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Market Matters Blog           11/23 14:21
Can Grains Get Worse?
HRW Wheat Basis Well Below Five-Year Average
Mr. Supply says Corn is Overpriced
Trump Administration Impact on Trucking and Infrastructure Uncertain
Election Night Market Reaction
No Vacancy 
Basis: Game On
US 2016 HRS Wheat Crop: Top of the Class 
Fear of Commitments
What's a Farmer to do With a Bumper Crop?

Can Grains Get Worse?

   At times like these, when grain piles are high and farm incomes are falling, 
it can be easy to feel like things will never get better. The truth is there is 
no reason to believe that 2017 will not provide another year of good growing 
weather, but at this moment no one can say for sure. 

   As long as we are all adults and understand that yes, grain prices can go 
lower again in 2017, here are a few things to note from a longer-term 

   Starting with corn, four consecutive years of good growing weather have 
taken spot corn prices down 54% the past 48 months. In fact, when spot prices 
closed at $3.01 1/2 at the end of August, the four-year price change hit a 
minus 62%. Going back to the presidency of JFK, corn has only had one four-year 
drop that severe and it happened in June 2000, coming off of a big spike in 
1996. Even the largest four-year decline of the 1980s only reached 55% in 
August of 1987.

   If we look at corn yields, the longest stretch of consecutive yields above 
trend in modern history happened in the seven years between 2003 and 2009. So 
yes, it would not be remarkable to see another above-trend corn yield in 2017. 
However, corn prices respond to many factors other than yield.

   Looking at spot corn prices, the longest stretch endured without reaching 
their one-year high in modern history was 4 1/2 years ended in February 1988. 
In the current bear market, corn's streak already ended at 35 months as spot 
corn reached its one-year high in July 2015 and again in June 2016. The 
opportunities did not last long, but they were there.

   The current king of bear markets is wheat where Chicago's spot prices are 
down 53% from where they stood four years ago and near their lowest prices in 
10 years. At the end of August, the four-year decline in Chicago wheat stood at 
59%, a drop that has only been approximated twice since the 1960s. The other 
two were a 58% drop in February 1978 and a 62% drop in April 2000.

   Except for one brief flicker in May 2014, Chicago wheat prices have not seen 
their one-year high in 52 months. This is eerily reminiscent of the 56-month 
stretch from April 1996 to January 2001 when prices finally rang the one-year 
bell at $2.85 1/2. Since the 1960s, there is no other time that comes close to 
these two long downward slides in wheat.

   As the lights dim on the bear markets for corn and wheat in 2016, it is fair 
to ask: can it get much worse than this? Our answer has to be yes, it can -- 
there is still downside risk in grain markets. But if it is any comfort, 
previous bears have rarely lasted this long or fallen this hard.

   Todd Hultman can be reached at  

   Follow him on Twitter @ToddHultman1

HRW Wheat Basis Well Below Five-Year Average

   If you take a good look at the chart accompanying this column, you will see 
that the weekly DTN National Average Basis last week continues to hover well 
below average five-year values. It started out the new-crop year slightly above 
the minimum five-year average, but took a turn for the worse before the end of 
June and has never recovered.

   Simply put, there is too much wheat in the world, including here at home. As 
global stocks continue to grow, usage can't keep up with the pace at which 
supplies will increase globally. The Nov. 14 Economic Research Service (ERS) 
wheat outlook reported that world wheat production in 2016-17 is forecast at 
744.7 million tons, up 0.3 mt, and 9.2 mt ahead of last year's record.

   On Nov. 9, the monthly USDA WASDE report raised global wheat supplies for 
2016-17 to 1.7 mt on a 0.3-mt production increase and higher beginning stocks. 
The largest beginning stocks change is for Ukraine on expectations of lower 
food use more than offsetting higher feeding.

   U.S. ending stocks were raised to 1.143 billion, up 5 million bushels on a 
reduction in food use. By class, hard red winter (HRW) wheat food use was 
raised 10 mb, hard red spring (HRS) wheat food use was lowered 10 mb and durum 
wheat food use was lowered 5 mb.

   The U.S. 2016-17 wheat for food use projection was lowered 5 mb, to 963 mb, 
based on the release of the USDA, National Agricultural Statistic Service 
(NASS) Flour Milling Products report Nov. 1 and expectations for the balance of 
the marketing year.

   The proportional use of HRW and HRS in the mill grind was adjusted in the 
ERS November report. ERS noted that the 1.2% increase in HRW use versus the 
0.9% decrease in HRS moves the 2016-17 wheat by class food use proportions 
closer to 2015-16 estimates, while still maintaining a higher-than average 
proportion of HRS in the mill grind.

   "Above-average proportional use of HRS for flour is reflective of increased 
use of relatively higher protein HRS to balance below-average protein new-crop 
HRW in achieving target protein levels," reported ERS. "Recent strength in HRS 
prices couples with strong export demand to support November's slight reduction 
of HRS food use. Greater-than-expected use of relatively higher protein 
old-crop HRW puts further downward pressure on HRS food use in the first 
quarter and favors a slight expansion to the annual projection of HRW for the 
same category." Feed-quality and lower grades of wheat are abundant in the 
world and are currently priced competitively to corn. Thus, premiums for 
higher-quality wheat grades are rising.

   Alex Bassett, risk management consultant for FCStone, LLC, told me that 
"Some mills we have spoken with are covered on wheat purchases well into March 
for some locations. In terms of blending, some HRW mills are using between 20% 
to 30% of HRS in their blend to hit the needed protein specs. So, this will 
hurt the domestic basis values for HRW; however, we have seen basis levels 
begin to firm for the export market for 11% and 12% pro wheat as U.S. HRW is 
the cheapest wheat in the world. However, you will see more HRW in the grinds 
in general and less HRS just due to the Minneapolis-Kansas City spread." 


   Informa Economics IEG recently updated its 2017 acreage projections saying, 
"Based on its November winter wheat planting survey (the third of the season), 
IEG projected winter wheat plantings at 33.8 million acres, which would be down 
7% from a year ago and about 1.7 million lower than IEG's previous report. Hard 
red wheat acreage was projected at 24.6 ma, which was nearly 1 ma below IEG's 
October update. Soft red wheat acreage was reduced 545,000 acres from last 
month to 5.7 million, and winter white was projected to total 3.4 ma, which was 
115,000 below IEG's October report. IEG forecast the 2017 winter wheat harvest 
at 1,326 mb, which, if realized, would be 345 million below last year."

