Market Matters Blog
Katie Micik DTN Markets Editor

Friday 08/01/14

Upper Mississippi River Closed Again

The heavy rain and flooding in the Upper Mississippi River this spring has created another problem for the river: shoaling. Shoaling is the result of sediment settling in the river, mainly in channels near locks, causing the water levels there to become shallow. This can create sandbars that would be dangerous for barges to navigate and they could become stuck. Barges need at least a 9-foot draft to navigate safely and when shoaling occurs, the Army Corps of Engineers needs to dredge the area, closing all traffic on either side of the area.

When shoaling occurs, the Army Corps of Engineers needs to dredge the area, closing all traffic on either side of the area. (Photo courtesy of USACE St. Paul District)

The USACE St. Paul District reported significant shoaling between Wabasha, Minn., and Alma, Wis. A portion of Pool 4, (a pool is the area between navigation dams) located between Wabasha and Alma, was closed to commercial navigation July 19. An area of Pool 6 near Winona closed on July 23 after a vessel ran aground near Blacksmith Slough by mile marker 719.2. The Corps reported that 17 vessels along with 120 loaded barges and 32 empty containers have been stalled by the dredging.

The Corps said they are still dredging the 9-foot navigation channel between Wabasha, Minn., and Alma, Wis., in Pool 4 and estimates completing a 200-foot wide pilot channel Aug. 10. The channel in Pool 4 was first closed July 19 at River Mile 754 due to shallow conditions. The channel also remains closed to commercial navigation in Pool 6, near Winona, Minn., and the Corps estimates completing a 200-foot wide pilot channel Aug. 8. The Corps reported that several locations have current depths less than 9 feet extending across the entire navigation channel.

The Corps said that they have two government dredging operations, the Dredge Goetz and a mechanical dredging crew, along with two contract mechanical dredging operations currently working to remove the dredged material from the channel. They also have two channel survey boats operating throughout the St. Paul District to monitor other areas within the river as well as supporting dredging operations. The Corps stated that, "The survey results will be evaluated and prioritized based on dredging needs."

With barges unable to move up or down river from the Minneapolis-St. Paul district to Winona, cash basis levels for corn and soybeans have been negatively affected all week. Terminals above the closure cannot receive any more empties to load out grain and some have very little bin space to hold grain. One elevator in the St. Paul District sent out this notice to their customers on July 29: "Due to (lack of) barge availability in the cities, we will be shut down for corn receipts until further notice."

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(AG)

Posted at 1:25PM CDT 08/01/14 by Mary Kennedy
 

Friday 07/25/14

Dread Grows as Harvest Nears

OMAHA (DTN) -- As harvest nears, elevator operators in the Northern Plains still waiting on railroad cars ordered months ago are experiencing feelings of dread, especially smaller operators or those handling specialty crops.

BNSF cars wait to be loaded at a Edgeley, N.D., grain elevator July 14. (DTN photo by Elaine Shein)

Reports are that larger-shuttle loaders and those handling mainstream grains are receiving cars before single-car loaders.

In its weekly update to the Surface Transportation Board on July 18, the Canadian Pacific railroad said they have a total of 23,761 open car order requests in North Dakota averaging 10.72 weeks late. The report from the prior week showed 24,280 open requests with an average of 10.14 weeks old.

The problem with the CP reporting system is it does not separate older orders from more recent orders, making it unclear how much, if any, progress is being made on the past due cars.

However, if you talk to most CP shippers in the U.S., especially those who don't load 100-car trains, they will quickly fill you in as to how late the railroad really is.

Jeff Kittell, manager of Souris River Cooperative of Lansford, N.D., an elevator serviced by CP, said he is "still waiting on a March 6 spring wheat unit train." He added, "Single cars ordered for February 3 are supposed come this week."

Keith Brandt, manager for Plains Grain & Agronomy in Enderlin, N.D., said, "We loaded a May 5 shuttle yesterday but have orders for smaller units dating back to April 8," said Keith Brandt, manager for Plains Grain & Agronomy in Enderlin, N.D. "Railroads are really favoring the large unit sizes. That makes it tough for specialty crops and there is not a big market for shuttles of spring wheat."

Robert Johnson, CP senior vice president of operations, told the STB, "We remain committed to working with our customers and the STB staff to move as much grain as possible and to find solutions to problems that may arise." Here is the link to the full July 18 report by the CP to the STB: http://goo.gl/…

But Kittell, like many other shippers, has little confidence in the CP's ability to catch up before harvest. He said his locations need at least three to four trains to clean out before harvest and that it was probably "not going to happen as winter wheat harvest is about three weeks away."

Brandt added, "We are plugged on wheat and wheat harvest is two weeks away. There is a lot of unpriced corn that wants to move before soybean harvest and that is going to muddle things up for soybean harvest."

BNSF MAKING PROGRESS

The BNSF railroad seems to be making progress, as cars owed and days late decreased from last week. The BNSF also announced on July 22 that it "will offer more shuttles and COTs for this year's fall harvest than in 2013. Specifically, we will run at least as many COTs as we did in 2013 during the fall months."

In their July 15 weekly service update, BNSF said, "For the week ending July 15, overall on-time performance decreased a little over 8 percentage points compared to the prior week but is still 27 percentage points better than our baseline week in early February. System velocity, which is defined as miles per day (MPD), increased to 177 MPD for the week ending July 15 compared to 173.2 the prior week. For the week ending July 15, our trains holding average is down 9 percentage points when compared to the previous week and down more than 32% since the week ending Feb. 7. Fewer trains holding means more trains can begin their trips without delay due to congestion or a critical resource."

In his weekly podcast of July 18, John Miller, vice president of BNSF agriculture products said on average, 6,154 cars were owed vs. 6,720 the prior week and days late were at 23.7 vs. 27.1 the prior week. North Dakota is still owed the most cars with 3,831 cars owed vs. 4,243 the week prior and has been waiting 26.5 days vs. 29 days the prior week. Montana is owed 1,098 versus 1,212 cars the prior week, Minnesota is owed 425 cars vs. 613 cars the prior week and South Dakota's total rose to 489 cars owed vs. 229 cars the prior week. Here is the link to the BNSF July 18 service report: http://goo.gl/…

RAIL, BARGE FREIGHT COSTS SOAR

Secondary freight costs continue to rise for U.S. BNSF shippers with the last trade reported at $3,500 per car and this is over and above the tariff rate paid to move the car. Cars in the primary railcar market (COT auction) have been trading at historic highs since late May for guaranteed railcar placement for grain shipments in August, September, and October.

"Bids for the week ending July 17 ranged between $2,700 and $3,200 per car for BNSF Railway's guaranteed grain car placement in September and between $2,800 and $3,000 per car for placement in October," according to USDA's weekly transportation update.

While most trading typically occurs in the secondary railcar market where shippers buy/sell cars originally bought in the weekly COT auctions, shippers are worried that cars will be hard to come by this harvest. This has sent many shippers vying for the weekly allocated cars sold by the BNSF in the primary freight market.

"Unlike premiums paid in the secondary railcar market, which are transferred between shippers and do not affect railroad profits," said the USDA, "premiums paid in the primary market accrue directly to the rail carrier."

Barge freight rates on the U.S. river system have also been moving higher since the rivers reopened after nearly three weeks of closure due to flooding which caused locks in the Upper Mississippi River and parts of the Illinois River to close, stopping barge movements. Now, as shippers try to catch up on shipments, empty barges are in high demand, sending freight costs substantially higher.

"As of July 22, barge rates for export grain from St. Louis and the Lower Illinois River were $15.76 and $25.38 per ton, respectively," USDA reported. "Since July 1, the St. Louis rates rose 52% and the Lower Illinois River rate increased 44%."

Barge operators are expecting demand to be higher than normal when the U.S. corn and soybean harvests start, which is sending October barge freight higher as well. "October rates for barge delivery to St. Louis and the Lower Illinois River are $25.86 and $34.66 per ton, respectively," USDA reported.

Higher freight costs both on land and in the river system will be and have been a big factor for U.S. corn, soybean and wheat basis levels this year. If end users are unable to procure grain when needed, they will absorb the freight costs for the most part. If grain is moving at a steady pace, it is likely that elevators and eventually farmers will have to absorb those higher costs.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(CZ/SK)

Posted at 2:20PM CDT 07/25/14 by Mary Kennedy
 

Tuesday 07/22/14

Imaginary Numbers

The soybean market is still reeling from USDA's July 11 supply and demand report where soybean ending stocks for 2013-2014 were increased to 140 mb, due to a reduction of residual use to a minus 69 million bushels. Maybe you are asking yourself: How can a demand category can possibly be negative?

As DTN Markets Editor Katie's article "The Root of Residual," states, a negative residual use number isn't anything new. In fact, I remember working with her predecessor Pat Hill on a similar article back in 2007, the last time USDA played this powerful wildcard.

It should come as no surprise that I disagree with this practice and here I provide a point-by-point counter argument to USDA's explanation contained in Katie's article. I seriously question the process USDA follows.

