Thursday, July 7, 2011

grain market comments 7-7-11 price in commodities just a chance to sell?

Markets are called mixed to better this a.m. behind firmer outside markets with a mixed overnight session that saw wheat in the red and the row crops positive.

In the overnight session corn was up 5-6 cents, beans where up 5-6 cents, KC wheat was down 9, MPLS wheat was off 4, and CBOT wheat was off 4 cents also.  At 9:05 outside markets have European wheat off about 2 %, equities are firmer with a better then expected jobless claims as the DOW is up 75 points, crude is 1.90 firmer, and the US dollar is softer with the Sept at 75.320 down .120. 

We do have a little grain related news out there today; first off we seen export business for wheat go the other direction last night as Egypt bought Russian wheat which has many talking about our wheat being over priced.  In other export news we did have a reported sale of corn to China; 540 k ton and then 300 k tons to unknown which is assumed to be China. 

Talk of the weather starting to get too dry in the eastern corn belt and a possible ridge building later in July is also leading the headlines.  We really should move into a weather market especially if the last USDA report is accurate in that we have a little more cushion on our balance sheets then we previously did.  Yield will end up driving prices by the look of things and the yield will be determined by weather; outside markets along with the money flow that they help create will be important; but it really comes down to weather.  Demand has remained good and margins are rather good for most of the users of corn.

The markets did open and have continued a mixed direction; at around 10 we have CBOT wheat up 2-3 cents, KC wheat off 12 cents, MPLS wheat off about a dime, while corn is 11-14 cents better, and beans are 15-20 cents firmer; while outside markets really haven’t changed.  It appears to be a little short covering on the CBOT wheat; while funds look to be selling the ownership off a little in the other wheat markets behind the thoughts that our wheat is becoming expensive.

As the day progress we did see the markets change up a little bit as the row crops lost a little steam while wheat managed to bounce a little off of their lows; outside markets continue to be supportive with the DOW now up 125 points as of about 1:30.

When the grains closed we saw KC wheat off 2-3 cents, MPLS wheat off 2-3 cents, CBOT wheat was up 7 ½ , beans where up 15-19, corn up 1-7 cents (with the July up a penny and Dec up 7), and the equities ended with the DOW up 93 points.

Overall a mixed day; rather interesting that we seen the Sept CBOT wheat contract showing strength over the deferred contracts; perhaps it was simply some short covering.  But any time real rallies have started it is usually the front month of CBOT leading the way. 

Technically we seen corn go back and fill it’s gap on the Dec contract; then close back below that old support new resistance level.  The price action seen the past couple of days since the report is rather similar to the price action we seen in 2008 when that big bull market turned into a big bear market.  The crop report in 2008 gave us a 64 cent break from the highs the day before the report to the lows the day after the report; we then followed that up with a 48 cent rally from the lows the day after the report and then the meltdown started back up as we slide all the way down to from a 7.99 high to a low of 2.90.  The price action on the Dec contract the past couple of days threw the last report is very similar; in that we broke 67 cents from our highs the day/night before the report to our lows the day after the report and then the past three days have bounced 46 cents from those lows. 

Who knows what the next coming week’s and months will be like; the potential for a 2008 repeat has to be considered when looking at risk management.  Outside market price action has hit and miss been similar to 08 and scary thing is the fact that the funds have more ownership now then they did back then.  Yield is yet to be determined and the one positive that have going for us now that we didn’t back then is a feeling of strong demand; which is being lead by old crop corn.  If we start to see basis pressure or a even a hint of coverage complete for end users one might really need to turn the marketing ideas much more aggressive if you are undersold at levels that despite the recent break are very profitable.

The birdseed market is one of those markets that is starting to display good coverage; sunflowers are still very tough to buy but the market feels like they are tougher to sell; the biggest wild card for that market will probably be when weather allows for a harvest; if the harvest is late there becomes the potential for little to no product creating a market where the sellers once again are in control.

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