Monday, October 10, 2011

Opening Grain Market Comments Monday - 10-10-2011

The grain markets are called firmer this a.m. behind very supportive outside markets.

In the overnight session we seen corn up a dime or so, beans about 26-27 cents, KC wheat was up 13-14 cents, MPLS wheat was up 10-13 cents, and CBOT wheat was up 13 cents.  At 9:00 outside markets have equities firm with the DOW up 230 points, crude oil is up 2.50 a barrel, the US dollar is getting smacked with the Cash index down 1.195 at 77.530, and European Wheat is about 1 % firmer.

The big thing in the markets appears to be the outside markets that are showing lots of strength this a.m.  Fundamentally it appears that much of HRW area got a good shot of rain and I have heard comments of the drought being broke.  The other big thing will be a USDA report which is out on Wed which should lead to some position squaring as we head into it.

Last year the USDA mentioned how the reason for the high Sept 1 stocks was due to new crop being harvested; will that be the reason this year again?  If it is will it give the bulls what they need to give our prices some life?  If not how much downside risk is there if the report comes out even more bearish then the estimates?  What about the fact that many producers have stopped selling; is there that much more that needs to be priced in the near future?

Estimates for this week’s report for yields are 148.7 on corn and 42 on beans; versus 148.1 on the Sept USDA report for corn and 41.8 for beans.  Carryout estimates are 804 million bushels for corn versus 672 last month, beans are pegged at 186 million bushels versus 165 last month, and wheat is estimated at 753 million bushels versus 761 in Sept.

With the recent drop in board basis has slowly been improving for most of the grains; but the improvement hasn’t been one that I would call a demand driven improvement; more supply cut.  That is something to keep in mind as we go forward.  If supply starts to increase we really need to have demand step up or ECON 101 says increased supply over demand gives us lower prices. 

The risk in the outside markets is still out there but most are starting to feel that liquidation is close to it’s end for the grains.  Only time will tell.

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