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3 Big Things Today, February 28

Beans, Grains Higher in Overnight Trading; Stocks-to-Use Better Measure Than Inventories.

1. Soybeans, Grains Higher Overnight on Signs of Demand

Soybeans and grains were slightly higher in overnight trading amid signs of potential demand for U.S. supplies.

The Department of Agriculture said in a report on Friday that accumulated exports of soybeans since the start of the marketing year are up 16% from the same period a year earlier, corn exports are up 66%, and wheat shipment have gained 28%.

Egypt’s General Authority for Supply Commodities (GASC) said yesterday it’s seeking from 55,000 to 60,000 tons of wheat from global supplies. The agency’s vice chairman said GASC wanted cargoes of U.S. soft white wheat, U.S. soft red winter wheat, U.S. hard wheat, or Canadian soft wheat.

The results of the tender are expected to come out today.

Soybean futures for May delivery rose 3¼¢ to $10.25¼ a bushel overnight on the Chicago Board of Trade. Soy meal futures added $1.30 to $336.90 a short ton, and soy oil gained 0.17¢ to 32.80¢ a pound.

Corn futures for March delivery added ¾¢ to $3.69 a bushel.

Wheat futures for May delivery gained ¾¢ to $4.39½ a bushel overnight in Chicago. Kansas City futures rose 1½¢ to $4.58½ a bushel.

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2. Stocks-to-Use Ratios are a Better Measure Than Global Inventories as Consumption Rises

While it’s easy for bearish investors to point to inventories to justify their bearishness, Dan Hueber, the owner of The Hueber Report, a brokerage in Sycamore, Illinois, said in a note to clients that investors should instead be looking at stocks-to-use ratios.

Indeed, stockpiles are expected to be at all-time highs at the end of the marketing year, according to the U.S. Department of Agriculture – but so are consumption levels.

Corn consumption globally will top 1 billion metric tons for the first time ever. Soybean and wheat use also will be record highs, according to the USDA. Still, a “more accurate picture” is looking at stocks-to-use ratios, Hueber said. 

For corn, the global stocks-to-use ratio is 21%, but that’s reduced if China is taken out of the equation, he said. The country owns 40% of global grain stocks and 22% of world bean inventories, and it will not export any of it as it keeps everything for domestic use. That means the corn stocks-to-use ratio falls to 10% globally, Hueber noted.

“Keep in mind as well that this was only achieved after four years in a row of solid production,” he said. “So, next time someone tells you about the overwhelming global grain inventories, take it with a grain of salt, no pun intended. As I have commented previously, it would not require much of a production hiccup to send buyers scurrying after products.”

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3. Southern Plains Again Sees Dry Conditions, Winds Gusting to 66 mph

The Southern Plains are again in a so-called red-flag warning due to extremely dry conditions, according to the National Weather Service.

A high-wind warning also is in effect for much of southwestern Kansas and the Oklahoma and Texas panhandles. Sustained winds in Guymon, Oklahoma, will move up to 36 mph, while they’re expected to reach 44 mph in Amarillo, Texas.

Gusts in the region may top 68 mph according to the NWS.

Relative humidity is expected to be extremely low at about 10% to 15%, with the lowest readings expected in the Texas Panhandle, the agency said.

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