   Bassett and other analysts I spoke to about their thoughts on the reduction 
in planted winter wheat acres agree that we will see at least 7% to 10% fewer 
planted acres than last year. 

   Angie Setzer, vice president of Grain Citizens LLC in Charlotte, Michigan, 
told me that in her neck of the woods, she expect planted acres to be down 
significantly versus last year. "Producers were already planning on planting 
less year-over-year due to unfavorable market conditions, but poor weather 
throughout October and well in to November has forced the hand of many growers 
with some choosing to claim prevented planting. What has been planted looks OK, 
but the extended pattern of warm weather has allowed some of the 
earlier-planted stuff to grow beyond what is considered an optimal level for 
winter dormancy."

   USDA will release its final 2016 winter wheat seedings report Jan. 12, 2017. 
Then, we will patiently wait for spring to arrive and watch as wheat comes out 
of dormancy and begins to start living its nine lives until harvest. In the 
meantime, producers are faced with cheap basis levels and low futures, which 
makes for an unattractive flat price for now.

   Mary Kennedy can be reached at 

   Follow Mary Kennedy on Twitter @MaryCKenn

Mr. Supply says Corn is Overpriced

   A few weeks ago, around the time of Halloween, I wrote an On the Market 
column titled "Dr. Technical and Mr. Supply." Based on Stevenson's Jekyll and 
Hyde, the theme was that the technical (chart-based) analyst side of me still 
viewed grains, including corn, as bullish. However, the fundamental (supply and 
demand-based) analyst that makes an appearance now and then can't be anything 
but bearish.

   It is the latter that is writing this blog. So don't hold his conclusion 
against me, sweet ol' Dr. Technical. I had nothing to do with it. 

   It is Mr. Supply's opinion that if one is still bullish corn, like Dr. 
Technical, then one is obviously crazy. All you have to do is look at USDA's 
November Crop Production and Supply and Demand reports, and we all know USDA is 
NEVER wrong, and see that corn production is pegged at a new all-time high of 
15.226 billion bushels, raising ending stocks to a modern-day record of 2.403 
bb. And yes, those 3 million bushels ARE important, so don't drop them off!

   Anyway, record demand projected at 14.610 bb doesn't help at all, with the 
bottom line ending stocks-to-use coming in at 16.4%. What's that you ask? 
What's "ending stocks-to-use" have to do with anything? Haven't you been paying 
attention?! (Dr. Technical: See, I told you he was mean.)

   Ending stocks-to-use are the Holy Grail to fundamental analysts. The higher 
the percent, the more bearish the market. Easy enough, right? What, more 
questions?! Just take a look at the attached chart...

   Granted, I'm not a specialist in scatter charts. I tend to leave those for 
DTN Analyst Todd Hultman and DTN Contributing Analyst Elaine Kub to decipher, 
but this is my best shot at one. Annual ending stocks-to-use pulled from USDA's 
January reports are plotted along the X-axis (bottom), with calculated national 
average cash price received plotted along the Y-axis (left hand). The blue dots 
show the combination of the two dating back to the 1995-1996 marketing year. 
For example, the first blue dot on the Y-axis is the ending stocks-to-use of 5% 
from 1995-1996, with an average price of $3.24.

   Generally speaking, the lower the ending stocks-to-use, the higher the 
price. That blue dot shining like the North Start at the top of the chart is 
the 7.4% (es/u) from 2012-2013 that had an average cash price of $6.89. On the 
other end of the spectrum, the last blue dot to the right marks the 19.8% from 
2004-2005 with an average cash price of $2.06. Simple enough, right? Good!

   So if, like me, ending stocks-to-use run your analytical life, then there is 
only one conclusion: This year's cash corn price is overpriced, and needs to be 
closer to $2.00 per bushel. 

   There, I've said it again. I was told earlier this year, "It just isn't 
summer unless Newsom predicts $2.00 corn." (Dr. Technical: Again, don't blame 
me. Mr. Supply is the crackpot.)

   Take a look at the fenced-in area. The big red dot (I did that intentionally 
to signify bearishness) marks USDA's latest projection es/u projection of 
16.4%. Did I mention that's the largest in 10 years? Anyway, USDA also 
calculated the average cash price at $3.30 in November. But look below that 
comet that is flaming out and you see something more realistic. Back in 
2001-2002 es/u was calculated at a familiar 16.3% with cash price coming in at 

   So, yes, based on the purest of fundamental standards -- remember, USDA is 
infallible -- the average cash corn price for 2016-2017 should be close to 

   It's time for all you technical bulls to drink the elixir that opens your 

   Darin Newsom can be reached at

   To track hisy thoughts on the markets throughout the day, follow him on 
Twitter @DarinNewsom.



Trump Administration Impact on Trucking and Infrastructure Uncertain

   While various trucking and transportation-related industries have 
congratulated President-elect Donald Trump on his election victory, some people 
are wondering if recent regulations may be reversed and others are concerned if 
the poor state of the nation's infrastructure problems will be addressed by the 
new admiration.

   Lane Kidd, managing director of the carrier coalition the Trucking Alliance, 
told DTN that he doubts Congress will reverse regulations it initiated, 
especially the most recent decision on electronic logging devices (ELDs) in 
interstate trucks.

   "To roll back Congressional actions -- that would be farfetched," he said. 
The ELD mandate rule, presented in December 2015, requires most truckers 
currently using paper logs to transition to an ELD by Dec. 18, 2017. The rule 
will not apply to drivers in vehicles made before the year 2000.

   On Nov.2, the Trucking Alliance, a coalition of freight transportation 
companies and other businesses that support safety reforms in the freight 
transportation industry, released a statement on its website applauding the 7th 
Circuit U.S. Court of Appeals Oct. 31 ruling. The ruling upholds a 2012 
congressional mandate to require electronic logging devices (ELDs) in 
interstate trucks, after one of the largest truck driver groups had appealed to 
the court to overturn the ruling as unconstitutional. ELDs automatically record 
the hours that truck drivers are behind the wheel; monitoring and limiting the 
hours helps reduce truck driver fatigue and improve highway safety.

