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Market Matters Blog           07/01 14:38
Record Trading Volumes in Ag
Additional Rains Add Insult to Injury Caused by Tropical Storm Bill 
Tropical Storm Bill Adds to Already High Water Conditions
Cotton's Acreage Conundrum 
STB Reviews Rail Transportation of Grain, Rate Regulations
TAS Orders Available Starting Monday
Rivers Fill Up, Wheat Condition Worsens, Harvest Slows
Will Farmers Keep 2014-15 Corn Through the Next Harvest?
Even Still, All is Not Quiet at the Western Ports 
USDA: Ag Exports at $140.5 Billion

******************************************************************************
Record Trading Volumes in Ag

   Tuesday, June 30, 2015 set records.

   CME Group's agricultural futures and option products did record volume: 2.87 
million trades. It was the largest volume day since... last Friday (June 26).  

   Combined corn futures and options volume: 1.12 million

   Corn futures only: 845,700 

   Combined soybean futures and options: 722,777

   Soybean futures only: 503,063

   Cash bushels traded electronically on DTN Portal: 16.7 million bushels, on 
track to trade 50 million bushels this month.* 

   DTN analyst Todd Hultman said excessive rainfall cast doubt on yield 
potential, and then USDA's Grain Stocks showed smaller supplies of both corn 
and beans than the market expected.   

   "Anytime you get a surprise that alters the prevailing view of the markets, 
there is a lot of running for the doors," DTN analyst Todd Hultman said. "The 
June 30 reports are notorious for such surprises and Tuesday's numbers refuted 
a lot of early fundamental biases about this year's balance sheets for corn and 
beans."

   DTN Senior Analyst Darin Newsom agrees, and adds that noncommercial traders 
held a large net short position going into Tuesday's reports. "Buy orders were 
running amok, particularly in the last half hour of trade when even wheat was 
goosed to a higher than expected close." 

   Commercial traders may have been involved in the action for part of the day, 
"but as overnight basis and today's action showed, they may have moved to the 
sidelines. 

   "It doesn't change this group's long-term outlook though: Still bullish 
soybeans, neutral corn, and increasingly bullish (but easily changed) toward 
wheat."  

   *More than 45,000 farmers have made offers to sell grain to their local 
elevators through DTN Portal or Farms Technology DPP Grain Desk. The two 
programs teamed up in 2014 to maximize their strengths, and the popularity is 
growing.

   In the first five months of 2015, more than 150 million bushels had been 
offered through Portal, up 40 million bushels during the same time frame the 
previous year, according to DTN agribusiness product manager Don Konz. More 
than 1.3 billion bushels have been offered for sale on Portal since it went 
live in 2007.  

   In June, DTN Portal launched branded apps for CHS, Valero Renewables and 
Green Plains Grain that allow farmers to make offers to any of those companies' 
locations.

   For farmers, DTN Portal is way to make, manage and monitor their offers to 
their preferred locations. For the elevators, Portal offers a comprehensive 
grain management platform that lets merchandisers accept offers, automatically 
hedge their purchases and view their entire position in real time, all while 
integrating with most accounting systems.  

   Konz argues that offers are the best way to judge how widely electronic cash 
markets are being adopted. How many bushels that actually trade through the 
platform, like Tuesday's 16.7 million bushel record, largely depends on market 
conditions -- like this 60-cent corn market rally. 

******************************************************************************
Additional Rains Add Insult to Injury Caused by Tropical Storm Bill 

   When Tropical Storm Bill exited the U.S. on June 21, it left behind rainfall 
totals of 4 or more inches in eight states: Arkansas, Illinois, Indiana, 
Louisiana, Missouri, Ohio, Oklahoma and Texas, according to the Weather Channel.

   The arrival of Bill caused rivers in Texas and Oklahoma, which were already 
swollen due to heavy rains that fell over the Memorial Day weekend, to spill 
over again. Rivers in Missouri and Louisiana also suffered from Bill as 
flooding covered not only city streets, but farm fields that had just been 
planted with spring crops or were not yet planted. According to USDA, as of 
June 21, farmers in Missouri had only planted 51% of their soybeans versus the 
five-year average of 88% and that only 34% of the soybean crop was rated in 
good-to-excellent condition. 

   The National Weather Service issued a flood warning on Saturday, June 27, 
for the Missouri River at St. Charles. The river there was at 29 feet on 
Sunday, June 28, and is expected to crest at 30.3 feet Monday afternoon. That 
would be just over 5 feet above flood stage. (http://goo.gl/ZHcfuo) On June 28, 
the NWS also issued flood warnings for the Wabash River, which was 22.8 feet at 
Lafayette, Indiana; moderate flood stage is 20 feet. The NWS said, "At 22.0 
feet, extensive flooding is in progress. During agricultural season, extensive 
crop damage occurs. Flooding will last from two days in central Indiana to the 
middle of July in southwest Indiana." (http://goo.gl/SdLJQQ) 

   Besides the stress on soybean crops, the soft red winter crop has suffered 
as well with diseases caused by too much rain. The CBOT price for soft red 
winter rose as Missouri, Indiana and Illinois were reported by USDA June 22 to 
have significant condition declines from the previous week. The front-month 
nearby Chicago wheat contracts traded to the highest levels seen since early 
January. For the week ending July 26, the July futures contract gained 73 3/4 
cents per bushel in Chicago. Cash basis, on the other hand, was weaker at river 
facilities affected by the high water with basis 7-10 cents weaker on average.

