent to a 30-year low less than 54 million acres. Production is expected to be down 11 percent to 2.2 billion bushels.
Speculators are holding 55,527 net short positions. Any positive news could stimulate buying to cover these positions.
Bearish news: World market prices are lower again this week reflecting continued softness in Asian prices. Long grain, Medium and short grain prices all dropped. Weekly export sales slowed down. USDA reported sales of only 36,400 tons. A third of That was medium milled to Japan, Israel, and Canada. Long grain sales went to Mexico and Central America. Weekly export sales met market anticipations.
Rough rice sales remain bearishly slow. Planting is well under way. Farmers face greater risks now and need more incentive to book new crop sales. Weakness in Asia persists as buyers are absent. Traders estimate low Asian prices for another month.
Thailand rice quoted between $485 and $510 a ton. Vietnam has dropped its minimum export price to $390 per ton. Pakistan rice is quoted at $390 per ton.
Trader profit taking after the monthly Supply/Demand report moved prices lower. Average volume was 1,335 contracts per day Open interest increased to 17,886 contracts last week.
Bullish news: Export shipments for the week came in at a whopping 154,100 metric tons. That was a marketing year high. Nearly half of the shipments (64,700 tons) went to Mexico and Venezuela as long grain. Another 45,700 tons of long grain milled went to Iraq, Haiti, and smaller buyers. Over 4,000 tons of milled parboiled rice was bound for Saudi Arabia. Turkey took 20,000 tons of medium rough. Nearly the same amount of medium milled was destined for Japan.
The USDA monthly Supply/Demand report indicated carryover would drop 8.5 million hundred weight. That includes 6.5 million of long grain supply reductions. Private sources believe carryover could be reduced even further. There were practically no changes in the world carryover.
Dry weather in the Far East could reduce rice production significantly in parts of Asia.