   The news release said that court ruling was unanimous, and quoted Judge 
David Hamilton saying that with logbooks, it "is easy to insert an error ... 
whether intentionally or not" and that logbooks "have been ongoing sources of 
concern because they are easy to falsify." This ruling virtually assures that 
all interstate freight carriers must install ELDs in their trucks by December 
2017, giving law enforcement a more accurate way to verify compliance with 
drivers' on-duty driving time.

   The three-judge panel frequently cited the importance it gave to Congress 
and its mandate of ELDs in 2012, and wrote that "requiring ELDs was not left to 
the discretion of the agency; Congress mandated it" and later emphasized that 
"Congress did not instruct the Agency to consider requiring electronic 
monitoring, as it had in the Interstate Commerce Commission Termination Act of 
1995. In 2012, Congress simply ordered the agency to require ELDs."

   "The fact that Congress mandated ELDs, rather than relying on the FMCSA to 
simply promulgate a rule making, gave this issue much more weight," said Kidd. 
"Congress mandating ELDs will prove to be the pivotal point that changed the 
trucking industry for the better and a new era of safety and compliance."

   He added, "The Trucking Alliance is making progress in promoting safety 
reforms in the freight transportation industry that can reduce the number of 
large truck accidents. We will be vigilant to maintain that progress and to 
continue to achieve even more reforms that can improve the safety for 
commercial truck drivers."

   Kidd did mention that newly decided regulations for tractor-trailer 
emissions may end up becoming a target for the new administration. Phase 2 
emissions regulations were finalized this past year by U.S. Environmental 
Protection Agency (EPA) and U.S. Department of Transportation's National 
Highway Traffic Safety Administration (NHTSA) and not mandated by Congress. "I 
can see where Congress could roll back or stall regulations initiated at the 
agency level," Kidd said. "There's a chance, but whether there's probability -- 
that's the big question."


   Mike Steenhoek, Executive Director Soy Transportation Coalition (STC) told 
DTN that, "It will be important for the Trump Administration to present a 
tangible "win" in the initial days of the new presidency to assure the American 
public it has the capacity to govern effectively. So many of the other issues 
featured throughout his campaign -- immigration, Obamacare repeal, Supreme 
Court appointments, tax reform, etc. -- are highly divisive and will encounter 
strong opposition from Congressional Democrats."

   Transportation issues may be less divisive for the politicians.

   "Transportation infrastructure enjoys considerably more bipartisan support 
and may be an area in which the new president and Congress are able to get 
something done. In contrast to other issues, the benefits of transportation 
infrastructure investment are more tangible and less hypothetical to the 
American public. Once the investment has occurred, one can point to the 
physical asset that will provide benefit for years to come as an example of 
success. Transportation investment can also be distributed throughout the 
country -- allowing both urban and rural areas to enjoy its benefits."

   Steenhoek noted that that President Elect Trump included the following 
statement in his acceptance speech: "We are going to fix our inner cities and 
rebuild our highways, bridges, tunnels, airports, schools, hospitals. We're 
going to rebuild our infrastructure, which will become, by the way, second to 
none. And we will put millions of our people to work as we rebuild it."

   Steenhoek said he expects preparations will be made by Trump officials to 
develop an aggressive infrastructure plan that will be unveiled in the early 
stages of his presidency. "Of course," added Steenhoek, "the beguiling question 
will be how to pay for new investment. President-Elect Trump throughout the 
campaign offered little insight into the potential sources of funding. The 
willingness, or lack thereof, of Congress to collaborate with him remains to be 

   I have spoken to various farmers and we agree that our nation's roads need 
to be maintained and improved because those roads are the gateway to 
agriculture commerce and farmers' ability to market their crops. It's not just 
our roads that need attention. Our waterways are in dire need of repair as the 
aging lock and dam system needs an overhaul and not just a Band-aid. Farmers 
near the river depend on barge shipments because it is another choice and 
sometimes better choice for them to market their grain.

   The agricultural products and the agribusiness industry that has developed 
in the Mississippi basin produce 92% of the nation's agricultural exports, 78% 
of the world's exports in feed grains and soybeans, and most of the livestock 
and hogs produced nationally. Sixty percent of all grain exported from the U.S. 
is shipped on the Mississippi River through the Port of New Orleans and the 
Port of South Louisiana. 

   On Sept. 28, the House of Representatives passed the Water Resources 
Development Act (WRDA) of 2016 by a vote of 399 to 25. The Senate passed its 
version of WRDA on Sept. 15 by a vote of 95 to 3. The bill authorizes $9 
billion dollars for inland navigation and water projects administered by the 
Army Corps of Engineers. According to various transportation groups, it is 
expected that Congress will entertain and pass the conference report during a 
lame duck session following the November election. Passing this important piece 
of legislation will be key to repairing and then keeping our waterways healthy.

   Mary Kennedy can be reached at 

   Follow Mary Kennedy on Twitter @MaryCKenn

Election Night Market Reaction

   Editor's Note: DTN analysts Darin Newsom and Todd Hultman took shifts 
through Election Day -- and through the night -- to give readers a stream of 
market commentary on the latest developments in the election and market 

   The following is the commentary on the markets through the night, from most 
recent to early Tuesday evening. 

   Darin Newsom 11/9/2016 | 4:59 AM CST

   One more and I am out of here! Financial markets remain relatively stable 
following a volatile post-election overnight session. DJIA futures are still 
down about 300 points while European equity markets are slowly extending gains. 
The US dollar index is down 0.575 as gold pushes its rally back to $30. Crude 
oil has turned higher, posting small gains after losing almost $2.00 Tuesday 
night. Grains remain under pressure Wednesday morning with soybeans down 8 
cents, corn down 4 cents, and Chicago wheat off 5 cents. This brings to an end 
DTN's round-the-clock coverage of the election and markets. Thank you for 
joining us as the night's historic events unfolded. We now return you to your 
regularly scheduled program.