The piece states that residual is a statistics term, a numeric value that represents how far off your original predictions were. This includes the abstract (another fun math term) "discrepancies in measurement." Again, the idea that USDA, or anyone, knows how many bushels (tons) are actually produced, used, and left over is a fallacy. It's all estimates built on estimates, with things like residual use making up the difference.

For now I'll leave the assertion that the hilarity that is corn quarterly stocks can somehow be tied to the inability to reconcile its balance sheet alone, except for the comment "counting new-crop as old-crop."

The crux of the matter is that the National Agricultural Statistical Service seems to have an interesting equation. In the piece it states this formula: Supplies - Use - X (residual use) = Ending stocks. With it being stated that residual use is the ONLY variable, the conclusion is that ending stocks are assumed before all demand can be subtracted. In times when supplies don't seem to be there, that means residual use has to be dropped into negative territory to maintain the expected ending stocks figure.

I wish I could do my accounting that way. I would estimate my life savings considerably higher, then create a debit category that can be negative to make it a "reality." That would be fun right up to the point of another powerful government agency telling me it isn't exactly legal, with penalties soon to follow.

I find it interesting that toward the end of the piece USDA says domestic soybean ending stocks-to-use hasn't fallen below that magical 4.5% level -- until now. But, given the open-ended system of accounting USDA has at its disposal, don't be surprised if enough 2013 bushels are eventually found to bring us back to this imaginary floor (the July ending stocks-to-use figure was 4.1%).

Why the false floor in soybean ending stocks to use? It's simple: What would happen if the world's largest buyer of soybeans was told supplies might not be available to meet demand? And that your largest competitor has boatloads of them ready to move?

I could go on forever. The bottom line is as it always has been: These reports are unnecessary up until the point that all the variables, including residual use, have been given a value. In other words, there is no need for the monthly volatility created by USDA, NASS, and WOAB guessing at what the supply and demand situation is.

Come this October, when all the tallying has been done for the 2013-2014 marketing year (not the 2014 crop mind you), a single, final report should be released. The information would be outdated enough that the markets shouldn't react, but valuable enough for later study when analyzing past supply and demand issues.

That's it. One report that looks back rather than trying to project forward, and without the fanfare that surrounds what we see today.

But it will never happen. It will never be allowed to happen. Therefore imaginary numbers like soybean residual use will continue to cause havoc for U.S. (and global) producers.

(CZ)

Posted at 6:45AM CDT 07/22/14 by Darin Newsom
Comments (13)
Gee, what a spoil-sport you are! How could specs have fun in the market without monthly reports to play with!
Posted by LeeFarms at 7:25AM CDT 07/22/14
Good morning. I agree. After all, that's what these reports were initially intended to do, right?
Posted by DARIN NEWSOM at 7:48AM CDT 07/22/14
The real question is if the stocks do not exist, yet they are assumed to have existed before, then what of the farmer who "supposedly" produced said soybean. Is he or she then but a variable with the reality of their production(or lack thereof)neither confirmed nor believed. In other words Is this real life? Stephen
Posted by Unknown at 3:27PM CDT 07/22/14
Follow up comment If I assume that I have made money on the bean. But I spend it on something(old car maybe). I get to the end of the year and the money doesn't exist. Does the IRS have a negative residual for income Concerned Stephen Ellis
Posted by Unknown at 3:35PM CDT 07/22/14
Thought provoking questions Stephen. There is no such thing as a reality of production to be confirmed or believed when it comes to soybeans. That was one of the key points I took from Katie's article. So no, it is not real life. Is it tradeable information? Yes, and that is was keeps the system in place. As for your second comment, what I've heard from customers following the sell-off in grains is that the IRS better have an accounting for a negative residual income. Just kidding. As I said in the piece, it would be nice if I could do my books the way USDA is allowed. As always, thank you for your your comments.
Posted by DARIN NEWSOM at 4:09PM CDT 07/22/14
I do know some numbers of reality,95 degrees and no rain since the 25th 0f June.
Posted by Raymond Simpkins at 4:41PM CDT 07/22/14
Thank you for your comment Raymond. I agree, that is reality.
Posted by DARIN NEWSOM at 6:52PM CDT 07/22/14
no rain here since june 27th only irrigation making grain what a waste not likley to get money back or the water so under valued it is sad. traders knowlege is not there
Posted by andrew mohlman at 8:40AM CDT 07/23/14
are you crazy? how dare you question the usda and nass. they may put a hit on you darin there are some decent crops in se nd but right across the road from them will be a field that is 50% gone. you can then add in the fact that even the decent looking fields are 2 weeks behind, uneven and short. that doesn't get us close to a normal crop. we have decent moisture but the next 2 weeks call for below normal temps and below normal precip. not really a forecast to add bushels.
Posted by harlan deike at 9:48AM CDT 07/23/14
Only in the good 'ol USA could taxes be spent on such a useful service as "voodoo statistics"! We are so passive!
Posted by Roger Cooper at 12:12PM CDT 07/23/14
I have been threatend by NASS agents to fill out their surveys.We had one show up at the house at 5:30 in the morning and told me I had to fill it out now.Needless to say she has never been back. Then they sent another guy who was a pain in the rear, Now when we get them in the mail they go to the round file cabinet.Our information is only used against farmers anyway no matter what.
Posted by Raymond Simpkins at 7:53AM CDT 07/24/14
They say the Gulf Water is cold and that there will be no hurricanes in the Gulf. That is our late moisture. Our crops are hurting now, where are we going to get the moisture to make the crop that everyone is talking about?
Posted by Unknown at 8:11PM CDT 07/24/14
I'm with you, Ray!
Posted by Roger Cooper at 9:50AM CDT 07/27/14
 

Friday 07/18/14

Grain Shippers Worry Upcoming Harvest Will Put Railroads Further Behind

OMAHA (DTN) -- Deliveries of past-due rail cars are still lagging in parts of the U.S. and Canada, and grain shippers worry the upcoming harvest will put railroads even further behind schedule.

This chart shows barge movement of grains on the Mississippi River. (Chart courtesy of AMS/USDA Grain Transportation Report)

A North Dakota Canadian Pacific Railway shipper told DTN he just loaded a wheat train that was ordered for March 3 and his next train that comes will have a March 6 want date. He said he is "...dumping old crop daily and it seems to be coming out of (the) woodwork."

In their weekly service report to the Surface Transportation Board, CP reported it has "Cumulative Open Requests (unconstrained)" car orders of 24,280 in North Dakota and 7,888 in Minnesota and is 10 weeks behind. "Grain hoppers online in the U.S. are at 3,649 and their grain hoppers offline in the U.S. are at 4,513," CP stated.

"Demand remains stable for Eastern milling markets, and we continue to fill all Pacific Northwest (PNW) demand presented. The demand for movements west through the PNW continues to be weak. Despite the fact that we have nearly 13,000 open PNW requests, actual go-forward demand on the PNW at present is between 600 to 800 cars per week," CP reported. Here is the link to the full July 14 CP service report to the STB: http://goo.gl/…

A BNSF shuttle loader in eastern North Dakota said he has one more corn shuttle to load and hopes to be cleaned out by mid-August and ready for harvest. A non-shuttle station operator in western North Dakota said he is currently loading cars he had ordered for early June. "There is a lot of old crop left to move and the situation is not looking good. On top of that, secondary freight costs have risen and last week singles went for $2,000 per car to $2,300 per car. This week, secondary freight is trading at $3,000 per car with shuttle offers at $3,500 per car," he said.

On July 11, the BNSF updated the STB on their service and car placements. According to the July 11 podcast, there were on average, 6,720 cars owed vs. 7,388 the prior week and days late were at 27.1 vs. 26.6 the prior week. North Dakota is still owed the most cars with 4,243 cars owed vs. 4,696 the week prior and has been waiting 29 days vs. 28.5 days the prior week. Montana is owed 1,212 cars, Minnesota is owed 613 cars and South Dakota is owed 229 cars.

John Miller, vice president of BNSF ag products, said, "Despite the impact of localized flooding along the Mississippi River, the overall network performance experienced areas of good improvements."

Miller said, "For the week ending July 8, overall on-time performance increased 13 percentage points compared to the prior week and is 35 percentage points better than our baseline week in early February. System velocity, which is defined as miles per day (MPD), slowed to 173.5 MPD for the week ending July 8 compared to 177.5 the prior week, but is still nearly 2% better that our baseline week in early February when we were at 170.8 MPD." Here is the link to the BNSF July 11 filing to the STB: http://goo.gl/…

CANADIAN RAIL UPDATE

The CN railroad reported an average weekly car-spot (cars placed on tracks at an elevator siding) of 5,544 in June, 2,311 cars per week above the five-year average of 3,233 cars," said DTN Canadian Grains Analyst Cliff Jamieson. "Canadian Grain Commission data for week 49, or the week ending July 13, indicates 919,000 metric tons of all grains were shipped from the primary elevator system on the Prairies, which is just slightly higher than the 10-week average."

Jamieson continued, "CP Rail's announcement of a record quarter is being heralded by the media as the company's turnaround continues, with the company's second quarter profits up 48% at $371 million. Revenues from grain rose 32% from the previous year in Canada while achieving a 26% increase in the United States. The company reports that oil by rail movement could increase to one train per day by the company's fourth quarter."

