Tuesday, May 29, 2012

Closing Comments- Wheat Charts 5-29-2012

The grain markets closed mixed today; with beans holding in there while corn and wheat had plenty of downside pressure as money flow continues to hit the exit door.

Old crop corn was 16 cents, new crop corn was off 4 cents, beans where up 5 cents, KC wheat was 22 lower,  MPLS wheat was off 15 cents, CBOT wheat was off 23 cents, equities where firmer with the DOW up 126 points, crude near unchanged, and the US dollar near unchanged.

After our markets closed we did have crop conditions that came out.  They showed a decline in conditions; perhaps a little more then what was expected.  Here is Country Hedging’s link to an the updated crop progress and conditions report. 

The big highlight was a 5 % decrease in the G/E corn crop conditions; down to 72% in the G/E.  Now it is really early and history has shown us that these conditions don’t always give us the yield we are expecting; but it is something the market will watch.  Bottom line is it could give us a chance that we have seen the biggest crop if conditions continue to go backward.  More important then this afternoon’s report will be the weather as we go forward.  Will the crop get bigger or smaller then the present USDA yield of 166 per bushel?

Corn price outlook really should be that simple; if we get a big yield or see an increasing yield trend we probably see prices trend lower.  If the yield gets smaller and macro’s, outside markets, or some Black Swan event don’t cause demand to curve the price outlook with smaller supply should be firmer. 

I would say that longer term to get bullish one much prefers demand over supply destruction as supply destruction has the ability to curve demand a little too much.  I would reference spring wheat this past year as case in point what can happen when we see smaller supply; as the spring wheat price really didn’t do much of anything as we simply failed to have the demand despite the smaller crop and less bushels.

The millet market has firmed up lately; we have had several buyers looking for offers.  Please give us a call if you would like us to offer some out.  It is almost starting to feel like buyers are realizing that millet might not have much for acres.  Not sure if they are in panic mode or not.  But they are looking for millet so don’t be afraid to have your offers out there.

It also felt like the sunflowers had a little upbeat today.  Perhaps it has something to do with a lack of coverage and the bean oil market stabilizing the past few sessions? 

The sunflower market and the old crop corn market really look like Mexican Standoff’s to me; lots of upside potential should the cards fall one way but lots of downside direction should the cards fall another way.  I guess most of the grain prices are like this; which is why practicing good risk management is simply the correct thing to do. 

You can find hundreds of people that can give you hundreds of reasons for corn price, wheat price, or grain prices in general to go up or to go down.  But not one of them can ever accurately predict on a day to day basis what it will do.  Sure sometimes guys will look like they know what is going to happen and plenty of times analysts or farm advisors get it right; but plenty of times they also get it wrong.  They too are guilty of selling fear and buying greed.  With this known the only thing I can preach is to practice good risk management in your grain marketing in a way that leaves you comfortable whether grain prices are going up, going down, or doing nothing at all.

Different things get different people comfortable.  Not everyone has the same goals or needs; sometimes making a good profitable sale with get a producer comfortable while other times just having some put protection might be what it is for some.  Bottom line in grain marketing get yourself where you want to be.  If you need help please feel free to give me our one of us in our grain department a call.

Attached are some wheat charts.


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