   Darin Newsom 11/9/2016 | 3:59 AM CST

   There's not much stirring in the markets at this point as the election 
driven wave of panic has subsided. However, European stock markets have 
stabilized, with most now down less than 1%. Meanwhile DJIA futures are off 280 
points while the U.S. dollar index continues to show a loss of 0.250. Gold is 
still $27 higher, well off its earlier gain of $64. Grains are lower with 
soybeans down 9 cents, and corn and wheat both off 4 cents.

   Darin Newsom 11/9/2016 | 2:59 AM CST

   You don't have to let your mind wander far to imagine a reversal in some 
global financial markets Wednesday morning. DJIA futures have whittled the once 
800-point plus loss to less than 300 points, while gold is holding onto only 
$26 of its early $64 rally. The US dollar index was once down almost 2.000, now 
showing a loss of 0.600. Things could get interesting as the morning 
progresses. As for overseas equities, Asian markets closed lower and European 
markets are trading lower early Wednesday. Grains are also still lower, though 
soybeans have erased some of the early sell-off, down about 9 cents. Corn and 
wheat are both 4 cents lower.

   Darin Newsom 11/9/2016 | 2:01 AM CST

   DJIA futures have cut loss by more than half, down 390 points. Gold still up 
$35, US dollar index down 0.550. All are moving quickly in the opposite 
direction of what was seen earlier Tuesday night. Grains still down with 
soybeans off 9 cents, corn off 5 cents, and wheat down 4 cents.

   Darin Newsom 11/9/2016 | 1:59 AM CST

   President-elect Trump: Sorry to keep you waiting, complicated business. Now 
is the time for America to bind the wounds of division. I pledge that I will be 
president for all Americans. Work together to unify our great country. Rebuild 
our infrastructure, put millions to work to rebuild it. We will double our 
growth and have strongest economy in the world. We will get along with all 
countries who want to get along with us.

   Darin Newsom 11/9/2016 | 1:49 AM CST

   Interesting to note that markets are recovering slightly as the band plays 
President-elect Trump to stage.

   Darin Newsom 11/9/2016 | 1:48 AM CST

   President-elect Donald Trump is taking the stage in New York City.

   Darin Newsom 11/9/2016 | 1:43 AM CST

   According to CNN, reportedly, Clinton called Trump and conceded. I have seen 
no confirmation of this. Markets aren't reacting to the potential news with 
DJIA futures still down 500 points, the US dollar index is off 1.250, and gold 
is up $43.

   Darin Newsom 11/9/2016 | 1:27 AM CST

   CNBC saying Mr. Trump is in the building and will likely make a speech, 
subject unknown given he doesn't have the 270 electoral votes yet. Markets have 
calmed, but are still nervous. Analysts saying he has to understand the 
enormity of the job and the task at hand.

   Darin Newsom 11/9/2016 | 1:13 AM CST

   CNBC asking if markets NEED to hear from one of the candidates tonight. As 
mentioned above, things have finally calmed down with DJIA futures off only 500 
points, gold holding a $40 gain.

   Darin Newsom 11/9/2016 | 1:07 AM CST

   Needless to say, Podesta's announcement not popular at Trump's gathering, 
also in New York.

   Darin Newsom 11/9/2016 | 1:04 AM CST

   Clinton Campaign Chair John Podesta saying no concession speech coming 
tonight, more votes to count. Sending the remaining followers in New York home.

   Darin Newsom 11/9/2016 | 1:00 AM CST

   It's late in the game, literally, with some media outlets giving 
Pennsylvania to Trump. If so, that puts him at 267 electoral votes and leading 
in most of the states still in question. Markets have quieted, for now, with 
DJIA futures down 630 points, Japan's Nikkei off 920 points, the US dollar 
index falling 1.300 points, and gold up $47. You'll notice that most of these 
markets have moved well off session highs/lows. As for grains, there hasn't 
been much change over the last hour. Soybeans are down 12 cents, corn is off 6 
cents, and wheat continues to show a 4-cent loss. Talk among some analysts has 
already turned to the likelihood of global trade wars, with most discounting 
the bulk of the threat at this point. But it is still early, the day after 
Election Day.

   Darin Newsom 11/9/2016 | 12:02 AM CST

   As the clock tolls midnight across the U.S. Midwest, CNN has the electoral 
vote at 238 for Trump and 215 for Clinton. Three states -- Wisconsin, Michigan, 
and Pennsylvania  -- with 46 electoral votes combined are being hotly 
contested. DJIA futures have recovered some of the earlier losses but are still 
down 690 points. The ripple effects are also being felt overseas with Japan's 
Nikkei off 928 points. The U.S. dollar index is down 1.760 and gold is up 
$51.00. Grains remain under pressure, though off session lows. Jan soybeans are 
down 12 cents, Dec corn is off 5 cents, and Dec Chicago wheat has fallen 4 

   Todd Hultman 11/8/2016 | 11:06 PM CST

   CNN has Trump leading the electoral vote at 232 to 209. Trump is also 
leading in key remaining states and the mood is reported as somber at the 
Clinton camp. Dow Jones futures are down 803 points, the US dollar index is 
down 1.8%, and Dec. gold is up $59.60. Grains remain lower with Dec. corn and 
wheat down 6 cents and Jan. soybeans down 14 1/2 cents.

   Todd Hultman 11/8/2016 | 10:15 PM CST

   CNN has the electoral count at 190-186 in favor of Clinton and commentators 
are saying it will come down to Wisconsin and Michigan -- both states where 
Trump is currently leading. This race may go deep into the night, but clearly, 
many are surprised that Trump is doing better than expected and the stock 
market is reflecting panic among investors which is partially spilling over to 

   Todd Hultman 11/8/2016 | 10:08 PM CST

   With key remaining states leaning toward Trump, Dow Jones futures are down 
670 points, Dec. gold is up $45.30 and the US dollar index is down 1.6%. Grains 
remain lower with Dec. corn down 5 3/4 cents, Jan. soybeans down 15 cents and 
Dec. Chicago wheat down 5 3/4 cents.