MISSISSIPPI RIVER MAY OPEN BY JULY 18

Ingram Marine barge company reported July 17 on their website that, "Upper Mississippi River locks have all reopened. The river is still closed at the Louisiana railroad bridge, forecast to reopen to navigation sometime Thursday, July 17, 2014."

The Louisiana Railroad Bridge crosses the Mississippi River between Louisiana, Mo., and Pike County, Ill. While rail traffic on the bridge is operating normally, the USDA's Grain Transportation Report said, "Additional work is needed to allow barge traffic to pass through the swing bridge portion. Assuming river levels continue to fall, and the bridge is cleaned and maintained, barge traffic will be able to travel the entire navigable portion of the Mississippi River by July 17 or July 18."

With the Mississippi and Illinois Rivers now open as waters recede, barge freight rates have begun to rise as terminals unable to move grain the past three weeks are looking for empty barges. USDA reported as of July 15, barge rates for the Twin Cities to New Orleans were $31.45 per ton, 18% higher than before the flood began three weeks ago. On the lower Illinois River, barge rates were $18.79 per ton, a 17% increase over last week.

USDA's Grain Transportation Report from Thursday stated, "During the week ending July 12, barge grain movements totaled 491,048 tons -- 29.2% lower than the previous week and 19.6% lower than the same period last year. During the week ending July 12, 322 grain barges moved down river, down 22.8% from last week; 600 grain barges were unloaded in New Orleans, up 4.3% from the previous week."

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

Follow DTN on Twitter @dtnpf

(AG/CZ)

Posted at 12:54PM CDT 07/18/14 by Mary Kennedy
 

Wednesday 07/16/14

Winning at the Waiting Game? Not in Ag Commodities

Investors can win by waiting in commodities, as a recent Wall Street Journal article suggests, but it's only when markets have a bullish, or inverted, structure. It's a risky proposition in most agricultural commodities right now, DTN Senior Analyst Darin Newsom said.

The Journal article explained the "rolling" strategy: "A fund manager buys a futures contract for delivery next month. Right before it expires, the investor sells the contract, buys a cheaper one for delivery at a later date and pockets the difference."

It went on to say that this strategy would work in 11 of the 24 commodities in the S&P GSCI Index, and that a fund tracking the index itself would have earned 1.8% from rolling contracts forward this year, even though the overall index was down slightly.(Here's the article: http://on.wsj.com/…).

"The article states that investment traders can make money in a situation where the nearby futures contract is higher priced than the deferred contract. That is simply an inverted (backwardation) situation, and as such a forward curve reflecting a bullish view of supply and demand by commercial traders. So restating the writer's thesis, investment traders can make money in a market with bullish supply and demand.

"How do they do that? Buying the nearby contract, holding it short-term, and rolling to the next, and the next, as long as the market remains inverted is standard operating procedure. Investors that do that in a carry (or contango) market usually suffer the consequence (e.g. 2008 crude oil)."

So what markets might this work in? Which ones have a bullish forward curve?

-- Corn: The new-crop forward curve shows a strong carry (roughly 67% of cost of carry) = Bearish

-- Soybeans: The old-crop forward curve remains inverted, but an investor will take his life in his hands betting on the August or September contract against the new-crop November

-- Wheat: Moving on.

-- Crude oil: The forward curve is showing contango (carry) but this has been weakening of late. Along with that, investors have lightened their net-long futures holdings.

-- Natural gas: Deferred contracts show a contango in the forward curve. However, what will happen in the market known as "The Widowmaker" is anyone's guess.

-- Gold: A different breed of commodity in that it has a more stable S&D situation. The market tends to show a slight contango, and such is the case again this year.

-- Live cattle: A minefield for an investor that doesn't understand the dynamics of a livestock market. Each contract is a harvest in and of itself. The investor has to be aware of how the current spread relates to historic levels, meaning a backwardation could still be bullish or a contango bearish.

-- Lean hogs: Ditto live cattle, but for traders who also like playing Russian roulette.

-- Cotton: Strong carry in the futures market hints at a continued bearish supply and demand situation despite the recent collapse (seasonal sell-off) in price.

-- Sugar: Forward curve situation similar to cotton

-- Coffee: Contango anyone?

-- Cocoa: Finally, a market in backwardation that investors might buy into. The only problem is that cocoa has been rallying for almost 2 years now.

What I find interesting about the timing of this article is its timing. Money has been flowing out of commodity hedge funds over the past few years, and as Newsom pointed out: "In general, noncommercial positions (mostly net-long) are smaller than they have been in years past. One exception is crude oil where the continued backwardation has led to recent long holdings of 550,000 contracts (more or less)."

While some investors may be happy making 1.8% on commodities, it pales in reflection of the potential earnings in equities right now. The author's premise may be correct. Yet, it's an obvious strategy that's more applicable in some markets than others. It's not a strategy for the grain markets right now.

(CZ/SK)

Posted at 12:59PM CDT 07/16/14 by Katie Micik
Comments (1)
nobody knows what the future will bring mother nature is in control in ag no matter what humans wish
Posted by andrew mohlman at 8:39AM CDT 07/17/14
 

Friday 07/11/14

Eight Locks and Dams Still Closed; St. Louis Rises Above Flood Stage

OMAHA (DTN) -- Conditions are improving for barge freight on the upper Mississippi River, but downstream problems remain an issue.

(Photo by USACE Mississippi River Rock Island District)

The U.S. Army Corps of Engineers, St. Paul District, reopened its three Minneapolis locks to commercial navigation Saturday, July 5, when flows dropped below 40,000 cfs. "So far this navigation season, the three Minneapolis locks, have been closed to commercial navigation four times, totaling 47 days," said the USACE. "Commercial traffic at these locks is shut down at 40,000 cfs."

Barges that were parked down river of the closure near Minneapolis were placed for loading at river terminals in St. Paul. However, they will be unable to get downriver yet as Locks 16 through 18 and 20 through 22 remained closed in the Rock Island District as of July 11 due to the water overtopping the miter gates, making them inoperable according to the USACE. Here is the link to the USACE Rock Island District Lock closures:

http://www.mvr.usace.army.mil/…

Farther down the Mississippi River in St. Louis, the water rose above flood stage and is at 30.98 feet as of July 11. Levels are expected to reach 31 feet by July 12 before falling. Flood stage is 30 feet above zero gauge.

The USACE St. Louis District said barge traffic on the river will continue to be affected by high water. Lock and Dam 24 in Clarksville, Mo., and Lock and Dam 25 in Winfield, Mo., are still closed to traffic as of July 11.

"Lock closures are essential to protect critical components and facilities from flood waters and be able to restore services as quickly and economically as possible after water levels recede," said the USACE. Barge lines have reported it could be sometime during the week of July 14 before the river reopens to traffic. Here is the link to the USACE ST. Louis District, river and reservoir daily report: http://mvs-wc.mvs.usace.army.mil/…

HIGH WATER ALSO HITS RAIL TRAFFIC IN U.S., CANADA

The BNSF reported on July 3 that it experienced flooding at multiple locations through the Missouri and Iowa regions on the Hannibal Subdivision.

According to the latest service update, "flooding and the potential for flooding along various sections of the Mississippi are keeping our crews and meteorologist busy. While the size of our network allows our dispatchers to re-route trains and plan trips around areas that are at risk for disruptions, those re-routes can create some challenges. Some trips will take longer since we are not able to use the most optimal route and adding traffic to certain traffic lanes means that our velocity and throughput becomes temporarily affected.

"In particular, our Hannibal subdivision, which is located in central Illinois along the Mississippi river, is out of service due to flooding in the area. We are managing that outage by re-routing traffic and using alternative lanes so as to continue service to customers. On our Ottumwa subdivision, which is also near the Mississippi in southern Iowa, our crews have been able to raise the track as much as 12 inches at a critical location in Burlington, Iowa, which allows that section of track to remain in service."

The CN (Canadian National Railway Company) reported on July 9 that "A number of branch lines suspended operations on Sunday, June 29, and have since resumed at least partial operations. The Cromer line partially reopened on Sunday, July 6. Both the Cromer and the Quappelle lines are scheduled to resume full operations on Monday, July 7. In the interim, local service to customers located along these branch lines may continue to encounter some delays. CN continues to keep a close watch on conditions in southern Saskatchewan and southwestern Manitoba and will continue to respond as required."

The CN reported a derailment along the Kingston subdivision of the CN main line on Thursday, July 10, near Brockville, Ontario, which affected trains due to transit along the Montreal/Toronto corridor.

On July 11, the CN reported that "repairs to the site were completed as of 1100 hours EDT on Friday. July 11. Customers should expect that traffic scheduled to run through the affected area may incur minimal delays during the return to normal traffic levels."

