Friday, March 23, 2012

Opening Grain Market Comments

Markets are called mixed to firmer this a.m. behind a very firm overnight session for the row crops and mixed to supportive outside markets.

In the overnight session corn was up 5, beans where higher by 14, KC wheat was down by a penny, MPLS wheat was up 1, and CBOT wheat was up 3.  At 9:00 outside markets have European wheat up about 1%, equities are mixed with the DOW off 20 points, crude is up 1.25 a barrel, gold is firmer, and the US dollar is weaker with the cash index down to 79.45.

Fear on the bean crop in South American getting smaller helped out our overnight session as beans once again lead the way.  With the type of estimates that are now being throw out in the marketplace there is talk now that the US will need to hit 80 million bean acres.  Most estimates are closer to 75-76 million acres for beans.  Acre war?

Below is an article with some info on the Chinese corn deficit; which seems to hit traders’ minds after we see price breaks.

03/23 02:04a CST  DJ China Official: Corn Deficit To Worsen In Coming Years-Xinhua
  BEIJING (Dow Jones)--China's corn deficit may rise in coming years because
of a swift increase in demand for corn used for processing, state-run Xinhua
news agency reported Thursday, quoting a senior cabinet analyst.
  Cheng Guoqiang, the deputy director of the executive office of the State
Council Development Research Center, the cabinet's think tank, was cited as
saying that the balance of supply and demand of corn in China appeared to be
reaching a tipping point, with demand now outpacing supply.
  Domestic corn-processing demand has risen 40% from 2008 to 45 million-50
million metric tons annually, he said, speaking at a conference.
  Even with a record harvests, China could see a supply deficit because of the
swift rise of processing demand, he said at the Bo'ao Forum for Asia.
  Cheng said China imported about 5 million tons of corn in 2011, and he
projected the figure to rise in 2012. The 2011 figure may include bookings that
have not yet been delivered to China, according to Dow Jones Newswires'
assessment of customs data.
  Other local media reports said Cheng projected that by 2020 China may see a
corn deficit of around 20 million tons annually.

   Technically yesterdays closes did bounce off of some support and make the charts look to be range bound until we see a new catalyst; which is probably next week’s USDA report. 

Basis in general feels a little better as producers focus on farming.  One should have some concern with the amount of grain that probably moves after planting but before wheat harvest as it feels like almost everyone has more grain on hand now then they really ever have had.

The birdseed market seems to have picked up recently as we have many more bids then we did just a few weeks ago.  The market is still tough to sell; but it is quickly getting to the point where there are more buyers than sellers.  Plus the past month or so we did see the crush take out a lot of product reducing the overhead supply a little bit.  But if we are to get a significant rally we will need to see demand and birdseed sales pick up.

There has been talk that the USDA will change the ethanol corn grind rate.  Presently the conversion is 2.7; and some are thinking it is closer to 2.8 or 2.9.  On the surface this adds supply back to the balance sheets as it takes away the ethanol usage; but it might actually help stabilize the up and down feed/residual usage a little bit and add back to the feed usage.  I guess next week’s report could show us something one direction or another.

Don’t forget that during next week’s marketing round table we will have a couple guest’s. Tregg Cronin from Country Hedging and Taylor Smalley from CHS Wheat Marketing.

Please give us a call if there is anything we can do for you.

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