   Todd Hultman 11/8/2016 | 9:11 PM CST

   With Trump still doing better than many national polls indicated, Dow Jones 
futures are down 618 points, the US dollar index is down 1.1%, Dec. gold is up 
$37.50, and Mexican peso futures are down 7.4%. Grains are lower, but not as 
panicked as financial markets. Dec. corn is down 3 3/4 cents, Jan. soybeans are 
down 9 cents, and Dec. Chicago wheat is down 2 1/2 cents.

   Todd Hultman 11/8/2016 | 8:36 PM CST

   CNN now shows Trump leading, 128 to 97 electoral votes and also contending 
strongly in key states. Dow Jones futures are down 488 points and Dec. gold is 
up $39.20 an ounce. Dec. corn is down 4 3/4 cents, Jan. soybeans are down 12 
1/4 cents and Dec. Chicago wheat is down 2 3/4 cents.

   Todd Hultman 11/8/2016 | 8:05 PM CST

   Technically, CNN shows Clinton with more electoral votes, but races are 
tight in key states and the financial markets are showing a strong 
Trump-friendly response. Dow Jones futures are down 206 points and Dec. gold is 
up $16.50. Grains are steady to lower with Dec. corn down 2 3/4 cents, Jan. 
soybeans down 3 3/4 cents and Dec. Chicago wheat down 3/4 cent.

   Todd Hultman 11/8/2016 | 7:08 PM CST

   Dec. corn is down 1 1/2 cents, Jan. soybeans are down 1/4 cent and Dec. 
Chicago wheat is up 1/2 cent. This is a quiet start and not unexpected, given 
Tuesday's higher closes. Dow Jones futures are up 73 points after CNN rewarded 
more electoral votes to Clinton after 7 p.m. CST.

   Todd Hultman 11/8/2016 | 6:56 PM CST

   The early pattern has been that gold futures go up when Trump votes come in 
and Dow Jones futures go up when Clinton votes come in. Currently, Dow Jones 
futures are up 34 points and Dec. gold is down 80 cents an ounce. Clinton 
leading in Florida, reports CNN with 72% of the vote in. Also leads in North 
Carolina with 28% of the vote in. Grains will be opening at 7 p.m. CST.

   Todd Hultman 11/8/2016 | 5:48 PM CST

   As we wait for polls to close, it may help to note that the Dow Jones 
Industrial Average closed up 73.14 Tuesday at 18,332.74. Dow Jones futures are 
up 35 points early Tuesday evening. Grains closed higher Tuesday and will 
re-open at 7 p.m. CST.

No Vacancy 

   Grain elevators and ethanol plants across the Midwest are shortening dump 
hours because they are running short of space for corn. Lines are long and corn 
piles are popping up throughout the Midwest. Most contract options currently 
are cash only, which is painful at current cash prices for farmers who need to 
sell corn due to lack of space on the farm.

   Harry Bormann, grain team leader at MaxYield Cooperative in West Bend, Iowa, 
told DTN that roughly 15% of the corn harvest remained the past week across 
their territory. MaxYield Co-op has 20 locations serving central, eastern and 
western Iowa. "Corn moisture, with the help of recent sunshine, is moving 
closer to 18%. We have locations that are tight on corn space. Belmond just 
finished filling their 1.5-million-bushel bunker and is now piling corn in 
other areas. Other locations are either loading a train or shuffling bushels 
amongst locations to make more room. The Everly (Iowa) corn pile shown in the 
photo (accompanying this column) has over 800,000 bushels on it as of 
Thursday," said Bormann.

   "We are preparing to put corn in our bunker in Garner for the first time in 
several years," said Bormann. "Even with harvest winding down across our area, 
MaxYield as a whole took in more than 1 million bushels of corn just on 
Wednesday, Nov. 2. We've had several days of receiving more than a million 
bushels of corn this fall."

   Cory Tryan, the grain department manager who is in charge of grain marketing 
and logistics at Alton Grain Terminal Hillsboro, North Dakota, a farmer-owned 
shuttle loading facility, told me that they went to cash only last week for 

   "We are a little different than most shuttle loaders in that we don't pile 
grain; we use the 4 million (bushel) space we have and pre-book freight with 
sales to turn it over during harvest as best we can," Tryan said. "We've got 
the contracts pretty well covered, and once they wrap up the harvesting, we 
probably won't see any more nearby cash with these carries to sell it for later 
delivery. We will stay cash only throughout November because of the markets 
nearby and space constraints. 

   "We did go to regular hours this week until next harvest and have been 
closing Saturday and Sunday (started that a couple weeks ago) to save some 
space for the start of the following week. The weekends are used to catch up 
drying the staged wet corn. We filled up midweek with corn but are loading a 
couple bean shuttles Thursday and Saturday that will give us a couple days of 
dumping corn early next week. Then three corn shuttles will start spotting by 
Thursday. By then everyone we'll be all but done, so space will start 
stretching out."

   Tryan told me that there are some piles out on farms that farmers will have 
to pick up within the next month or so and core a few bins. "A few years ago, 
we saw corn left in the field over the winter, and it dried down to 15.0 
moisture or less in the field and the test weights came up 2 pounds or more by 
the first of April," said Tryan. "There was some cob loss, but the drying and 
low-test-weight discounts the previous fall they would have been paying, so it 
worked well. Like you said, it was a nice winter back then. They did some of 
this two years in a row up here. This year it'll all come off by mid next week. 
We had a high-quality row-crop harvest that broke previous yield records."

   Another elevator manager in North Dakota told me that it was a "zoo" in his 
area. He said their elevators dumped 400,000 bushels a day (nearly 8 million 
bushels in October) until a week ago when they filled up. He told me they were 
closed for the week ending Nov. 4 and may not reopen for trucks until the 
middle of the upcoming week and will hopefully have room for 10 more days, if 
the volume remains heavy. He said due to the "huge" corn crop, space is running 
out and they are cash only right now. He said he expects the trend to continue 
to at least the end of the year.


   Farmers have not been selling much corn unless they are out of space on the 
farm. Some farmers are leaving their corn in the field, but will likely harvest 
it at the end of the month, especially since the current winter forecast is 
calling for above-average snowfall in much of the Midwest. An elevator manager 
in central North Dakota told me that farmers did not expect to harvest their 
largest corn crop in history. He said farmers are now piling corn in their farm 
yards because the flat price and basis by itself are at such "cheap" levels and 
some had not made contracts for fall delivery. North Dakota grain bins were 
already overflowing with wheat and also soybeans, which produced a record 
harvest as well.