"Speed restrictions remain in effect along the Sprague and Fort Frances subdivisions. As a result, trains running between Winnipeg, Manitoba, and our Ranier, Minn., border crossing are operating with some delays." Here is the link to the CN State of the Railroad web page: http://goo.gl/…

BNSF, CP RAIL COMPANIES PROVIDE SECOND SERVICE UPDATE TO STB

On July 7, the BNSF reported to the STB (Surface Transportation Board) there was an average of 7,388 past due cars vs. 8,462 for the prior week and were 26.6 days late. Minnesota was owed 743 cars with days late at 16.9; Montana was owed 1,415 cars with days late at 29.8 and North Dakota was owed 4,696 grain cars, with days late at 28.5 days late. The entire report (PDF) by the BNSF to the STB can be seen here: http://goo.gl/…

The Canadian Pacific (CP) reported it was behind 10,000 to 12,000 cars and on average and were nearly 10 weeks late. The CP also reported new open order requests of 24,786 cars in North Dakota and 8,186 in Minnesota. The entire report (PDF) by the CP to the STB can be seen here: http://goo.gl/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(AG)

Posted at 4:51PM CDT 07/11/14 by Mary Kennedy
 

Thursday 07/03/14

Informa Pegs Corn Yield at 165 BPA, Soybeans at 44.5 BPA

OMAHA (DTN) -- Private analytical firm Informa Economics said U.S. farmers have the potential to produce a 13.7 billion bushel corn crop and a 3.7 bb soybean crop this year.

The national average corn yield is forecast at 165 bushels per acre, 1.6 bpa above its previous estimate, and a soybean yield of 44.5 bpa, even with its last forecast. Both are slightly below USDA's estimates.

Informa adjusted USDA's acreage figures using data from its own survey of farmers. It thinks farmers planted corn on 91.39 million acres with harvested acres projected at 83.24 ma.

The corn harvested acreage estimate is 600,000 less than USDA's with the difference stemming from a 250,000 acre reduction in planting and 350,000 acres abandoned due to excessive moisture.

"Informa said Thursday that they expect the 2014 U.S. corn crop to total 13.73 bb, down 1.4% from 2013, but still large enough to expect increased supplies in 2014-15," DTN analyst Todd Hultman said. "Their estimate is reasonable, given USDA's estimate of 91.6 million planted acres of corn and suggests a yield of 165 bpa."

Farmers are likely to harvest 83.23 ma of soybeans, Informa said, 830,000 less than USDA's June estimate with the reductions coming fewer planted and harvested acres in from Ohio, Michigan, Louisiana, Illinois, and South Dakota. Informa sees abandonment increasing in Minnesota, Iowa and North Dakota.

"Informa's estimate of 3.7 billion bushels is slightly below my estimate of 3.8 billion bushels, but it is too early to take any slight differences seriously," Hultman said. "The clear point is that outlooks for both corn and soybeans are bearish this year, but that was already known before Informa's estimates.

USDA's World Agricultural Outlook Board will release its initial projections of U.S. production in its next report on July 11 at 11 a.m. CT. As Informa and Hultman pointed out, these early estimates could readily change as growing conditions improve or worsen.

USDA will also update supply and demand tables in its upcoming report to include the recent Grain Stocks report, which indicated larger corn and soybean supplies on hand than previously thought.

Informa also sees sorghum production exceeding last year's production by 39 mb, totaling 428 mb. Although acreage has decreased, yield prospect are likely to improve. Informa estimates yield at 66.9 bpa, up 7.3 bpa from last year.

Informa also released its Crop Production report for the wheat complex. USDA will update its winter wheat production and issue its first spring wheat production numbers in its next report.

"Informa's estimate of U.S. winter wheat production was reduced to 1.37 b bu, slightly below USDA's estimate of 1.38 bb, but not a significant change," Hultman said.

Informa forecast spring wheat production at 534 million bushels with an average yield of 43.2 bpa.

The firm's global forecasts included a few changes. Informa increased Brazilian corn production to 76.5 million metric tons, which is 2.5 mmt above USDA's estimate and "suggests that USDA may increase its world corn production estimate in the July 11 WASDE report."

Informa also reduced its India wheat production forecast to 99 mmt, which is 3 mmt higher than USDA's June estimate. Argentina wheat production was boosted from 13 mmt to 13.75 mmt, which is above USDA's estimate of 12.5 mmt.

"Overall, the outlook for world wheat is bearish and nothing in Thursday’s Informa numbers changed that," Hultman said. "I see nothing here to change the markets’ already bearish outlooks for corn, soybeans, and wheat."

(CZ/SK)

Posted at 11:09AM CDT 07/03/14 by Katie Micik
Comments (8)
Informa and Hultman don't want to see anything that might be bullish. Like too much rain makes poor stands, poor population, disease , vomitoxin , low test weight and poor quality in corn and wheat. Last winter took its toll on winter wheat. Persistent rains have raised the levels of vom 20 percent in southern areas in wheat. Corn and soybeans were planted one month late and El Nino weather pattern points to colder than normal for the next 90 days and to a frost in September.
Posted by ALVIN FERGUSON FERGUSON at 9:10AM CDT 07/04/14
We can only hope for a early frost in central Mn, crops are a disaster, thousands of acres not planted, every low area gone from lakes in the fields, the USDA markets are down thanks to the corrupt reports from that United States Dictatorship of Agriculture. How times change when in 2012 this area made up for numerous states during the drought according to the USDA, now somehow this area does not count in their lies and reports. There was another comment made by another DTN subscriber saying high school kids are doing the numbers, I wish they were, as they would be more honest than the highly trained scam artists that now fudge false and dishonest reports, market changing "estimates" and surprises. What a joke the CBOT has become.
Posted by DAVID/KEVIN GRUENHAGEN at 8:18PM CDT 07/06/14
how would traders make money if they did not manipulate the market. Never say they were wrong always right they all run to the same door.farmers know truth.hold it back from thieves.it will be too late when truth told.china needs cheaper grains? traders threat too americas security.wasting are resources always plenty not real. importing beans? would hate to pay a farmer when he is right that is messed up.the under pricing needs to stop.addicted to stealing from ranchers or farmers sad state.
Posted by andrew mohlman at 8:46AM CDT 07/07/14
I love today's Bloomberg quote noting that an "avalanche" of grain will be coming to harvest this fall. I think that the avalanche may occur slightly before harvest as producers ship out the last inventory of the 2013 crop, probably beginning in August. I believe that there is still a lot of 2013 crop stored. Due to the old crop inventory, and the early planted 2014 crop, it may be that harvest lows will be put in early, and markets may rise throughout the fall and into early winter.
Posted by James Zeeb at 12:45PM CDT 07/07/14
looks real good from manson iowa to alma Kansas. would have to have lot of bad weather to hurt it
Posted by Matt & Cindy Bauer at 7:28AM CDT 07/08/14
I like the word POTENTIAL they all use.Any seed company will tell you their seed has the POTENTIAL to produce record yields when it is still in the bag.Well it has to go along way with all elements being near perfect to produce record yields.I don't know how Informa or anyone else can know what the crops are like without driving coast to coast and looking.I have seen some very poor crops in northeast Ohio this week.Small beans and yellow uneven corn.There are some very nice crops too always are,but USDA needs to figure in all the unplanted acres also.On a return trip from Texas this weekend alot of crops under water along the Mississippi and corn was no bigger in Ill. than here in Mi.
Posted by Raymond Simpkins at 12:00PM CDT 07/08/14
just wanted to let Informa know our POTENTIAL record yields were fading fast.With no rain for almost a month and cold temps, crops have come to a stand still.
Posted by Raymond Simpkins at 6:50AM CDT 07/16/14
shh raymond it is always a record would like it cheap on farmers backs
Posted by andrew mohlman at 8:39AM CDT 07/18/14
 

Tuesday 07/01/14

Reports Revive Old Questions

A bearish confirmation of the markets' outlook sent the grain complex down pretty hard on Monday. Tuesday followed up with another slide, although there was an attempt at a late session rally.

As Darin Newsom pointed out in his column following the report, now that the smoke has cleared, the reports did nothing more than solidify the trends and, in the case of soybeans, kick it into hyper speed.

But they did raise -- perhaps resurrect is a better word -- questions about the crops' supply and demand tables. If corn stocks are really 3.85 billion bushels, is the 5.3 bb of feed demand for the 2013-14 crop year still valid?

DTN's analysts have written many times about how the math on the feed number seemed a little out of place. The cattle herd is at a historic low. Hog farms are struggling to fend off the PED virus. At corn's low price (especially compared to wheat), the animals might eat more it in their rations, but the feed consuming units just aren't there.

In a webinar Tuesday morning, University of Illinois ag economists Darrel Good and Scott Irwin explained that they dropped their feed forecast by 100 million bushels following the stocks report. They also tweaked their ethanol use figure upwards by 25 mb and trimmed exports by 25 mb. Those changes would boost the ending stocks figure to 1.25 billion bushels with a stocks-to-use ratio of 9.2%, compared to the June WASDE estimates of 1.15 bb and 8.4%. Prices will likely remain below USDA's average price of $4.55.