   HIGH WATER LEVELS AFFECTING BARGE MOVEMENT

   Just as many rivers had crested, more rain fell during the week of June 22, 
causing some of the rivers to climb back toward major flood stage. Tom Russell, 
Russell Marine Group, updated DTN in an email on June 29 on the most current 
river conditions. "High water on the Illinois River, Upper Mississippi middle 
area mile 300, and Upper Mississippi from St Louis to Cairo remain 
problematic," said Russell. "The rain pattern that has dropped concentrated 
amounts of rain in center areas of Midwest and Illinois River dropped more rain 
last weekend. The rain pattern in this area is forecast to drop slight to 
moderate amounts of rain in the area this week. Drying not expected to occur 
until July 9. Navigation in these three areas is difficult and very slow at 
best with some areas entirely closed. The situation is 'touch and go' and will 
require ongoing daily monitoring until general drop in water levels start to 
occur."

   Russell said "Illinois River will see a rise due to weekend rain and some 
parts of the river are near record high levels set in 2013. Areas near the 
mouth of the river mile 30 to 89 will close due to high water and fear that 
levees may be compromised. The river in area of closure will not crest until 
July 4 -- 5 without additional rain. However, some rain is forecast throughout 
this week."

   "On middle part of Upper Mississippi locks 25 (mile 241), 24 (mile 273), 22 
(mile 301) were closed due high water last few days. However, weekend rain has 
not impacted this area and these locks are opening again to navigation by June 
30," added Russell. "In the Upper Mississippi River at St Louis to Cairo, the 
St Louis Harbor did not close this past weekend as expected. The river level 
stopped rising just below closure levels. Some tows are moving out of the 
Harbor but it is extremely slow going and the Harbor remains heavily congested 
with back log of barges waiting to move."

   All of the above areas are at critical mass and minor changes in rainfall or 
adjustments in water levels can mean the difference between rivers remaining 
open or closed, according to Russell. "Changes are occurring daily and will 
require close monitoring until there is a general improvement in conditions."

   On June 25, USDA reported barge operators are not quoting rates for Illinois 
River barge services until most loading facilities are operational, which will 
occur sometime after the crest. "Barge operators have limited operations in the 
St. Louis area partly due to accumulations of flood-caused debris that can 
damage towboats and barges. In addition, tows of barges greater than 600 feet 
are restricted to daylight-only passage while the St. Louis gauge is greater 
than 25 feet," USDA reported. (http://goo.gl/T4A7xx)  

   Russell said, "Elsewhere, The northern parts of Upper Mississippi River, 
Ohio River, and Lower Mississippi are OK at this point. The Arkansas River that 
had been closed due to high water is now entirely open. Some areas are daylight 
transit only."

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

   Follow Mary Kennedy on Twitter @MaryCKenn

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Tropical Storm Bill Adds to Already High Water Conditions

   OMAHA (DTN) -- Last month, heavy rains moved across Texas and Oklahoma then 
through the center of the Midwestern states. The result was flooding and high 
water on the Missouri, Arkansas, Illinois and Upper Mississippi rivers between 
St. Louis and Cairo, Illinois. As Tropical Storm Bill came up from the Texas 
coast last weekend and became a tropical depression, it moved through most of 
the same waterlogged states, adding more water to the already high rivers. 

   Tom Russell of Russell Marine Group told DTN via email that, "Waters were in 
the process of flushing through the system when heavy weather concentrated 
rains in those central areas again, giving rise to the same rivers." 

   Russell said that the Illinois River and Upper Mississippi between St. Louis 
and Cairo are now at flood stage. "Two locks on the Illinois River have been 
closed to all navigation due to high water, resulting in the CME declaring 
force majeure at loading locations on the Illinois River." http://goo.gl/LClvaA 

   On June 17, the CME released this statement: "Effective immediately and 
until further notice, pursuant to CBOT Rule 701 ("Declaration of Force 
Majeure"), The Board of Trade of the City of Chicago, Inc. ("CBOT" or 
"Exchange") is hereby declaring a condition of force majeure for corn and 
soybean shipping stations as a majority of the facilities on the Illinois River 
are unable to load due to high water levels and/or flooding. As a result, CBOT 
Rule 703.C.G(8) is in effect for ALL corn and soybean shipping stations." 
http://goo.gl/3sFYRz

   "St. Louis Harbor has become extremely congested as a result of high water 
over the past weeks," Russell said. "Heavy drift debris is reported throughout 
the harbor. Barge traffic is moving, but slowly, and in a bit of gridlock. 
High-water safety protocols have been put in place."

   On June 21, the U.S. Army Corps of Engineers said on their website that, 
"Flood fight teams have been deployed across the area and are providing 
technical assistance to levee districts. The Jerry Costello Lock and Dam and 
the Lock 27 Auxiliary Lock remains closed."

   The USDA Grain Transportation Report noted on Thursday that since early 
June, the St. Louis gauge has been above 25 feet, "a threshold where the Coast 
Guard restricts tows of barges greater than 600 feet to daylight-only transit 
in the St. Louis Harbor." With the additional rains from Tropical Depression 
Bill, the river level is not expected to drop to 25 feet until possibly June 
27, when the daylight-only restrictions could be lifted, according to USDA. 
http://goo.gl/T4A7xx

   Oklahoma news sources reported that The Port of Catoosa was experiencing 
high water along the port's entire waterway system, which shut down barge 
traffic late in the week. Russell noted that while navigation just resumed on 
the Arkansas River, the remnants of Bill may stop traffic again as waters are 
expected to approach flood stage again.