   Shuttle loaders who ship to the Pacific Northwest report that basis levels 
delivered to the PNW have dropped dramatically since Oct. 1. BNSF shuttle basis 
delivered to the PNW for the first half of November was at +88Z at the 
beginning of October and is currently at +52X. The CP shuttle basis was at +73Z 
and is currently at +46Z. Tryan told me that nearby is still all about the 
soybean program for the most of the PNW. He said there is "still more corn out 
here wanting a home than demand or need for it, especially delivered PNW. 
Exporters tell us their capacity in the PNW is covered through mid/late 

   For the week ending Nov. 4, the DTN national average corn basis was at 43 
cents under December futures and is running nearly even with the minimum DTN 
five-year average at this time, versus the five-year average of -23 and the 
maximum five-year average of -10. DTN's National Corn Index ended the week at 
$3.06. DTN Analyst Todd Hultman noted that December corn continues to trend 
sideways, and prices are probably "paralyzed" until at least Tuesday, the day 
before Wednesday's Nov. 9 WASDE report.

   Tryan told me, "We'd like to see higher cash prices to get the farmers back 
into the black again; those net incomes are showing reds yet." That sentiment 
is likely shared by every U.S. farmer right now.

   Here is a link to current number of bushels piled as temporary or emergency 
storage by federally licensed grain elevators:

   Mary Kennedy can be reached at

   Follow her on Twitter @MaryCKenn

Basis: Game On

   In its weekly crop progress update released Monday afternoon, NASS pegged 
corn harvest at 75% and soybean harvest 87% completed. Both were at or slightly 
above five-year averages. In the grand scheme of things, one could say fall 
harvest will soon be wrapping up across the U.S. Midwest. 

   Then things should get interesting.

   By almost all accounts, this year's corn and soybean harvests have been bin 
busters. As everyone knows, in its October Crop Production report USDA 
estimated corn production at a record 15.057 billion bushels and soybean 
production at 4.269 bb, also record large. The endless pictures of grain piles 
across the U.S. Midwest and Plains (both Southern and Northern) are testaments 
to the tight storage situation created by "the blessings of fruitful fields and 
healthful skies" (from Abraham Lincoln's Thanksgiving Proclamation). Another 
sign of the extraordinary supplies on hand during the rush of harvest has been 
the weakness of basis, particularly for soybeans. 

   I like to track national average basis each Friday evening, using the DTN 
National Index (national average cash price) minus the nearby or most active 
futures contract. This past Friday saw national average soybean basis rolled to 
the January, coming in at roughly 84 1/4 cents under. By comparison, the 
five-year average was near 51 1/2 cents under and the 10-year 60 cents under. 
The bottom line: A rally in futures plus continued selling of newly harvested 
bushels equals one of the weakest basis readings for any week over the last 10 

   But all of that may be about to change. As October turns to November, farmer 
selling could start to slow. Futures spreads have already stabilized, with the 
January-to-March holding at just under seven cents. Looking at the market's 
forward curve, short-term carry is neutral while long-term carry is bullish. 
Yes, you read that right. The carry in the May-to-July spread covers only 28% 
of full commercial carry out that far. 

   How is this possible? Export business continues to run at a brisk pace. 
Monday's weekly export inspection figure (for the week ending Thursday, October 
27) came in at a marketing year high of 105.4 million bushels. This followed 
the previous weeks' the previous week's "paltry" 100.7 mb. Furthermore, weekly 
export shipments (covering the same time period) are now expected to come in 
above the 100 mb as well when released Thursday morning. Marketing year 
shipments are already running ahead of pace, last calculated at 20% above the 
previous year as compared to USDA's October projection of 5% year-to-year 

   As the five-year and 10-year seasonal indexes indicate, national average 
basis tends to strengthen for the balance of the marketing year. To see that 
this year, meaning to chew through all the supplies, means demand will have to 
remain strong. Short-term, basis at the Gulf has improved about seven cents 
over the last week, strength that will take time to ripple back up the river 
and across the Midwest. Whether or not it reaches the Plains is yet to be seen. 

   So what do we need to keep an eye on? First, basis. You should start to see 
small improvements over time. Also keep track of futures spreads, the room 
where merchandisers hide from illogical market moves made by noncommercial 
traders. Lastly, take note of weekly deliverable stocks numbers released each 
Tuesday, keeping track of how large or small supplies are getting at key export 

   Those still holding short-hedges, again focusing on the soybean market, 
could start to seem them appreciate if/when basis does start to improve. It's 
going to take time, and may not be as strong as seasonal indexes would imply, 
but the next couple of weeks should start to get interesting. 

   Or as one trader put it, "Game on." 

   To track my thoughts on the markets throughout the day, follow me on\Darin Newsom


US 2016 HRS Wheat Crop: Top of the Class 

   The 2016 U.S. hard red spring wheat crop featured a high-grade profile, high 
protein content, sound kernel traits and improved functional performance, 
according to the North Dakota Wheat Commission's annual hard red spring (HRS) 
wheat crop quality report. 

   Thanks to a near-perfect growing season after farmers were able to plant 
early in the spring, the national average 2016 spring wheat yield was at 46.2 
bushels per acre. The crop averages a No. 1 dark northern spring (DNS) and is 
very similar to the 2015 crop for many grade parameters.

   "Specifically," reported the NDWC, "the crop averages a 61.6 lb/bu (81 
kg/hl) test weight, near-zero damage and 77% vitreous kernels. Ninety-two 
percent of the samples grade No.1, and 81% are above 60lb/bu (78.9 kg/hl) test 
weight. The crop average vitreous kernel level is slightly lower than last 
year, but higher than the five-year average. Vitreous levels are exceptionally 
high across Montana and the PNW. In the eastern half of the region, portions of 
the crop are showing slightly lower vitreous counts, due to some sporadic 
harvest rains. Still, more than two-thirds of the crop exceeds 75% vitreous 
kernels, the minimum for the DNS subclass."

