Monday, March 26, 2012
Closing Grain Market Comments - Outside Bearish Day on Corn - Corn Chart
Markets closed mixed today in a choppy rather volatile session.
Old crop corn had the worst performance for the grains as it was off 9 cents, new crop corn was down 4 cents, beans where up 7 on the new crop, old crop beans where up 14, KC wheat was up 5, MPLS wheat was up 5, CBOT wheat was up 5, crude oil was up about a quarter, gold up over 20 an ounce, the equities had a big winner with the DOW up 161 points, and the US dollar made 3 week lows with the cash US Dollar Index down 423 at 78.923.
Overall versus the strength we seen this a.m. a very disappointing day for the grain markets; corn had a bearish outside day closing nearly 20 cents off of its mid-session highs. It was decent to see wheat and beans stay in the green or positive despite corn turning very ugly but that was about the only good thing we seen it what was suppose to be range bound quiet trade ahead of Friday’s USDA Quarterly Stocks and Planting Intentions report.
Export inspections or export shipments came out this a.m. and they did lead to a little of the sell off as wheat came in at only 15.4 million bushels well off of the pace the last couple of weeks and below what is needed on a per week basis to meet current USDA balance sheet projections.
Corn export shipments where even worse; coming in at only 22.2 million bushels; only a little bit more then ½ where they where just a couple weeks ago and well below the 34 million bushels we need to see on a per week basis to meet the current USDA projections.
Bean shipments remained strong coming in nearly twice as much as we need on a per week basis and in the same range we seen the past couple of weeks; they came in at 24.9 million bushels shipped.
Today’s price action should leave us feeling a little scared on corn; holding last weeks lows which we are just marginally above will be rather key. Some say a break below could really open up some fund selling and another leg down.
Here is the chart of May corn. First off you will notice that we have had a series of higher lows; if we look at chart you see that we had a low in Dec and then a nice bounce into Jan then after the January down move (quarterly stocks report) you will notice we held the previous lows, we then did the same thing during the couple corrections in Feb (held the January or previous lows), and so far have done that in the last correction; but we are dangerously close to breaking that area and perhaps moving us down towards the next support zone.
I would think with a firm basis and overall strong spreads it would be tough for us to make another leg lower ahead of the crop report but that is also the nature of futures trading for you.
One good thing I have had happen recently is that I have had end users pulling some deferred corn contracts a little early (a couple different ethanol plants pulling April/ May contracts already). It is nice because originally they paid a premium for later and now it makes sense for them to take the product now. I view it as a strong sign of upfront demand or at least a lack of upfront supply.
Don’t forget to get yourself in a comfort zone in regards to marketing ahead of Friday’s report. Either make some sales to catch up or consider buying a little insurance in the form of purchasing some puts and if you feel you are oversold don’t be afraid to buy some out of the money calls. Bottom line is one wants to be in the game should the USDA throw us a bullish report; but be PROTECTED should they throw us another bearish curveball. Keep in mind that might be a little bit of what happened today is the market just took some risk off the table because lately these quarterly stocks reports have been very bearish.
Here is a run down of the last 4 of these reports.
March 31, 2011 – limit up; traded synthetically much higher; at the end of 3 sessions we had traded corn over a dollar a bushel higher then where corn closed at on March 30th
June 30th 2011, down 69 cents on the July corn……..OUCH!
Sept 30th 2011, down 40 cents traded synthetically about another 20 cents lower; at low spot we lost 60 cents from the day before the report
Jan 12th 2011, down 40 cents, traded down 65 in 4 sessions
This gives us an average move from the last 4 of these quarterly stocks reports of 73 cents or about $110 an acre.
I don’t know if this report will be like last years and in a week we will have corn a dollar higher then it is today; I don’t know if we will be like the last three and 60-70 cents weaker. But I do know that if you are comfortable with your sales and or have protection or re-ownership strategies in place you will probably sleep a little better then the guy that doesn’t do what his gut is probably telling him to do; and that is make a good risk management decision that takes a little risk off of the table.
Don’t forget we with have our weekly meetings this week covering some strategies and our thoughts on what this report will bring.
Please give us a call if there is anything we can do for you.
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