   "The Lower Mississippi is high and will remain high at least for another 
three to four weeks as the upper rivers run off," said Russell. "The northern 
part of Upper Mississippi and Ohio Rivers are at normal levels and traffic is 
moving. The Baton Rouge and New Orleans Harbor are in high-water protocols with 
safety advisory for barge tows passing through Baton Rouge. Barge and ocean 
vessel traffic are moving, but count on delays over the next three to four 
weeks."  

   SOYBEAN BASIS RISES WITH THE RIVERS

   High water can not only stall empty barges from arriving at river terminals, 
but it can also cause the inability of a barge to "fit" under the loading 
spout. The spot CIF barge basis was reported to have traded 10 cents higher on 
Wednesday, June 17, from Tuesday's spot price. By the end of the week, CIF 
basis was 5 cents weaker, but the bid/ask spread at +80 versus +97 over the 
Chicago July futures. CIF basis offers were 16 cents higher on Friday June 19 
than from the prior week. Farmers have been selling soybeans on the futures 
rallies, but the logistics of getting them to the Gulf have been tedious and 
will likely be that way for the next week.

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

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
Cotton's Acreage Conundrum 

   DTN China Correspondent Lin Tan sent us an article about China's declining 
cotton acreage earlier this week. Farmers there have planted 20% fewer acres to 
cotton than they did the year previous, marking two years of decline. 

   Cotton acreage in the U.S. is also taking a hit this year. According to 
USDA's Prospective Planting survey, farmers were only likely to plant 9.55 
million acres, down 13% year over year. With the heavy rains in Texas this 
spring and early summer, there have been plenty of reports about cotton acreage 
declining even more. 

   It's just one of the many things to watch for in USDA's June 30 Acreage 
report. But the real question is: when will the world work through its glut of 
cotton stocks? With global stocks-to-use around 92%, it seems there's a lot of 
work that needs to be done to turn the cotton prices around. 

   In the meantime, here's Lin Tan's story for a better perspective on why 
cotton is falling out of favor with Chinese farmers. 

   ***

   China Cotton Acres Seen Down 20%

   By Lin Tan

   DTN China Correspondent

   BEIJING (DTN) -- Cotton acreage is expected to decline 20% in China this 
year, down to 8.4 million acres from last year's 10.4 ma, according to a recent 
field survey by the China National Cotton Market Observing System. 

   "This is the second year of sharp decrease in cotton acreage," said Zhonghua 
Wang, an analyst in Beijing. "Last year's acreage was 12.5% lower than 
2013/2014."

   DTN Analyst Todd Hultman said a 20% decline in acreage is steeper than the 
10% USDA's currently predicting. "I would say there are slow bullish changes 
emerging in cotton, but it is difficult to tell how long it might be before 
prices actually climb higher.

   "It also helps that USDA is estimating a 16% drop in U.S. planted acres this 
year, and that may even turn out to be less with this year's excess rain in the 
Southern Plains. The difficulty for cotton is that it will take time to work 
off the heavy burden of world ending stocks that USDA estimates at 106 million 
(480-lb.) bales or 92% of annual use." 

   China's acreage is due in large part to a change in China's support policy 
to a target price program. Lower prices didn't help either, Wang said. 

   "The Chinese government terminated the floor price purchase program on 
cotton last year," he said. "The program had supported cotton prices for 
several years, but the uncertainty of the market after the policy change put 
pressure on farmers to produce more cotton" before the program changed. 

   The floor price in 2013, the last year of the program, was $1.49 per pound. 
The new target price program for cotton attempts to subsidize farmers based on 
their output and comes in the form of a direct payment, which doesn't affect 
the market price. The government sets the target price and then calculates an 
average market price for each province. Farmers are paid the difference between 
the average in their province and the target price. 

   "Upon June 10, national cotton price index is 13,329 renminbi per ton (98 
U.S. cents per pound), down 23.3% compared to the price of last year," said 
Fang Gao, Deputy Chairwoman of China Cotton Association.

   The government lowered the target price for this year's crop, Gao said. Last 
year, the price was $1.45 per pound. It is 5 cents lower this year at $1.40. 

   The current estimate of cotton production is 5.86 million metric tons, less 
than last year's 6.39 mmt.

   "This acreage change is good for China's cotton market and also good for the 
state reserve," Wang said. "We are expecting the carryout in 2015/2016 will be 
12.66 mmt, 0.31 mmt less than the carryout of 2014/2015." 

   While stocks are expected to decline, Gao said the carryout will still be 
too high. Overall consumption in expected to be 7.35 mmt. 

   Imports have fallen off sharply as China's textile industry tries to work 
through the stockpile. So far in the 2014/15 marketing year, China's only 
imported 1.17 mmt of cotton, down 44.5% from the same time period last year. 

   "China is expected to import only 1.58 mmt of cotton in the crop year of 
2014/15," Wang said.  

   The U.S. is still the largest exporter to China, with a 30% market share. 
It's followed by India with 21%, Brazil with 15%, Australia and Uzbekistan with 
12% each, and a handful of other countries sharing the remaining 10%. 

******************************************************************************
STB Reviews Rail Transportation of Grain, Rate Regulations

   OMAHA (DTN) -- Grain shippers, ag organizations and railroad companies all 
had the opportunity to express their opinions about improving procedures to set 
fair shipping rates during a hearing held by the Surface Transportation Board 
June 10 in Washington, D.C.   

   Through these meetings the STB intends to explore the issue of "making the 
rate-case process more accessible" to all grain shippers who use rail as their 
mode of transportation. The Staggers Rail Act of 1980 provides rail shippers 
the ability to challenge unreasonable rates. 