   Protein levels are high, averaging 14.2% (12% moisture basis), up slightly 
from 14.1% in 2015 and the five-year average. HRS wheat, which typically has 
higher protein levels than hard red winter (HRW), is expected to be used in 
greater levels this year by mills, especially for blending the 2016 HRW wheat 
crop, which had a sub-12% protein average of 11.2%. 

   The 2016 crop provides buyers with many positive attributes including high 
grades and protein levels, little to no vomitoxin, and good functional 
performance overall, especially for dough strength, absorption and bake 
quality. NDWC added, "Differences in growing season environments created some 
variance in protein levels and functional performance among cropping regions, 
but key parameters such as dough stability, absorption and loaf volume all tend 
to improve with protein content in 2016. Buyers can buy with confidence, but 
diligent contract specifications are still the best way to get the quality 
demanded." The full NDWC 2016 HRS quality report can be found at:


   Farmers in Canada have described the 2016 Canada Western red spring (CWRS) 
wheat harvest and the inability to harvest the rest of their crop as 
devastating. Continued rains and then early snowfall across Western Canada has 
continued to delay the 2016 wheat harvest in Alberta and Saskatchewan. 

   At the end of September, the Canadian Grain Commission reported 16% of the 
Canadian Western red spring samples graded No. 1 CWRS, 45% No. 2 CWRS, 22% No. 
3 CWRS and 17% Canadian Western Feed. Besides the poor quality due to 
bleaching, sprout and sub-14% protein, high levels of vomitoxin will not meet 
the specifications of some foreign buyers, especially Japan who requires, 1.1 
parts per million (ppm) or lower. 

   As of Oct. 24, Saskatchewan reported that 81% of the spring wheat had been 
harvested and Alberta reported 76% harvested. With farmers still needing to 
harvest at least 20% of their acres and a downgraded crop on top of their 
current difficulties, Canada's customers may have to shop in the U.S. for 
milling-quality spring wheat.

   DTN Canadian Grains Analyst Cliff Jamieson told me, "Our sample program has 
been extended until Dec. 31, so it may be some time before we have full 
appreciation of the quality we are dealing with. Farmers are reluctant to let 
earlier high quality go in case needed for blending, while lower quality sits 
as the industry figures out what to do with it. It is possible combines will be 
rolling in the spring so this is one ugly, drawn-out harvest."

   Recently, weekly U.S export sales have shown an increase in U.S. HRS 
exports, and milling-quality 14% protein spot premiums have doubled since early 
September. On Oct. 14, USDA estimated 2016 production of other spring wheat at 
534.027 million bushels, down nearly 70 million bushels from the 2015 estimate 
of 603.2 million bushels. U.S. HRS production for 2016 will likely end up at 
least 13% lower than in 2015.

   Due to the quality and production losses in the CWRS crop and lower HRS 
wheat production in the U.S., milling-quality 14% protein spring wheat premiums 
will likely remain strong until the next harvest as exports increase and more 
HRS wheat is blended into HRW wheat to pull up the protein for flour milling.

   After trading spring wheat for more than 15 years, I can tell you from 
experience that as demand increases for spring wheat, farmers who have good 
milling quality and good protein in their bins will lock them up tight, knowing 
that the market will have to come to them. It is and should stay a seller's 
market under current conditions.

   Mary Kennedy can be reached at 

   Follow her on Twitter @MaryCKenn

Fear of Commitments

   I was sitting at my desk last Friday afternoon, doing some work when the 
latest CFTC Commitments of Traders report was released. From the next cubicle I 
heard DTN Analyst Todd Hultman say, "Wow! This isn't going to be good. 
Noncommercials moved to a large net-long in corn." Todd was right. As Monday's 
4 1/4 cent sell-off showed the corn market had a fear of commitments, or in 
this case, commitments of traders showing much above a flat corn position. 

   First some background: What is the CFTC Commitments of Traders report? This 
is a set(s) of numbers released each Friday by the U.S. Commodity Futures 
Trading Commission that breaks out open futures and options positions held at 
the close of business the previous Tuesday in a variety of trader categories. 

   Each commodity's report includes Disaggregated Futures Only, Disaggregated 
Futures and Options, Legacy futures, and Legacy Futures and Options; all with 
both a long format and a short format. I'm sure there are other forms of the 
Commitments report, but those are the ones most often discussed. 

   For simplicity, I look at the legacy, futures only, short format. While not 
absolutely clear on what is or isn't a commercial or noncommercial trader, it 
gives us a rough idea of what each group holds. Others have made the argument 
for the increased categories of traders of the disaggregate futures, but as the 
old saying goes, you can't teach an old dog new tricks. So I'll stick with what 
I know until something I can tell is better comes along. 

   Those of you familiar with DTN's Six Factors methodology know the importance 
I put on noncommercial activity. To me it determines trend of the futures 
markets. And to apply Newton's First Law of Motion to Markets: A trending 
market will stay in that trend until acted upon by an outside force (more often 
than not a chance in noncommercial activity). 

   For the better part of 2016, noncommercial traders have held a net-short 
futures position (more contracts sold than bought) in corn. This has ebbed and 
flowed, with the ebbing resulting in rallies and the flows sell-offs (see 
attached chart). As recently as September 6, the noncommercial net-short had 
grown to 61,230 contracts, a substantial position that still paled in 
comparison to the net-short 100,176 contracts from March 7. 

   However, since September 6, the number has generally been growing smaller, 
corresponding with a rally in the December futures contract from $3.15 1/2 
(August 31) to $3.45 1/2 on Tuesday, October 11. Regarding the latter, the 
report the following Friday showed noncommercial traders had trimmed their 
net-short futures position to a scant 636 contracts. 

   From that Tuesday's close, Dec corn rallied to settle at $3.53 3/4 on 
Tuesday, October 18. The 8-cent plus rally in the futures market implied 
noncommercial traders had fully covered their net-short holdings, making the 
question one of just how large a net-long they might have built. As it turned 
out the switch was to a net-long of 52,533 contracts, the largest net-long 
since 72,060 contracts from July 26. 

