Markets closed mixed today in another volatile day in our grain markets.
Corn was unchanged on old crop, and up ½ cent on new crop, beans where down 2-5 cents, CBOT wheat was down 3, KC wheat was off 14 cents, MPLS wheat lead the pressure down as it was off 18, the US dollar was softer with the March now at 78.30, crude was up about 60 cents a barrel, and the equity markets where firmer with the DOW up 62 points.
I don’t really know how one sees some of the wheat contracts off as much as 81 cents from last week’s highs and beans nearly a dollar and doesn’t fear that the sky is falling; but that is
what the price action the past two days gave me. First and most importantly is the price action in corn despite the action in MPLS Wheat, KC wheat, and beans. Second is how the corn spreads have narrowed up or inverted more over the past week or so. Then I see CBOT wheat manage to close nearly unchanged with the other wheat and bean contracts closing about a dime off of their lows. Corn each of the last couple sessions saw big moves in the last 30 mins or so of trading. Also leaving me with a feeling that there is a good chance that the price movement the past couple of days is simply technical profit taking and a correction before resuming the uptrend is the weakness off the US dollar as it has shown signs that it’s bounce is just a corrective bounce and the fundamental fact that the only fundamental change that we have really seen has been money flow.
We have yet to fix the acre need and demand need situation; sure much of the pressure that really started or propelled the set back was from the idea that the USDA baseline indicated an increase in 10 million acres. But those acres are far from planted and even though we have seen slight signs of demand starting to ration we haven’t seen any big signs or confirmed signs as our balance sheets and projections simply remain tight and until that changes and we take the acre war possibility and the possibility of running out of some of the old crop grains out of the equation in my opinion I think there remains tremendous upside potential especially if some of the factors get or stay bullish. Longer term I do question if we can hold many of these levels; but in the short term there is plenty of room for bounces back up until fundamentals and the fear that usually drives spring rallies is over.
I would not that many of the above mentioned factors should also keep our volatility rather high; as with all of the potential upside out there is certainly what if’s that could play out that turn our balance sheet extremely bearish. The reality is that if our prices are indeed too high from an ECON standpoint it will be almost impossible for our fundamentals not to shift back to the extreme bear camp; especially given the magically ability our markets and money flow have to over due price action and curve and source demand as well as supply.
For the cash markets we have seen the birdseed market under some pressure as buyers appear to have nearby needs covered (provided freight can get them the product) and with the break in beans and bean oil crush sunflowers are weaker and birdseed buyers tend to run for the doors when prices are getting softer. I would note that sunflowers are hard to find bids on; but some of the other birdseed products like millet and milo seem to have some support and overall there isn’t much supply getting offered to the markets; so even though bids are softer in order for a buyer to go and get big coverage it probably only comes from someone in the middle of the supply chain such as an elevator that is long or broker that owns some; producer offers are not much if any lower then they where a week ago.
Basis for spring wheat on the spot floor remains very hot; the futures don’t show it; but it is a very strong market with basis on the spot trading well above the to arrive bids. This still appears to be a logistics related basis rally.
Winter wheat is the same as spring; something loaded on track has decent value; while bids and offers for later slots are on the wide side of things. Fundamentally wheat has plenty of supply; perhaps we lack supply and it’s relationship to the other grains should help support it at least until we have a better idea of the crops around the world. But in marketing wheat one might want to keep in perspective what our typical price has been when we have had similar type balance sheet numbers.
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