Monday, March 26, 2012

USDA Report Report - Opening Grain Market Comments week leading up to quarterly stocks report

Markets are called mixed this morning behind a mixed overnight session and supportive outside markets.

In the overnight session corn was off ½ on old crop, new crop corn was down 2, beans where up 12 cents, KC wheat was down 2, MPLS wheat was off 1, and CBOT wheat was unchanged to up a penny.  At 9:00 outside markets have gold firmer, crude about unchanged, the equities firmer with the DOW up 102 points, European Wheat is firmer by a little over 1 %, and the dollar is weaker with the cash index off 240 at 79.105.

Watch outside markets for direction; but this week’s trading is likely pre-report trading as the USDA will have out their quarterly stocks report and planting intentions report on Friday.  Don’t forget that we will have a couple guest speakers at this week’s MWC Marketing Hour Roundtable on Wed at 2:30 in Onida and they will be covering a little info ahead of Friday’s big report.

Below are the trade estimates for Friday’s report.; the first is planting intentions and the second is quarterly stocks. 

                         Corn    Soybean  All     Winter  Spring  Durum  
                                          Wheat   Wheat   Other            
Average trade estimate  94.720   75.393  57.422  41.963  13.313   2.223  

March 1 stocks:            Wheat      Corn       Soybeans
Average trade              1.223      6.150      1.387          
Source: Reuters       

Overall the market seems to be looking for some choppy trade ahead of this week’s report.  It should include a little position squaring also; keep in mind the funds are now very long beans, long corn, and still massively short CBOT wheat.

With producers in the field basis feels like it is stabilizing; but it also feels like harvest happens in late May or early June; as there is simply a lot of grain to move before we get to wheat harvest.

The sunflower market also feels like it has stabilized; but with the rally beans have had sunflowers stabilizing isn’t exactly a good showing.   The one thing that the beans rally could lead to is an acre war; the returns for beans are quickly becoming better and better and could be shifting some acres that direction.  To me it says that spring wheat is too cheap and perhaps that corn is getting a little cheap as well as the rest of the row crops that are competing with beans.

Keep in mind that this week’s report will give an update to the old crop balance sheet ideas (they won’t actually update the balance sheets until Aprils S & D report); and if we have tight balance sheets for old crop the acres become very important and weather becomes that more important; whereas if we see old crop balance sheets showing a little wiggle room or plenty of supply weather and acres become less important.  Bottom line is a friendly report on Friday gives us a chance for a major bull story and a negative report could leave the funds and producers owning way too much in a crashing market.

For risk management purposes don’t be afraid to take a little risk off the table heading into Friday’s report as I think every knows it is simply the right thing to do; especially when you look at what these reports have done over the past couple of years. 

Please give us a call if there is anything we can do for you and don’t forget about this week’s MWC Marketing Hour Roundtable on Wed at 2:30 in Onida.


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