   "Yet, despite concerns about high rates from shippers of grain over the 
years, no such shipper has filed a rate complaint with the agency since 1981," 
said the STB. Shippers say some of the reasons could be the current formula is 
arbitrary, too costly and onerous, which discourages them from taking part in 
the current process.

   In her opening remarks at the hearing, acting STB Chairman Deb Miller said 
that she has heard from grain shippers who "don't feel they have received all 
benefits of Staggers Act." 

   Vice Chairman Ann D. Begeman added, "We are not here to debate rates, but 
rather to fulfill the statutory mandate to ensure a process for every shipper 
to have access to that rate judged fairly and timely."

   The National Grain and Feed Association (NGFA) urged the STB to "issue a 
proposed rulemaking to establish a new process that agricultural commodity 
shippers could use to challenge freight rates they believe are unreasonable or 
unlawful under the Staggers Rail Act of 1980." (See the proposal at 
http://goo.gl/gD2N8g)

   In a June 11 press release, the day after the hearing, the NGFA said that, 
"As part of the STB's proceeding (Ex Parte 665, Sub-No. 1), NGFA in 2014 
developed and proposed a new rate-reasonableness methodology -- dubbed the 
"agricultural commodity maximum rate methodology" -- as one approach that the 
STB could use to change its existing procedures to resolve rail rate challenges 
involving agricultural products." 

   The NGFA noted that its proposed new approach would "meet the tests of being 
more accessible and inexpensive to administer, including for shippers with 
smaller claims; provide a meaningful constraint on the ability of carriers 
through their rate-pricing practices to make certain facilities uncompetitive 
in shipping by rail, and provide for more expedited and timely decisions."

   According to the NGFA press release, NGFA Board member Bruce Sutherland, 
vice president of Michigan Agricultural Commodities (MAC), presented 
"real-world" examples to the STB of current rate-pricing practices by a major 
Class I rail carrier that will significantly alter geographical rate spreads in 
the Eastern Corn Belt. Sutherland explained to the STB at the hearing that this 
could lead to "dramatically increased freight rates and reducing the prices 
elevators are able to pay to producer-customers in some parts of the region, 
while reducing traffic on regional short lines and making some facilities 
uncompetitive to serve customers by rail."  

   Tim Luken, manager of Oahe Grain, an elevator located on a short line 
railroad in Onida, South Dakota that is serviced by the Canadian Pacific, told 
DTN via email, "Back in 2007, it cost $2,644 per car on the short line for the 
25-car rate to Chicago and beyond. Today it costs $3,881 per car to Chicago and 
beyond; a 46.8% increase in eight years."

   Representatives from the Class 1 railroads were also present at the hearing 
to testify on the current rules in place. BNSF stated in its presentation that, 
"Formulaic, outcome-oriented regulations are not productive and would have 
unintended consequences." (http://goo.gl/7NbUBl)

   Union Pacific pointed out that, "Previous studies have concluded that many 
agricultural shippers have a range of transportation alternatives, that grain 
transportation markets are largely competitive, and that different modes of 
transportation often compete head-to-head to move grain." (http://goo.gl/3iYHhL)

   CSX Transportation told the STB that, "Agriculture is an important business 
to CSX; competition on origin and destination grain sourcing is vibrant. CSX is 
working to improve efficiencies for both CSX and our customers through mutually 
beneficial programs." (http://goo.gl/Klyktw)

   Stu Letcher, executive vice president of the North Dakota Grain Dealers 
Association, told DTN in an email, "The current system for challenging rates is 
overly burdensome according to testimony from participants on both sides of the 
issue. We understand the need for and support a financially stable rail 
industry, but we feel a more transparent and efficient process for grain rate 
reviews would not put that stability in jeopardy."

   The STB will conduct a separate, but related, public hearing on July 22-23, 
which will examine what it means for a railroad to be revenue adequate and how 
that should affect regulation of the railroads' rates and other related issues. 
The STB said that once a railroad becomes revenue adequate over a period of 
time, "shippers should be able to challenge such railroad's rates on grounds 
that the carrier is financially healthy and thus does not need to charge such 
high rates."  

   UPDATING CURRENT METHODS

   The Transportation Research Board (TRB) recently conducted a study examining 
the future role of the STB in overseeing and regulating the service levels and 
rate offerings of railroads, particularly as they become revenue adequate. The 
TRB said, "The study committee finds that while the U.S. freight railroad 
industry has become modernized and financially stable since the Staggers Rail 
Act of 1980, some of the industry's remaining economic regulations have not 
kept pace and should be replaced with practices better-suited for today's 
modern freight rail system." The report was released to the public June 10. (It 
can be found, in its entirety, on the Web site of the National Academies Press 
http://goo.gl/GOhExX)

   In a press release on their website, Association of American Railroads (AAR) 
President and CEO Edward R. Hamberger provided the following response to the 
report released by the TRB: "The TRB report is a solution in search of a 
problem," said Hamberger. "The United States already enjoys the most efficient, 
safest freight rail network in the world. In fact, freight rail customers today 
pay rates that are on average 43% less than they paid in 1980. The report is a 
theoretical exercise that would upend the real-world concrete successes 
achieved since the Staggers Act passed in 1980."

   The STB will begin reviewing all comments and presentations before making 
any decisions and stated, "Following the hearing, the record will remain open 
until June 24, 2015, during which time parties may submit written rebuttal 
testimony."