It seems the question surrounding new-crop corn is the perpetual one this time of year: will corn yields meet or exceed trendline estimates for the first time in years? Right now, Irwin and Good say the market is pricing in a yield in the mid-160s. All in all, it looks like ending stocks will increase to 1.69 bb with a stocks-to-use ratio of 12.6%. That scenario puts the average corn price at $4.15. If the national average yield ends up closer to 170 bpa, corn prices would average less than $4, perhaps $3.85, Irwin said.

There are also questions floating around about drowned out acreage in the northwestern Midwest, and the FSA's prevent plant acreage reports will be watched with interest.

The question on old-crop soybeans: where did this increase come from -- imports or domestic production? We're going to have to wait for that answer, but we'll get an idea soon enough. June 1 stocks, at 405 mb, were higher than the average trade estimate. The demand side of the soybean table over the last quarter has appeared to be robust on expanded export demand in the off-season. So, analysts look to the supply side. We know the U.S. has dramatically increased soybean imports this year, so it's quite possibly the source of extra beans. We also know that USDA does a full reconciling of soybeans in the September Grain Stocks report, and has a history of revising the previous year's production number, like it did for the 2012 crop. Irwin said it's very hard to predict changes based off of one quarter's surprising stocks report, and users will have to wait and see. It'll also be worth watching how USDA accounts for those bushels in the next WASDE report.

How low can new-crop soybean prices go? Irwin and Good think the average price could be $10.25. With increased acreage and, like corn, the potential for a record yield above 44 bpa, ending stocks could be 380 million bushels with a stocks-to-use ratio of 11%. That's the largest since 2006.

We will get USDA's opinion on how the Acreage and Grain Stocks figures change the supply and demand outlook on July 11 at 11 a.m. CT when the next WASDE report is released. In the meantime, enjoy your holiday weekend.

Irwin and Good's slides from the webinar are available here (http://bit.ly/…) and a copy of the webinar will soon be available here (http://bit.ly/…)

(AG/CZ)

Posted at 4:18PM CDT 07/01/14 by Katie Micik
Comments (4)
The U.S.D.A. are kinda like our weathermen!!! It might rain and it might not.They don"t know whats out there they just go with what the market will use.Don't tell me it takes 8 months to know what last harvest yields were,not in this day and age.You can figure that right off crop insurance.
Posted by Raymond Simpkins at 4:50PM CDT 07/01/14
I think they have found a few senseless high school kids to dream up these reports, read what they came up with for the crop progress for North Dakota vs. Iowa, really there is more silking corn in ND, same amount of flowering soybeans. I can't hardly find corn that will be knee high by the 4th of July up here
Posted by JAMIE KOUBA at 1:22AM CDT 07/02/14
Time will tell, but the increase in ddg exports and the removal of oil from corn prior to or after converting to eoh could explain the 100 million bushels that appears to be over estimated in corn's feed and residual use. The removal of ddgs and oil from ddgs from the feed channels might have been or will be replaced by corn. Freeport, IL
Posted by Freeport IL at 8:53AM CDT 07/02/14
52 degrees this morning, I think they should drop a couple off more "nuke" bombs in the pacific so "EL-nino comes, warm up the water anyway
Posted by Mark Knobloch at 10:01AM CDT 07/02/14
 

Friday 06/27/14

Heavy Rains in the Upper Midwest Hampering Rail and Barge Traffic

OMAHA (DTN) -- The Angela K moved 12 barges through Lake Pepin on Wednesday, April 16, officially opening the 2014 Upper Mississippi River shipping season and marking the latest start to a shipping season on record.

Barges slowly make their way south toward the confluence of the St Croix and Mississippi near Hastings, Minn., on June 24. (Photo by Katharine Sawyer)

The late start was attributed to the unprecedented amount of ice covering the lake over the winter. Two months after the ice cleared, shipping was stalled as flood waters, due to a record amount of rainfall in Minnesota, closed Lock and Dam No. 1 located just north of the confluence of the Mississippi with the Minnesota River at Mississippi River mile 847.9, in Minneapolis.

To reduce the flood risk upstream of the lock, the U.S. Army Corps of Engineers (USACE) opened the Tainter gate at Upper St. Anthony Falls lock, in downtown Minneapolis on June 20. The Tainter gate is a type of radial arm floodgate used in dams and canal locks to control water flow.

"This is the sixth time the St. Paul District has passed water through the chamber," USACE stated in a news release. "The previous years that this has been done include 1965, 1969, 1997, 2001 and 2009."

The Corps added, "Due to the high flows, the St. Paul District anticipates having to pull Tainter and roller gates at each of its dams from Lock and Dam 2, in Hastings, Minn., to Lock and Dam 10, in Guttenberg, Iowa, no later than June 23. The gates are pulled when they are no longer required to maintain the 9-foot navigation channel. When the gates are out of the water, the river is flowing naturally, as if the locks and dams weren't there."

While barges are still able to move, they face high water restrictions, which include slow speeds to avoid causing any wakes. The danger of moving through flood waters is debris underneath the water, which creates obstacles for moving barges. Barges also find difficulty loading and unloading in high water.

As of midweek, Minnesota received a record 10.85 inches of rain in June with more rain expected in the next week. The current level of the Mississippi River Twin Cities District is at 19.94 feet about flood stage after reaching its crest of 20.5 feet on June 26. The river is expected to remain above flood stage at least through July 3; minor flood stage is 14 feet above zero gauge and major flood stage is 17 feet. However, with more rain in the forecast, the Mississippi River at St. Paul, at its highest reading since 2001, could remain at flood stage longer. Barge lines reported late in the week that logistics continue to worsen on the Illinois River and mid-Mississippi River as well.

Here is the USACE St. Louis District RIVER & RESERVOIR DAILY REPORT: http://mvs-wc.mvs.usace.army.mil/…

RAIN AFFECTING RAILROADS, TOO

"Recent heavy rainfall and high water levels disrupted CN operations in southwestern Iowa," The Canadian National railroad reported on June 25. "In particular, our yard facility in Council Bluffs, Iowa, was evacuated and suspended its activities over the weekend. Water levels crested on Monday, June 23, as expected, and the main line returned to normal service as of 1415 hours CDT on Monday. Speed restrictions remain in effect along the Sprague and Fort Frances subdivisions. As a result, trains running between Winnipeg, Manitoba, and our Ranier, Minn., border crossing are operating with some delays."

The BNSF is also dealing with washouts. In his weekly podcast, BNSF Ag Group Vice President John Miller reported, "While periodic weather events will undoubtedly challenge our maintenance and expansion efforts, our team continues to do a tremendous job of remaining focused on completing projects. Most recently, sections of track on two subdivisions were washed out due to flooding, and fortification with sandbags is occurring on another subdivision to prevent any additional washouts."

Miller reported key outages in the Twin Cities division along the north-south routes. The line from Wilmar, Minn., to Sioux City, Iowa, and another through the Sioux Falls, S.D., to Mitchell, S.D., closed for three days due to flooding through mid-last week.

In his past-due car update, Miller said, "Twenty-seven previously committed grain shuttle sets became available and were redeployed as added capacity to allow BNSF to work down the number of past-due cars. For the week ended June 20, past-due ag cars were reduced by more than 1,200 cars and at the lowest level owed since February. In fact, last week past-due cars related to our agriculture business were at their lowest level since February and were reduced by more than 1,200 cars from the prior week. The only state which actually saw an increase in cars owed was South Dakota, which was in part due to washed-out tracks." Past due cars were at 316 in South Dakota vs. 217 owed the prior week; North Dakota was owed 5,133 cars vs. 6,137 cars the prior week; Minnesota was owed 845 cars vs. 1,208 the prior week and Montana was owed 1,798 cars vs. 2,129.

STB DIRECTS RAILROADS TO FILE WEEKLY REPORTS

On June 20, 2014, the STB "directed Canadian Pacific Railway Company and BNSF Railway Company to report their plans to timely resolve their backlogs of grain car orders, as well as respective weekly status reports pertaining to grain car service." These reports are to include a state-by-state count of any past-due car orders still outstanding. While the BNSF already offers this information to the public on its website via a weekly podcast (they are currently on the 19th week of podcasts), the CP does not publish a weekly report on car backlogs and some shippers in the U.S say they are still waiting for unfilled orders from as far back as February. Here is the link to the STB decision: http://goo.gl/…

CANADA CRACKS DOWN ON RAILROADS

The Canadian government announced this week that it will speed up plans to conduct a review of Canada's transportation system. "Challenges facing the movement of grain this winter along with issues such as the rapidly increasing movement of oil by rail have shed light on issues which can hamper Canada's ability to serve export customers, while remaining competitive and nimble enough to meet the needs of the market," said DTN Canadian Grains Analyst Cliff Jamieson.

"We need the right conditions for a system that has capacity and flexibility to respond to global and domestic demands," Canada's Transport Minister Lisa Raitt said in a statement."

"While the grain industry waits for the final rules that will govern the Fair Rail for Grain Farmers Act, or Bill C-30," said Jamieson, "the success of the current initiatives taken depends largely on who you talk to. The government is suggesting that railways are meeting their weekly targets of 5,500 cars each, totaling 1 million metric tons of movement. CN has responded by saying that it would have achieved current volumes regardless of government intervention. Farmers would respond by questioning where was the needed capacity all winter when the railroads fell some 70,000 cars behind in meeting the needs of the industry while totally eliminating movement in some shipping corridors and leaving grain shippers and customers without service?"

