Friday, August 5, 2011

Opening Comments

Markets are called mixed to weaker behind follow threw weakness in the outside markets.

In the overnight session corn was off 8 cents, Beans where down 8-17 cents, KC wheat was off 6 cents, MPLS was off 8 cents, and CBOT wheat was 6 cents weaker.  At 9:25 outside markets European wheat down about ½ of a percent, equities are in the positive with the DOW up 40 points after being down over 500 yesterday, the US dollar is softer down about 460 at 74.653 on the Cash index, and crude oil is off about 20 cents a barrel.

It seems to be all about the outside markets and money flow the past couple of days; the volatility has really spike for some of the markets as of late.  Most calls for the early price action are that where the overnight session left off at.  Many have pointed out that a large part of yesterday’s weakness in the outsides happened after the grains closed so we could have a little catch up to do.

Fundamentally we do have a USDA crop report that will be out next week and the market will be watching for the yields and carryout projections.  Ideas are that yields will be slashed a little in many of the grains; corn in particular; thus giving us a tighter balance sheet.  One are of concern has to be the recent price action seen in corn and crude; I read something today that crude was down about 10 a barrel while corn was up a dollar over the past month or so.   I don’t think that has added to the ethanol margins.

One risk that I see out there is that we see next week’s report show a bigger crop that what is expected; no comments at all have been that we could see an increase in yield from the USDA in next week’s report.  But what happens if we do; as markets sure have a history of doing the opposite of what many think will happen.  Plus we have the outside markets just a little nervous and the old crop corn basis is starting to turn weaker as has the Sept-Dec spread went from a big inverse to a carry. 

With the basis weaker and the board going to a carry on old crop corn one has to think we have opened a door to the old crop corn balance sheet getting bigger; that would give us a bigger starting spot on the new crop balance sheet.  

If we where to get a couple of the possible negative things happen in our market place it is possible to paint a very negative price picture despite the fact that overall today’s information has to lean towards the friendly side with the expectation of the outside market movements as of late.

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