Monday, January 9, 2012

Grain Market Commentary Jan 9th a few days before big USDA Crop Report; limit moves here we come again?

Markets where called mixed behind mixed to generally firmer overnight markets and mixed outside markets.

In the overnight session most of the grains saw good strength with the exception of MPLS wheat which was actually weaker by 8 cents, corn was up by 8 cents, KC wheat was 8 firmer, CBOT wheat was up 11, and beans where up 9-10 cents.  At 9:20 outside markets have the equities slightly firmer with the DOW up 30 points, the US dollar is weaker down 121 on the cash index at 81.119, and crude oil is down 50 cents a barrel.

Not much for new news out there; the main thing remains the weather in South America; talk this a.m. is that there is a chance of some wide spread coverage but the amount of moisture is less then what was expected.  After the rain event it talk is then of hot and dry ride returning.

Later in the week we will have a big USDA crop report that likely sets up the stages for the months to come. 

We did see the markets show some strength today right from the get go; we then managed to consolidate breaking a little lower; as the session pulled to an end we seen corn show a little weakness in the last 10-15 while wheat and beans closed rather well.   The left beans up 36 cents, KC wheat up 18, MPLS wheat up 9, CBOT wheat up 17, corn up 8, equities had the DOW up 33 points, crude off about 25 cents a barrel, and the US Dollar slightly weaker.

Overall a good day; a little disappointing that corn slide nearly a dime off of it’s high’s but still a good day for the grains.  Export shipments where out this a.m. and they where mixed; wheat coming in at 10.8 million bushels; which is less the 14.2 needed on a per week basis to meet current USDA projections.  Corn came in at 33.9 which was above what is needed and beans came in at 32 million which is also above what is needed.

As mentioned above the USDA report is out on Thursday and due to that we will be moving up our weekly marketing meeting to Tuesday.  We hope to go threw some strategies ahead of the report.

The average estimates for the carryout are 753 million bushels for corn, 227 million bushels for beans, and 831 million bushels for wheat.  Versus last month those numbers are all decreases in carryout; last month corn was pegged at 848 million bushels, beans at 230 million bushels, and wheat at 831 million bushels. 

The big thing that is starting to stick out in my mind is the fact that overall the market is really looking for a bullish report; I was rather shocked that that overall estimate average on the corn carryout is as low as it is.  I think the report has a chance to move our markets tremendously depending on how things shake out.  Corn carryout comes in under estimates limit up isn’t a stretch; nor is limit down should we see the carryout come in at 1 billion bushels or so. 

There are a couple things that lead me to think the USDA report won’t come in super bullish is the fact that basis has been very defensive lately and their simply is more supply then nearby demand.  Plus many ethanol plants are now running in the red; the wild card will be S.A. weather and if that leads to increases in exports and our final yield.  I have seen some think we actually have corn yields down under 145 million bushels.

Historically this report has really been a market mover; 4 out of the last 5 years I believe have been limit up or limit down.

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