While numbers would suggest movement has improved, small shippers, shippers on branch lines and farmers counting on producer car shipments continue to struggle. North-south movement continues to suffer along with movement of smaller specialty crop volumes. The equitable and reliable distribution of freight services remains an issue that needs to be addressed in Ottawa in the final push to make Bill C-30 law, Jamieson said.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(CZ/SK)

Posted at 1:55PM CDT 06/27/14 by Mary Kennedy
 

Monday 06/23/14

Spring Rains Forced Some Regions to Switch Acres to Soybeans

OMAHA (DTN) -- A rainy spring made planting difficult for some farmers this year, but for the most part, growers stuck with their original planting plans, a recent DTN 360 Poll shows.

(DTN graphic)

The poll highlighted the regional nature of this spring's rain, but it also showed that a majority of farmers prefer to stick to their typical crop rotation.

More than 400 farmers responded to the question "Have you altered your planting from your early spring plans?" between June 5 and June 17. The most popular response, at 62%, was "No, I stuck with my typical rotation."

Spring weather forced 15% of respondents to switch to soybeans. Some farmers said they stuck to their plan, but that plan included increased soybean (10%) or corn (6%) acres this year. Three percent of respondents said planting weather was great for corn, so they planted more of it.

Clarks Grove, Minn., farmer Jerry Demmer watched the economics swing toward soybeans throughout the winter, but he stuck with his rotation because he put down fertilizer in the fall.

"I don't think there was a lot switched from corn to beans because in our area 80 miles south of the Twin Cities, farmers like to put their N on in the fall," Demmer said.

The grain markets are focused on USDA's upcoming Acreage report, which will be released on Monday, June 30, at 11 a.m. CDT. Private analytical firm Informa Economics said earlier this month that it sees USDA increasing soybean acreage by 285,000 acres to 81.78 million acres. Informa trimmed corn acres projections slightly to 91.58 ma.

The second most popular response to DTN's poll was "Yes, rain delays made corn planting tough, switched some acres to beans," with 15% of all responses.

Broken down by state, 50% of the responses from North Dakota indicated a switch to soybeans. North Dakota was followed by Michigan (38%), Ohio (23%), Minnesota (19%), Wisconsin (15%) and South Dakota (14%).

Adam Spelhaug, agronomy manager at Peterson Farm Seed in Kindred, N.D., said just about everyone switched some of their acres to soybeans or another crop or took prevented planting.

The snow melted off pretty well this spring, "but it was such a cold winter the soil was really frozen. We were waiting for it warm up before it could dry down," Spelhaug said.

Some corn acres were planted around April 21, but that was pushing it on soil temperature. "Then it rained for three weeks."

Many farmers pushed planting all the way to the May 25 deadline for crop insurance, and then started switching to beans. If it was still too wet in early June, they took prevented planting. On Spelhaug's family farm, 120 acres didn't get planted this year.

"A majority of people didn't get everything planted they were planning on back in March," Spelhaug said.

In Harbor Beach, Mich., farmer Brian Roggenbuck was glad most of his tiling is spaced 25 feet apart instead of the more typical 60 feet. He'd already planned to grow more acres of edible beans because the prices for corn and sugarbeets were so low.

He struggled to get his sugarbeets in the ground in late April because it was wet, and ended up planting corn, sugarbeets, soybeans and navy beans all in the same week.

"When we had to go, we went around the clock. And then we'd get rained out," he said. "It wasn't terribly wet, but just before we were ready to get back in, it'd rain again."

Rain wasn't an issue on Demmer's south-central Minnesota farm until this past week. The crop was off to one of the best starts he's seen, and even though it was planted a little later than ideal, good conditions and the right amount of heat helped the corn crop catch up.

Then it started raining. His farm got 2 inches last weekend, which was followed by a 2-inch-per-hour storm last Monday night, putting his total for this past week above 6 inches.

He estimates about 10% of his fields have been drowned out.

"It's tough to look out our window and say the market has to go up because of our loss, but it doesn't have to do anything," he said, noting that so many economists are calling for a record crop and he keeps reading about great crop conditions in the "I" states. "We have to stop sometimes and say it could be worse. All in all, we have a good crop coming, the remainder of what's out there, anyways."

Katie Micik can be reached at katie.micik@dtn.com

Follow Katie Micik on Twitter @KatieMDTN

(AG/SK)

Posted at 11:14AM CDT 06/23/14 by Katie Micik
 
Meal Did What???

Friday afternoon, I was preparing my presentation for the closing market video. I would finish, I thought, with a collection of yield anecdotes from this week's 2014 Kansas Wheat Harvest Reports and decided to highlight the soybean meal market in the first chart slide. In the 1:00 p.m. Quick Take, I wrote: "July soybean meal is on track to post its lowest close in nearly 13 weeks, raising larger concerns that China's demand for old-crop feed needs has pulled back." Friday had been a very quiet day and prices in the soybean complex had barely moved since 10 o'clock. It looked like traders had already scrammed for the weekend.

The chart above shows the final minutes of trading in July Soybean Meal on Friday, June 20. Meal had been trading lower all day long with very little volume and was headed toward a sleepy Friday finish. At 1:07 p.m. however, prices began inching higher on gradually increasing volume and then erupted into a frenzy of buying in the final minutes of trading before settling up $8.00 a ton at $459.20.

After some last-minute scouring for news, I looked up to see July meal quoted up $14.50 on the day. What??? No, that can't be right! It was just down $6 a couple of minutes ago. I brought up my one-minute chart in ProphetX and saw all I needed to see -- a late surge of high-volume buying in the final minutes of trading had caught the market off guard on a sleepy Friday afternoon. One-third of the day's total trading volume took place in the final five minutes. This was an option-expiration day ambush.

For those not familiar with the unique risks of option expiration day, let me try to explain. Put and call options are valuable market tools, used by both hedgers and speculators and they derive their value from the futures contracts that they are based on. Options also have time value based on their remaining contract life. However, on the day of expiration, time value dwindles to zero and the option's value becomes completely dependent on the price of the futures contract. A small change either way in the price of the futures contract can make a big difference in the value of the option at expiration.

A good example of this Friday was the July $450 meal call. The owner of this call option has the right to buy one futures contract of July soybean meal at a cost of $450 a ton. Since the July futures contract was trading at $445 earlier on Friday, this call option looked like it was going to expire worthless and could have been purchased for 35 cents a ton or a total cost of $35 or less on Friday around mid-morning. In fact, someone did buy 60 call options shortly before 1:05 p.m. for a total cost of $10 each. Why would someone just throw away $600 on a bunch of call options that were about to expire worthless?

Hmmm....

What if they knew someone with a lot of clout in the market that would be willing to go in at the end of a sleepy, low-volume Friday and hit the market with a big rush of buy orders? The result was that the $600 throw-a-way finished minutes later as 60 call options worth a total of $55,500 -- not a bad day of work, if you can get it. Of course, many more of those options could have been purchased earlier with a little planning.

If you feel your blood pressure rising at the unfairness of this manipulation and see this as another abuse by the One Percent sticking it to the little guy, you are not alone. But the reality is that the unique risk of option expiration day in grains and other markets is not likely to change anytime soon. The important thing for those who use the futures and option markets is to be aware of the risk that this special day carries so that they can protect themselves accordingly. It is common for producers to be short call options as a way of enhancing the price that they receive for their grain. As a DTN Grain Market Analyst, I no longer trade in the futures and option markets so that you can trust my neutral bias. When I did trade, however, I would always take profits on any short option positions that were close to their strike price before expiration day to stay clear of the kind of ending that we saw Friday. I would much rather buy back a call for 30 bucks than let it sit there and hope that nothing bad happens.

Friday's higher close in meal was crazy and this week will show if meal's higher prices can be sustained. I suspect prices will correct back from Friday's aberration. The four-month uptrend in July meal ended on June 12 and prices have fallen since then with concerns that China's demand is pulling back. It is understandable to get upset when we see obvious cases of market manipulation, but the larger lesson should not be lost. Markets are not for the faint of heart and the risks are often well-disguised. At times, low-volatile market behavior can lull us into a false sense of security, but do not succumb to the temptation of complacency - these are shark-infested waters.

Todd Hultman can be reached at todd.hultman@dtn.com

Follow Todd Hultman on Twitter @ToddHultman1

(CZ/AG)

Posted at 7:45AM CDT 06/23/14 by Todd Hultman
 

Friday 06/20/14

Rains Filling Rivers; Shuttle Trains Slowed by Weather

OMAHA (DTN) -- Wet weather is affecting grain transportation on land as trains must slow down on tracks covering marshy ground and on waterways as water levels rise.

(Courtesy USDA)

Heavy and record rainfalls in Minnesota have caused all rivers and tributaries to spill over, closing roads along the way and flooding fields and homes. River levels in the Upper Mississippi River District have been fluctuating the past week and on June 16, the U.S. Army Corps of Engineers, St. Paul District, closed three Minneapolis locks to commercial navigation. According to USDA's weekly Grain Transportation report on June 19, "This is the fourth time this season that the three Minneapolis locks -- Upper and Lower St. Anthony Falls locks and dams and Lock and Dam 1 -- have been closed to commercial navigation because of water conditions."