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

   Follow Mary on Twitter @MaryCKenn

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TAS Orders Available Starting Monday

   CME Group is rolling out a new futures order type for agriculture products 
next Monday to help smooth the transition to electronic-only trade, and experts 
believe the new trade at settlement (TAS) order type has beneficial aspects for 
the grain industry. 

   TAS, as it's commonly referred to, allows market participants to buy or sell 
futures contracts during the day equal to the yet-to-be-determined market 
settlement price plus or minus 4 ticks, said CME Director of Commodity Products 
Tim Andriesen. One tick is one-quarter of a cent. 

   During harvest, this could give grain elevators the ability to pre-hedge the 
bushels they plan to buy after the market closes at the settlement price. It 
could also give the market a little more flexibility when it's locked in 
limit-up or limit-down trade. 

   "So any time during the day, I could say I want to buy 10,000 bushels of 
corn at the settlement price, and I'm willing to pay 1 tick more than the 
settlement price to get that done," Andriesen said. "It is a market, so you 
have to have somebody who is willing to sell it to you at 1 tick more."

   The order will execute, but the absolute value of it won't be known until 
after the market settles at 1:15 p.m. CT. 

   TAS orders will replace market-on-close (MOC) orders, a type of order that 
can be executed in open-outcry pit trade but not on CME's Globex platform. CME 
will be closing its futures pits after the July 2 trading day. Options pits 
will remain open for grains, oilseeds and livestock markets. 

   Settlement in the grains will remain at 1:15, but the electronic futures 
market will continue to trade until 1:20 p.m. effective Sunday, July 5 for the 
July 6 trading day.

   Diana Klemme, vice president of Grain Service Corporation, said the people 
who are most likely to use TAS orders already used MOC orders to buy or sell 
before weekends or overnight.

   "Frankly, I think they will find it more useful and like it better than the 
old system," she said. 

   On a recent conference call with grain elevators, no one said they thought 
the idea was horrible. They had very few questions and found it reassuring that 
TAS has been in use in other markets for quite some time. 

   In the energy markets, 97% of the TAS business is done at flat, which means 
at the settlement price or plus 1 tick, Andriesen said. "Some of the time 
trying to do MOC orders, you would get a fairly good-sized range on the 
settlement and it might be more than 1 tick off the settlement price where you 
got your pre-hedge executed."

   Klemme said the switch to TAS will help avoid other issues that can arise 
with MOC orders, like calling your broker only to find that everyone's trying 
to do last-minute business and you can't get the order through. 

   For grains, TAS orders will be available on the first three listed 
contracts, plus the first new-crop month, if it's not already represented in 
the first three months. So on June 15, TAS will be available on the July, 
September and December corn contracts. In February, TAS will be available on 
the March, May, July and new-crop December contact. TAS will be available for 
corn, soybean (including meal and oil) and wheat, but not for rice and oats. 

   In the livestock markets, TAS will only be available of the first two listed 
contracts. 

   TAS will also be available on spreads. For grains, it'll be available on the 
old-crop, new-crop spread and the first two listed calendar spreads. For 
livestock, it'll only available for the first listed spread. 

   Andriesen and Klemme said it'll take time for the industry to learn about 
TAS and start using it. They think TAS will likely be a popular tool to help 
grain elevators hedge at times of year when they expect to buy a lot of grain 
during non-market hours, like harvest. It could also be an option on days when 
the market locks limit up or limit down. 

   TAS lets you trade the settlement price +/- 4 ticks, Andriesen said. In 
theory, that adds about a penny to the limit. He anticipates that on 
locked-limit days TAS orders are more likely to be filled if they're the 
settlement price +/- 4 ticks because they allow a little more room for a trade 
to take place. It'd be less likely that a settlement +/- 1 tick would be 
filled. 

   "It does allow a little bit more space on limit days," he said. "Keep in 
mind that this is a market, so to trade TAS, a TAS buyer and a TAS seller have 
to match on price and on quantity. Putting in a TAS order doesn't necessarily 
mean you will get it done."

   On locked-limit days, Klemme said, "we'll find out how it works. It doesn't 
take anything away, and it just might let us get things done that we might not 
have been able to do before."

   Klemme said TAS reminds her of the 1980s when options were first introduced 
in ag products. 

   "No one knew what a put or a call was. But what we learned over time was 
that marketing with just futures was like using a sledgehammer, and marketing 
with options was much more like using a scalpel. There are some things TAS will 
let us do on the close to limit risk that we couldn't do with MOC orders. It'll 
take a while to learn what you can do with it, but we'll adapt."

   If you'd like more information on TAS, please visit 
http://www.cmegroup.com/agtas 

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

   Follow Katie Micik on Twitter @KatieMDTN

******************************************************************************
Rivers Fill Up, Wheat Condition Worsens, Harvest Slows

   Heavy, frequent rains in the central Plains filled the Missouri River up 
over its banks last week, along with creeks and streams in the same area. In a 
span of 36 hours, the river near Waverly, Missouri, rose three feet to 29.38 
feet on June 7.

   Adam Casner, a farmer in Carrollton, Missouri, told DTN via email he 
expected to be "heading for higher ground" on June 5 after packing up his home, 
equipment and tools as the flood waters threatened. He farms next to the levees 
along the Missouri River and said the water they were getting was "seep water," 
which is sitting in his corn fields. Casner said the water is "like a heavy 
rain that won't drain and will stand till the river goes down."

