Monday, April 23, 2012
Open Grain Market Comments 4-23-12
Markets are called mixed this a.m. behind a choppy mixed overnight session and rather weak outside markets.
In the overnight session old crop corn was up 2 cents, new crop corn was unchanged, beans were down 3-6 cents, KC wheat was up 2, MPLS was up 1-4 cents, and CBOT wheat was up 1-2 cents a bushel. At 8:55 outside markets have European wheat off about ½ of a percent, the US dollar is firmer up 300 at 79.495 on the cash index, equities are in the red with the DOW off 160 points, crude is off about 1.80 a barrel, and gold is off about 12 an ounce.
We still have yet to see confirmation of any Chinese corn purchase which was rumored late last week and we now have some rather ugly outside markets. Not exactly a great receipt for higher prices; but we do have a market in beans that seems to just want to run and we are at the bottom end of the ranges we have had for a long time for corn and wheat. So I don’t think I want to get overly bearish this a.m.
The volatile outside markets along with the prospects for big crops should keep us rather defensive in our grain marketing approach. Remember 2008 anyone? The funds are now record longs in the bean market, near record shorts in the wheat market, and they have trimmed their shorts big time in the corn market.
We will have export inspections out this a.m. and this afternoon we will have crop progress and crop conditions. The market is expecting that a good amount of corn got planted last week. Enough that one of the articles I read this a.m. mentioned 1 billion bushels of corn available by September; more then 3 times normal.
I don’t think now should be panic time for corn and wheat, but the bottom line is the wheat crop looks great and has got bigger the past several months and the prospects for corn look good too. So if we continue to get ideal weather and were to see the outside markets under some extended pressure the downside risk for the grains is rather large(even at these levels). I think we should find good values at or near the present levels but if money flow decides to leave or weather is simply ideal there is plenty of downside risk that should tell us to be pro-active and don’t be afraid to make sales on the bounces and perhaps don’t be afraid to get protection at or near these levels.
For a scary thought one of the regulars that I follow who is simply a technical trader has a target for corn at 3.50 on the board. That would be under 3.00 cash price (ouch). One thing I do know is that bottoms are usually made when everyone becomes bearish and things look the worse. While tops typically happen when everyone is bullish and thinks things can only go up. I keep both of those in mind but I also think in grain marketing one needs to simply practice good risk management in a way that takes out those extremes and allows comfort whether the markets go up or down. Don’t be afraid to give us a call if you need some help with your grain marketing plan.
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