On Friday, June 20, the Corps released a statement saying they are opening the Tainter gate at Upper St. Anthony Falls lock in Minneapolis, to reduce the flood risk upstream of the lock. The Corps said, "The National Weather Service forecast indicates Mississippi River flows will be near 50,000 cubic feet per second, or cfs, in the next few days. Opening the gate will reduce the flood threat to the area by allowing approximately 10,000 to 14,000 cfs to pass through the lock chamber. The St. Paul District will keep the gate open until the flows fall below 40,000 cfs. This is the sixth time the St. Paul District has passed water through the chamber. The previous years that this has been done include 1965, 1969, 1997, 2001 and 2009."

In St. Louis, river levels came within 4 feet of flood stage on June 12 and, while water receded early this week, the latest predictions are that with all of the excessive rainfall in Minnesota and Iowa, the Mississippi River at St. Louis will reach 24.4 feet by June 28, 3.6 feet below flood stage. Here is the latest on all river stages as of June 20 from the USACE, St. Louis District: http://mvs-wc.mvs.usace.army.mil/…

Barge traffic has yet to be affected, but if waters continue to rise, it is likely that no-wake zones will be put in place, slowing barges. There are still delays at Melvin Price Locks and Dam, near St. Louis, Mo., (Upper Mississippi River mile 201) which is slowing barge traffic through there. Ingram Marine Group posted on their website that Mel Price Lock main chamber is closed for repairs, with an estimated completion of 8/12/14. Nevertheless, according to USDA, "Grain barge tonnages are up from last year, when quantities of grain were reduced by the 2012 drought."

RAIL WOES CONTINUE

The BNSF continues to be stymied by poor weather conditions causing service problems throughout its system. On Friday, June 13, the BNSF reported a derailment at Elk River, Minn., 37 miles east of St. Cloud with both tracks finally returned to service June 14. On Monday, June 16, BNSF reported multiple washouts near Marshall, Minn., 155 miles southwest of Minneapolis. The track was scheduled to reopen June 18, but service delays may continue for 24 to 36 hours through those corridors.

In his weekly podcast on June 13, John Miller, BNSF agricultural group vice president, reported that average system-wide shuttle turns per month dropped to 2.1 TPM, which is the worst reported since late March. When shuttle TPMs are at least 2.5, elevators face fewer headaches in getting their grain to destination and then back to origin in a timely manner. The turnaround for shuttles heading to the PNW was at 2.1 TPM, the lowest it has been since April. Miller said BNSF continues to work through service-related impacts experienced over the past few weeks caused by soft track conditions. Periods of dry, warmer weather are helping to improve stability of the most troubled subdivisions along the Northern Transcon route. The accompanying graph shows that while grain deliveries by rail at PNW ports are unchanged from the previous week, they have dropped from two weeks ago.

Miller said he expects trains will start to speed up. "Our Glasgow subdivision, which runs from eastern Montana to Minot, N.D., across our Northern Transcon route, is expected to experience steady, weekly velocity improvements through the month of June and into early July when delays due to slow orders will have declined from a peak of 328 minutes in early June and are projected to be less than 45 minutes." Miller went on to say, "Our Devils Lake and KO subdivisions, which run from Minot, N.D., to Hillsborough, N.D., and Dilworth, N.D., respectively, will receive a steady and substantial decrease in the number of "slow orders" for those segments each week through early July as maintenance crews return stability to the subgrades of those sections." Slow orders are requirements for slower train speeds to match the stability of the track. If tracks are not suffering from weather-related issues and are in good condition, trains can move faster.

System-wide, BNSF still owes on average 11,127 past-due cars and is 28.2 days late vs. one week ago owing 12,406 cars and being 28.3 days late. Montana is owed 2,129 cars vs. 2,691; Minnesota is owed 1,208 cars vs. 1,269 and South Dakota is owed 217 cars vs. 277 one week ago. Days late in Montana were still high at 31.6 vs. 31.8 days late vs. the prior week.

North Dakota is owed 6,137 cars vs. 6,360 cars the week prior week and is at 28.7 days late. Some shippers say that it's still a mess with end-users clamoring for past-due products and fight over cars that do show up and one shipper reported that it is a "jungle out there." An elevator in western North Dakota reported that he is scheduled to receive cars this week that he had ordered for April arrival.

Shippers on the Canadian Pacific line in North Dakota say they continue to look down the tracks to see if their past-due cars are near. One shipper said he is still waiting for a unit train to arrive that he ordered for February and as far as his late single-car orders, he said he doesn't expect to get them at all. Shippers are concerned that the upcoming harvest is going to be challenging if there are no rail cars readily available and the CPR remains backlogged.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(CZ/SK)

Posted at 3:12PM CDT 06/20/14 by Mary Kennedy
 

Wednesday 06/18/14

No Hard Landings, More Ag Investment

It's difficult to overstate the importance of the Chinese when it comes to American agriculture. Soybean farmers happily recite the statistic that one out of every four rows of beans grown in the U.S. are sold to China. They also buy large amounts of corn and DDG (although the recent Agrisure Viptera spat slowed that trade), not to mention cotton and other commodities.

A pair of headlines on China caught my attention this morning. The first: "Chinese Premier Li Keqiang Promises No Economic 'Hard Landing' Amid Strong Business Confidence" from the International Business Journal. The second: "China's sovereign wealth fund shifts focus to agriculture."

The state of China's economy is a perpetual concern. If it were to slow dramatically, or experience a "hard landing," many economists figure the country's demand for ag products would drop precipitously. China's shown over the last six months that it's willing to take a lot of targeted measures to keep its economy rolling.

The International Business times reported that Li said he expects the Chinese economy to grow 7.5% this year.

"China's economy is slower than the past, but normal," Li said in the IBT article.

"Despite considerable downward pressure, China's economy is moving on a steady course. We will continue to make anticipatory and moderate adjustments when necessary. We are well prepared to defuse various risks. We are confident that this year's growth target will be met."

You can find the whole article here: http://bit.ly/…

China's leaders appear confident about their economy, and that's a good think for U.S agriculture. China's also looking closely at its long-term strategy. The country's leaders know the middle class is growing, and it will consume more dairy, grain, meat and vegetable oils than ever before. China's future food security needs played a strong part in an opinion piece in the Financial Times on Tuesday.

The chairman of China Investment Corporation, the country's $650 billion sovereign wealth fund, explained why agriculture is a solid long-term investment and will be a growing share of the country's portfolio.

"The world has no shortage of fertile land and every prospect of meeting that target. But the crops will not plant themselves. Meeting the world’s need for food will require long-term investment -- which, in developing countries, will have to increase by as much as 50 per cent from the current level," his opinion piece stated. (You can view the entire article here: http://on.ft.com/…)

The piece went on to say: "China Investment Corporation is a long-term financial investor with a diversified portfolio. We believe the agriculture sector offers stability, a way of hedging against inflation and a device for spreading risk. We are keen to invest more across the entire value chain – in partnership with governments, multilateral organisations and like-minded institutional investors – in areas that will help to unlock the industry’s potential, increase the food supply and offer attractive returns.

"While we are focusing on existing assets, we are also keen to work with the right partners to invest in greenfield projects."

China's previous investments in Africa and land purchases in South America encountered plenty of scrutiny. The acquisition of Smithfield Foods by Shuanghui raised mountains of criticism and skepticism about China's motives. If China follows through on its plan to ratchet up its agriculture investments, more controversy is sure to follow.

(CZ/AG)

Posted at 2:22PM CDT 06/18/14 by Katie Micik
 

Friday 06/13/14

Trains Take Longer to Get to Destination and Back

In its weekly podcast on June 6, the BNSF reported that soft track conditions along the Northern Transcon route have slowed the process of moving cars. John Miller, group vice president of Agricultural Products said, "While we expected those soft conditions to have improved by now, we continue to experience a very full and sluggish network, which has been caused by less-than-optimal track conditions at multiple locations and service interruptions caused by weather-related derailments including a wind-driven derailment and recent tornado activity. These less-than-optimal conditions mean that we must operate trains at slower speeds to keep our operations running safely, and incur periodic service delays while tracks are being repaired."

The Federal Mattawa entering Duluth port to load grain. (Photo courtesy Kenneth Newhams, Duluth Shipping News)

This slowdown could be seen in shuttle turns per month (TPM) which dropped from one week ago. System wide on the BNSF, shuttle TPM went to 2.1 versus 2.3 the prior week. Shuttles moving to the PNW are taking longer at 2.1 TPM versus 2.5 the prior week, causing rail corn basis for shuttles to rise. Miller said that trains returning to the interior from the PNW face longer transit times but should improve by the end of June.