   As of 8 p.m. June 6, the levees along the river were less than a foot from 
overtopping. The river crested the afternoon of June 7 at 29.42 feet and as of 
Monday morning, levels were at 26.74 feet. Minor flood stage is 20 feet; 
moderate flood stage is 29 feet; major flood stage is 31 feet.

   Farther north near the confluence of the Missouri and Yellowstone rivers in 
North Dakota, the river breached minor flood stage on the morning of June 7 at 
22.45 feet and was expected to crest at 22.9 feet late that day. Here is a link 
to the current status of the river: 
http://water.weather.gov/ahps2/hydrograph.php?wfo=bis&gage=wltn8

   Heading south again, the historic rain fall that occurred in the Texas 
Panhandle and Oklahoma during May caused a "significant fast rise" on the 
Missouri River, and the Arkansas River as well, according to Tom Russell, 
Russell Marine Group. Ingram Marine said on their website June 8 that the 
Arkansas River was experiencing high water conditions and the river was closed 
to navigation.

   Russell told DTN in an email, "as the remainder of the rain system moved 
north, it did give slight rise to Illinois River and Upper Mississippi between 
St. Louis and Cairo, but manageable. As this water flushes down the Lower 
Mississippi it will keep water levels slightly high but manageable from Cairo 
to New Orleans."

   "Water levels in the Baton Rouge and New Orleans harbors will remain high 
enough throughout the balance of June to keep safety protocols in place, which 
have only been lifted for a brief period of time during mid-May. River levels 
are to remain slightly high and safety protocols in place at least until second 
half June," said Russell. "Barge and ocean vessel traffic is moving and loading 
with only minimal slowdowns due to water levels."

   DTN Senior Ag Meteorologist Bryce Anderson said "While flooding is occurring 
in the lower Missouri River in central Missouri, along with the Red River and 
Arkansas River in eastern Texas and western Louisiana, there is very little 
additional flooding forecast this week. Rainfall will be light, less than .25 
inches, in the majority of the Plains and Midwest through Thursday. The pattern 
does turn wetter in the Midwest from Thursday through Saturday, so by next week 
we could see more flooding in the Missouri River. Central Texas stays on the 
light side for rainfall all week; thus, a new round of flooding in the Red and 
Arkansas does not look imminent."

   Another useful link:

   http://water.weather.gov/ahps2/hydrograph.php?wfo=eax&gage=wvym7

   Rains Affecting New-Crop Winter Wheat Harvest/Quality

   Heavy rains that battered northeast Colorado, northwest Kansas and southern 
Nebraska over the weekend will likely deteriorate winter wheat conditions 
further. In addition, heavy rains in Texas, Oklahoma, Ohio, Arkansas and 
Missouri the past few weeks have already caused harvest delays and quality 
downgrades in winter wheat.

   The U.S. Wheat Associates June 5 harvest progress report said "Another week 
has passed with no harvesting in the southern SRW growing region due to 
continuing rain and extremely wet fields. The HRW wheat harvest is finally just 
starting in north Texas through central Oklahoma. Areas in south-central Texas 
have been ready to harvest for several weeks, but wet conditions are still 
keeping most combines out of the fields."

   The USW report added, "There are concerns about the likely occurrence of the 
fungal disease fusarium (head scab) in the HRW crop from northern Texas to 
southern Nebraska because of the consistently cool, wet spring weather." Adding 
to that is the probability proteins may be lower and sprout damage will cause 
lower falling numbers which, depending on the severity, will cause mills to 
reject it.

   The cash price reacted to the harvest delays and quality concerns, rising to 
36 1/2 cents in the Kansas City July futures last week. SRW basis levels 
improved slightly and protein premiums for spot HRW moved higher. Premiums for 
11 through 11.8 proteins are 5 cents stronger from one week ago; 12 through 
12.8 proteins are 3 cents stronger with 13 proteins a 5 cent premium to 12's 
and 14 proteins a 7 cent premium to 13 proteins. Winter wheat basis usually 
wants to weaken once harvest starts, but until the harvest gets into full swing 
and there is a better handle on quality, quantity and proteins, the cash market 
will likely remain firm.

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

   Follow Mary on Twitter @MaryCKenn

******************************************************************************
Will Farmers Keep 2014-15 Corn Through the Next Harvest?

   A recent DTN poll revealed that a large number of farmers plan on keeping 
some or all of the corn they have left in storage from the 2014-15 season 
through the next harvest. Below is a recent article on the topic, but I wanted 
to ask you -- what are you planning to do with your stored corn? What perils, 
pitfalls and possible rewards do you see in this kind of strategy?

   ***

   More than 25% of the respondents to a recent DTN 360 Poll said they're 
willing to roll the dice and see if holding 2014-15 corn into the new-crop 
marketing year will fetch a better price.

   A majority of the 305 responses to the non-scientific poll -- 58% -- said 
they plan on selling all of their corn in storage within the next two months or 
before harvest. But 27% plan on holding their corn into October and beyond. 
Another 15% plan on selling part before harvest and waiting to see what the 
market does before they sell the rest. 

   "I don't see any surprises in this poll, with almost 60% looking to clear 
space before harvest," DTN Senior Analyst Darin Newsom said. "As I discussed in 
last Friday's column, this fits in with the seasonal tendency of the DTN 
National Corn Index to move lower in July, while basis also weakens." (NCI.X 
versus the September from the last week of June through the last week of July). 

   At the end of March, USDA estimated farmers held 4.38 billion bushels of 
corn on the farm. Another 3.36 billion bushels were stored in off-farm 
locations. 