   So why the bearish reaction Monday? For starters, the market is still 
dealing with endless bearish headlines of record U.S. production. Monday 
afternoon's weekly Crop Progress report from NASS pegged harvest at 61% 
completed, meaning some new-crop bushels are likely being put on the market. 
More importantly, market volatility was calculated at 28% at Friday's close, 
down from the recent high of 30.8% from late August, put still implying a great 
deal of risk. Noncommercial traders aren't fond of high volatility, with the 
factor usually leading to a round of position squaring. 

   Tuesday saw the market stabilize, the Dec contract closing 1 cent higher for 
the day at $3.49 1/4. However, compared to the previous Tuesday close of $3.53 
3/4 the contract was 4 1/2 cents lower. Therefore it could be assumed that this 
coming Friday's CFTC position update would show noncommercial traders reducing 
their net-long holdings, possibly cutting it back to near 30,000 contracts. 
This could prove to be a more comfortable level, particularly if market 
volatility continues to decline. 

   To track my thoughts on the markets throughout the day, follow me on\Darin Newsom

What's a Farmer to do With a Bumper Crop?

   Farmers have many marketing options for their new-crop harvest. Usually the 
first choice is to keep the crop at home if there is enough bin space, or even 
bag the crop rather than sell at lower harvest prices. Local elevators will 
offer various contract options to help them market their grain if they need to 
move it off farm for lack of space. 

   If a state-licensed elevator/plant fills up, they could apply for temporary 
or emergency storage allowed by U.S. Warehouse Act (USWA). This would allow the 
elevator to take in grain during harvest rather than turn producers away. 
However, temporary storage can be costly due to USDA rules/requirements and 
that cost may be passed on to the farmer. Temporary storage structures need to 
have a permanent (concrete/asphalt) base, sidewalls, tarp, and aeration fans 
and ducts. Temporary storage is permitted for six months while emergency 
storage is only allowed for three months and involves piling grain on the 
ground. There are many elevators that don't or can't take advantage of either 

   In that case, farmers may have fewer contract options if their local 
elevator/processing plant fills up and needs to wait until some of that grain 
ships out or is ground for feed or ethanol. Ryan Wagner who farms in Roslyn, 
South Dakota, told me via phone that one elevator in his area is only taking 
contracted grain because they are full. He said he contracted some bushels so 
he had somewhere to haul new-crop bushels that can't fit on his farm yet.

   "There are a lot of ground piles around here," said Wagner. He has heard of 
elevators throughout South Dakota that have bagged new-crop wheat to make room 
for corn and soybeans. I have heard similar stories of farmers doing the same 
thing. He did tell me he has not heard of any free delayed pricing (DP) 
contracts offered, which makes sense if elevators are filling up and/or piling.

   Tim Luken, manager Oahe Grain, Onida, South Dakota, told DTN, "In our area 
or here anyway on corn, I have not heard of any free DP right now, but I will 
not rule it out being offered after the first of the year or a little later. DP 
charges I have heard around here are 5 to 6 cents a month with no minimum. I 
have also had a few guys do HTA (hedge to arrive) on spring wheat, winter wheat 
and corn, but very few. I have been trying to get other producers to do this 
especially on winter wheat with the huge carries we see in that market.

   "As far as charges go, this marketing year on other contract options, there 
are no charges in my area on HTA or Basis Fixed. I have had charges in the past 
for HTA but with the board so low, I don't know anyone in our area charging any 
fees. One thing I do is (I) will not let producers roll their HTA contracts." 
He added, "I am surprised how many deferred payments have been applied for 
already this year after grain sales."

   In western South Dakota, an elevator manager told me they were offering some 
free DP for various grains and limited bushels. Their spring wheat DP program 
is free until Jan 31, 2017, then costs 3 cents per month starting Feb 1, 2017. 
Winter wheat is 30 days free then 6 cents per month starting from the average 
date of unload. Corn and milo are two weeks free then 5 cents per month 
starting from average date of unload for a limited amount of bushels and only 
certain locations. This elevator, like many others, also offers basis fix, 
futures fix (HTA), cash and minimum price. He told me that most of his 
customers are using cash or DP and some of his farmers did a futures fix 
contact for winter wheat to take advantage of the Kansas City  futures carries. 

   There is also a floored average contract offered that locks in a floor 
price. Over time the bushels are divided by the weeks specified in the contract 
and priced once a week. The seller gains on that week's bushels if the weekly 
close is over the floor price, but does not lose if below. Cost is slightly 
less than call options. The price of the floored average contract is deducted 
from the floor price and the net is paid up front, similar to a minimum price 

   Angie Setzer, vice president of grain at Citizens Elevator in Charlotte, 
Michigan, told me, "Our customers use a mix of contract types. While many of my 
customers who have on-farm storage use HTAs to price, most of my customers who 
have to deliver at harvest tend to lean towards cash contracts or DP options. I 
do have some customers forgoing DP and choosing to spend what they would on 
storage, on an option after selling cash. With wide carries in the market and 
weaker basis values I do not recommend anyone take basis contracts at this 

   "Costs vary greatly and really are based on what the customer wants to spend 
to cover his needs when looking at option strategies," said Setzer. "The 
increase in carry in the market has resulted in increased storage costs. We've 
seen wheat DP increase from 8 cents a month paid last year to 12, while corn 
and bean DP rates have increased 2-5 cents a month versus what was charged a 
year ago. We are not seeing any free DP offered yet; we typically don't at 
harvest time."

   Setzer said, "We have places that have permanent structures set up for piles 
and those will be used. In the eastern belt it is rare to see a pile like 
you'll see out this way though. I was amazed last year when I saw corn dumped 
in the parking lot of co-ops for November movement. You just don't see that 
happen in my neck of the woods!"

   So, the choices are many, but some of them are not very lucrative for 
farmers, especially basis fix contracts and cash contracts. The DTN Cash Index 
for corn on October 21 was $3.10 and while farmers would be happy to see $6, 
realistically they would likely take $3.50 or better at this point. The DTN 
Cash Index for soybeans was $9.12 and while farmers love "beans in the teens," 
they would probably be happy with a price of $10 or higher. 

   However, right now at harvest the key is to find a home for their crops and 
like one farmer told me, at least make a contract so you can get rid of it if 
you don't have space on farm.

   Mary Kennedy can be reached at

   Follow her on Twitter @MaryCKenn



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