Miller went on to report that past-due car orders decreased for the week ending June 6 "with help from reductions in the number of shuttle sets, which has freed up additional equipment towards past-due orders." Average cars past due system wide are at 12,406 versus 13,050 the prior week with days late average at 28.3 versus 28.6 the prior week. North Dakota is owed 6,360 cars versus 6,703 the week prior; Montana is owed 2,691 cars versus 2,833; Minnesota is owed 1,269 cars versus 1.505 and South Dakota is owed 277 cars versus 369. Days late in Montana increased the most at 31.8 days late versus the prior week of 29.7 days late. Soft tracks and repairs along with continued rains have slowed traffic in the Northern Transcon route of Glasgow, Mont. to Minot, N.D.

The CN Railway reported similar problems with soft tracks. In its State of the Railroad report for June 12, the CN said," As a result of unusually warm temperatures and high water levels, trains running along the Sprague and Fort Frances subdivisions remain subject to speed restrictions. Trains running between Winnipeg, Manitoba, and Ranier, Minn., in either direction continue to operate at slower track speeds than normal. A recent track washout, located south of Ranier on the Rainy subdivision and since repaired, has caused additional delays to traffic in the area. Affected shipments continue to encounter some delays."

Canada Still Facing Backlog

The struggle to clear the prairie backlog of grain continues. Cliff Jamieson, DTN Canadian grains analyst said, "terminal unloads at the west coast and Thunder Bay totalled 725,700 metric tons in week 44, the week ending June 8. This was below last week's 806,300 mt, which was the highest terminal receipts seen this crop year, while 92.9% above the three-year average for the same shipping week. Thunder Bay has acted as an important relief valve for prairie grain, with a late start to shipping resulting in the highest volume May in 16 years and 90% above the five-year average."

"The debate continues around the final set of rules that will be included with Bill C-30, the Fair Rail for Grain Farmers Act." said Jamieson. "The Western Grain Elevators Association is asking for the minimum shipping target to be raised from 11,000 cars per week for the two railways combined to a range of 11,000 to 14,000 cars. They have also requested minimum shipping targets by shipping corridor to be included, so that sales can be fulfilled in all directions, given the challenges faced over the winter in fulfilling obligations into markets such as the U.S., Mexico and even domestic markets."

Despite the increased movement, Canada's total grain carryout stands to exceed 20 mmt at the end of July, the largest in decades." One grain industry official has suggested the negative impact on markets could last throughout the 2014/15 crop year and even longer," said Jamieson. "Canadian producers continue to face excessively wide basis levels and weak cash bids in relation to prices paid in United States markets."

Saltie Anchored in Duluth Harbor Waiting to Load Grain Finally Enters Port

After sitting within short distance of the Twin Ports entrance for more than three weeks, the Federal Mattawa finally made her way inside the port early in the week. The Duluth Shipping News reported that "after 23 days of hanging around outside the Aerial Lift Bridge, the Federal Mattawa came in early Tuesday evening. The grain carrier was given the go-ahead to ply its way to the CHS dock in Superior, where it was deemed there was enough grain to fill the ship."

Adele Yorde, spokeswoman for the Duluth Seaway Port Authority, told the Daily Great Lakes and Seaway Shipping News the long wait for the Federal Mattawa has been "unusual," much like the season so far, as ice conditions on Lake Superior slowed shipping into May. "The ship started on the St. Lawrence Seaway in late April and, after dropping cargo in Hamilton, Ontario, made its way to Thunder Bay by May 8. It was "repositioned" to Duluth because of backups in the Canadian port," Yorde said, "and then has had to wait out other salties loading grain." A shortage of grain at various terminals in the Twin Ports has also slowed saltie loadings as months of rail issues have caused delays to grain cars destined for Duluth." To see more about the Federal Mattawa, here is the link to Duluth Shipping News: http://duluthshippingnews.com

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(SK)

Posted at 11:42AM CDT 06/13/14 by Mary Kennedy
 

Friday 06/06/14

Past-Due Rail Cars Arriving Too Fast For Some Elevators

OMAHA (DTN) -- It may be a case of be careful what you wish for.

Lake Superior June 5th, 2014. (Photo courtesy NOAA)

Many North Dakota elevators waited in frustration for rail cars to load out grain during the past four months, but some are now reporting BNSF is inundating them with empties. One elevator operator reported he is still trying to unload fertilizer cars currently sitting at his siding. He will end up loading more cars this month than he has all year.

Another elevator operator said there is not enough room on his track for all the cars that are suddenly arriving. While both elevators are grateful that past-due orders are starting to get filled, one manager commented that the current situation is "getting ugly."

According to the BNSF May 30 podcast, the system-wide average for past-due cars was 13,050 vs. 14,069 the prior week and average days late was 28.6 vs. 27.9 the prior week. Past-due cars in North Dakota were 6,703 vs. 6,839 the prior week; Montana cars past due were 2,833 vs. 3,258 prior week; Minnesota cars past due were 1,505 vs. 1,719 the prior week; and South Dakota cars past due were at 369 vs. 435 prior week.

Shuttle turns per month (TPM) were slightly lower with the average at 2.3 TPM vs. 2.5 the prior week. The turn time to the PNW was lower at 2.3 TPM vs. 2.5 last week. Some of that can be attributed to track improvements, but also due to soft track beds.

"As we continue our focus on improving service, seasonal weather is causing washouts and some instances of soft track conditions along our Northern Transcon as the ground frost caused by this year's extreme winter weather begins to thaw," said John Miller, BNSF group vice president of agricultural products in the podcast. "As always, we are proactively monitoring all our lines to ensure minimal impacts to service and are performing expedited maintenance to keep these lines in service. Customers can expect to experience occasional delays and temporary interruptions, particularly for freight moving across a couple of key sections of the railroad between Minot and Grand Forks, N.D., and between Minot and Dilworth, Minn., as BNSF crews repair tracks that are impacted by frost heaves."

The CN Railway sent out a similar bulletin on June 4 stating, "As a result of unusually warm temperatures and high water levels, trains running along the Sprague and Fort Frances subdivisions remain subject to speed restrictions. Trains running between Winnipeg, Manitoba, and Ranier, Minn., in either direction are now operating at slower track speeds than normal. In addition, a portion of track near Ash Lake, Minn., south of Ranier on the Rainy subdivision, was found to be washed out on Saturday evening. The washout, which was repaired as of 1900 hours CDT on Sunday, June 1, has caused additional delays to traffic in the area. CN has run a number of trains via an alternate path north of the Great Lakes, however customers should expect that delays to affected traffic continue at this time."

The Canadian Pacific railroad reported in their June 3 service update, "Yard dwell is stable and shipments moving per plan. Train speeds improved slightly, continuing to exceed 2013 levels. There are no service issues in both Canadian corridors, but Chicago remains at Alert Level 1 and CP is operating normally with heavy inbound volumes from offline carriers."

Some CP shippers in the U.S. continue to wait for past-due cars along the northern tier of North Dakota with one elevator operator concerned he will not be able to load out old-crop wheat in time for the harvest.

BARGE GRAIN MOVEMENTS TO THE GULF HIGHER; CORN LEADING THE PACK

According to USDA's weekly Grain Transportation report, "During the week ending May 31, barge grain movements totaled 853,928 tons -- 28.7% higher than the previous week and 158.5% higher than the same period last year."

Corn continues to lead the way and river basis levels have been strong. Soybean movement down river actually improved that week as shipments to Asia increased. But soybeans heading to the Gulf will more than likely become flat due to the seasonal slowdown because of the large Brazil crop.

There were 549 grain barges that moved down river, which is 30% higher than the prior week and barge movements on the Mississippi River at Locks 27 in Granite City were up 143.7% from last year and 54.7% higher than the three-year average.

So far, high water has not been a serious issue for barge traffic, but due to recent heavy rains in the Midwest, river levels at St. Louis and Cairo are expected to rise by this weekend. Levels in St. Louis on June 5 were at 16.51 feet and are expected to rise to at least 22.8 feet by Sunday. Flood stage is 30 feet. On the Mississippi River at Cairo, Ill., water levels on June 5 were at 25.11 feet and are expected to rise to 29 feet by the weekend. Flood stage is 40 feet. Rising water levels may slow barges if high-water restrictions are put in place by the Corps of Engineers, which would slow the speed at which barges could travel.

WINTER SAYS GOODBYE UP NORTH

Ice was finally gone from Lake Superior on June 5, according to NOAA. According to the ice analysis by the GLSEA on Thursday, there was zero % ice concentration on the Great Lakes. George Leshkevich, physical scientist at NOAA's Great Lakes Environmental Research Laboratory. "We haven't seen this before, at least this far into June."

"We saw the ice as early as Nov. 25 and now into June," Leshkevich said. "In terms of duration I would think it's up there, if not at the top of the chart" in the historic record.

While the last day of ice coverage is considered to be a new record for Lake Superior, oddly enough, the total ice coverage this past winter was not. Lake Superior was almost 96% covered with ice in early March, making it the fourth-highest ice cover total; in March 1977, Lake Superior was 100% ice covered. Total ice coverage for the Great Lakes in March was 92.2%, the second highest in 40 years of record-keeping.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(CZ/SK)

Posted at 11:51AM CDT 06/06/14 by Mary Kennedy
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