   There's probably been a steady flow of farmer selling since then, DTN 
Analyst Todd Hultman said, but there's been nothing dramatic enough to cause 
big moves in the basis. A large basis move would be an indicator that farmers 
had started selling grain from their storage. 

   Hultman said the inclination to empty the bins before the next harvest is 
not a surprise, and "reinforces the neutral to bearish trend in corn prices as 
it ensures that commercials should have no worries obtaining corn this summer. 

   "The 42% of respondents who intend to store all or part of their corn past 
harvest may change their minds if they don't see any hot and dry weather 
materialize this summer."

   The poll was taken from April 27 to May 8. 

   A second DTN 360 poll, taken from May 8 to May 20, showed that 49% of 
respondents felt confident in their ability to keep grain in good condition 
through summer. 

   Eleven percent mentioned they had concerns about keeping bins monitored due 
to other responsibilities on the farm. A full 17% said they're "hoping for the 
best." 

   Thirteen percent said they'd purchased new monitoring equipment or assigned 
the responsibility to a specific person. Six percent moved grain to a 
commercial elevator. 

   "The bottom line, in my opinion is that farmers generally view themselves as 
solid quality managers so have no problem storing corn beyond this year's 
harvest," Newsom said. 

******************************************************************************
Even Still, All is Not Quiet at the Western Ports 

   After nearly 10 months of labor slowdowns resulting in monetary losses to 
container shippers, the members of the Pacific Maritime Association (PMA) and 
the International Longshore & Warehouse Union (ILWU) ratified a new five-year 
contract on the West Coast which is retroactive to July 1, 2014, and runs 
through June 30, 2019.

   According to the PMA website the contract, which covers 29 ports on the West 
Coast including major container ports in Los Angeles, Long Beach, Oakland, 
Portland, Seattle and Tacoma, features an "enhanced arbitration system" 
designed to support waterfront stability, capacity growth and productivity. 
"This is especially important given the increasingly competitive environment 
West Coast ports face now and into the future from a variety of factors, 
including the long-anticipated opening of the expanded Panama Canal," PMA 
stated.

   "Health care changes maintained in the contract will foster greater 
efficiency, cost containment and fraud prevention for the long-term. To date, 
these efficiencies have already delivered significant savings to the health 
care plan. At the same time, ILWU members will continue to enjoy a very 
generous, employer-paid health care plan. The agreement also features wage and 
pension increases for ILWU members," the PMA statement continued.

   The one catch in this contract that is now causing problems for trucking 
companies at the port is the agreement the PMA made with the ILWU workers 
allowing them jurisdiction over the maintenance and repair of truck chassis. 
While this agreement does not allow the ILWU to inspect trucker-owned chassis, 
the process is creating a slowdown in trucks' ability to enter the port. All 
trucks are pulled over because there is no way to immediately tell if they are 
privately owned. Curtis Whalen, executive director of the American Trucking 
Association's (ATA) intermodal conference told DTN via phone, "The whole 
process is illegal and the ILWU has no legal right to stop the truckers." Even 
still, Whalen said the unions continue to "do what they want," whether it is 
legal or not. 

   Whalen pointed out "the intermodal equipment provider (IEP) is responsible 
for roadability and under law, inspections are done long before the trucks 
arrive at the ports." Shipping lines no longer own the chassis after selling 
most of them to IEPs, mainly to save themselves money. Whalen said this means 
the PMA, which represents the shipping lines, has no authority over the chassis 
inspection. Whalen said the "union and PMA had no right to negotiate over 
something they do not own."

   The Federal Motor Carrier Safety Administration (FMCSA) has rules and 
regulations governing ocean carriers, railroads, chassis pool operators and 
other IEPs. These rules, issued in December 2008, affect the chassis, which are 
special trailers that hold cargo containers when they are transferred from ship 
or rail to truck for final delivery. The new regulations made IEPs subject to 
the FMCSA rules for the first time, and establish shared safety responsibility 
among IEPs, motor carriers, and drivers. "We want to ensure that every piece of 
equipment traveling on our highways is operating safely," said FMCSA 
Administrator John H. Hill in a Dec. 17, 2008 press release. Here is a link to 
the press release and new regulations: http://goo.gl/FsvHN5

   Whalen told DTN he has already notified the FMCSA in Washington DC, about 
what is happening on the West Coast. Whalen said if the ILWU continues to pull 
trucks over, truckers may refuse to haul to the ports, causing a loss of truck 
drivers in an industry that is already experiencing shortages.

   NEGATIVE EFFECTS OF LABOR SLOWDOWNS STILL LINGER

   Mike Hajny, vice president of Wesco International, a hay exporter in 
Ellensburg, Washington, told DTN in an email that their volume of orders has 
dropped off significantly due to too much inventory in certain countries such 
as Japan or Korea. "When the port slowdown was in full swing, customers such as 
Australia, Spain and Pakistan had to move to find other sources for forage. 
That product turned out to be less expensive and filled warehouses," said 
Hajny. "After the PMA/ILWU announced their agreement, cargo magically started 
to flow out of West Coast Ports. As it arrived in Japan and Korea, the 
warehouses were full of product from other countries and there was nowhere for 
USA cargo to go."

   Hajny said now the market is in an "over-supply situation. Of course issues 
with container free time have caused many customers to move into 'price dumping 
mode' and offer product at a loss, just to get it off the docks. This has 
caused tremendous confusion in the market and has caused any vigor in the 
market to evaporate. Worst issue is, 2015 crop harvest is underway in USA, and 
there is little to no interest at this time from customers. Paint it however 
you will, but this is a direct result of the port slowdown and cargo not moving 
smoothly for four months."

   Portland is another issue, Hajny added. "With no shipping line with direct 
call to Portland, everything has to be moved by rail or truck up to 
Seattle/Tacoma. Space is limited on the rail and it's difficult to get bookings 
at times. Trucking adds tremendous time and costs to the shipments. It's just 
not pretty, and it probably is going to stay that way."

   The Washington apple industry also continues to feel pain from the West 
Coast slowdown. AP reported "a record crop of apples, coupled with the West 
Coast port slowdown earlier this year, is taking a toll on Washington apple 
growers. Nearly $100 million worth of apples that cannot be sold have been 
dumped into fields across central Washington, the nation's most productive 
apple region. The apples are being left to rot and compost in the hot sun, an 
unusual occurrence for an industry that has found ways to market ever-growing 
crops."

   Todd Fryhover, president of the Washington Apple Commission in Wenatchee 
told the AP, "If we wouldn't have had the port slowdown, we wouldn't have 
needed to dump apples. The ports dispute created numerous problems for farmers. 
A big issue is that apples loaded into unrefrigerated containers sat on docks 
for weeks waiting to be loaded on a ship." Fryhover added that he estimates 
apple exporters lost at least three weeks of their season because of labor 
problems at West Coast ports. "Along with a record supply of apples, that 
created surpluses that could not be shipped profitably to markets or 
processors," Fryhover said in the AP article.

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

   Follow Mary Kennedy on Twitter @MaryCKenn

******************************************************************************
USDA: Ag Exports at $140.5 Billion

   USDA's latest forecast for agricultural exports in fiscal 2015 shows a $12 
billion year-over-year decline to $140.5 billion, which is the third highest on 
record but the lowest estimate since 2012. 

   Most of the decline comes from high-value products like the $1 billion 
horticultural, fruit and vegetable products. The forecast for livestock, 
poultry and dairy exports was lowered $500 million on increased global 
competition for dairy products and reduced poultry exports following the avian 
influenza outbreak. 

   The outlook for oilseed and grain and feed exports brightened. USDA's 
quarterly Outlook for U.S. Agricultural Trade said exports of oilseed and 
oilseed products increased $100 million as high soybean meal values offset 
lower soybean prices. The forecast for grain and feed exports increased $600 
million on higher sorghum and DDGS sales. 

   "The strong pace of American agricultural exports continues, with a trade 
surplus of more than $23 billion, a $1 billion increase from earlier 
projections for fiscal year 2015," Agriculture Secretary Tom Vilsack said in a 
press release. "Fiscal years 2009 to 2014 represent the strongest six years in 
history for U.S. agricultural trade, with U.S. agricultural product exports 
totaling $771.7 billion. For many American products, foreign markets now 
represent more than half of total sales. U.S. agricultural exports now support 
more than 1 million jobs here at home, a substantial part of the 11.7 million 
jobs supported by exports all across our country. Expanded U.S. trade overall 
has added roughly $13,000, on average, to every American family's income. 
Fiscal year 2015 exports are now forecast to be the third-highest on record, 
led by a strong performance in bulk commodities such as grains, animal feeds, 
and oilseeds."

   Total grain and feed exports are forecast at $30.5 billion. USDA expects the 
volume of corn exports to be higher than its February estimate by 1.5 million 
metric tons. Its new estimate is 46 million metric tons (1.8 billion bushels). 
The volume increase is largely offset by weaker prices, USDA stated. 

   Strong early-season sales and commitments support record soybean and soybean 
meal export volume. "Unit values for soybeans are reduced based on strong 
competition from Brazil, a weak real, and record U.S. plantings this spring," 
the report stated. "This reduces the soybean export forecast by $200 million, 
but is more than offset by a larger soybean meal forecast, raised in response 
to stronger-than-expected unit prices."

   Wheat exports are forecast at $6.1 billion, a $300 million decrease from 
February's forecast. USDA said lower volumes are largely to blame. 

   Vilsack also used the news to emphasis the importance of free-trade 
agreements to the American economy and especially the farm sector. "Exports to 
countries where the United States lacks the assurances offered by trade 
agreements have declined this year, highlighting why it is so important for 
Congress to act and pass strong trade promotion authority legislation," Vilsack 
said. 

   The U.S. Grains Council's weekly newsletter highlighted one of the successes 
of the free-trade agreement with Colombia in its weekly newsletter. That 
agreement was passed in 2011 and went into effect in May 2012. 

   For the second year in a row, Colombia is likely to exhaust its duty-free 
quota, 2.43 million metric tons (95.6 mb) early in the calendar year.

   "The Colombian industry estimates importers are planning to purchase an 
additional 2.6 million tons (102 million bushels) this calendar year," said 
USGC Regional Director of the Western Hemisphere Marri Carrow. "Out of quota 
U.S. corn will have a 16.5% duty applied, which is the same for Argentina and 
Brazil. Capturing these final year sales will really depend on the basis, but 
current market dynamics are favorable for the United States to maintain its 
current market dominance." 

   In the 20 countries where the U.S. has free-trade agreements, U.S. ag 
exports have been relatively steady, Vilsack said. 

   "Every day without trade promotion authority, American agriculture suffers 
as competitors negotiate their own agreements and lower global standards when 
it comes to environmental impact, consumer safety, and working conditions. USDA 
will continue to fight to get the best deal for farmers and ranchers, but our 
ability to open new markets and create new customers is limited without 
Congressional action."

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

******************************************************************************


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