Tuesday, May 15, 2012

Opening Grain Market Comments 5-15-12

Markets are called better behind a better overnight session; while outside markets are mixed and could lead to a little pressure with ideas that the grains open a little softer then where the overnight left off at.

In the overnight session corn was up 5, beans where up 18 on old crop, new crop beans where up 15, KC wheat was up 8-9 cents, CBOT wheat was firmer by 8, and MPLS wheat was 6 higher.  At 8:50 outsides are mixed; EU wheat is up about 1 %, equities are near unchanged with the DOW up 5 points, crude is off about a dime, gold is off 8.00 an ounce, and the US dollar looks like it is making another move up with the cash index at 80.903.

Yesterday we had a crop progress report; that basically showed the majority of the row crops planted with good emergence and a good wheat crop.  We really lack weather premium right now as headlines lately have been great big crops coming.

Basis remains firm for corn and beans; perhaps firming a little bit.  Yesterday we saw open interest in soybeans go up which indicates good commercial interest and end user pricing; not bad thing to happen.

One thing that has been on the headlines lately is the issues in EU.  If it leads to more macro liquidation then the grains could struggle; if not it feels like basis and demand are strong enough that the grains have a chance to bounce from these areas.

I have heard talk of higher protein getting harvested down south.  I seen a train of 13.76 pro yesterday and heard most of 12.5.  Overall higher protein isn’t exactly the best thing.  It acts as a replacement for spring wheat if it is high enough and then it doesn’t get feed and doesn’t help our export program out.  So I think a higher pro crop down south hurts demand a little bit and I think demand is really what wheat needs if we want to have a bull story at some point down the road.  I would also have to think that a higher pro crop means yields are off a little from what was expected……typically pro and yields go hand in hand in a reverse relationship.

One thing we need to watch going forward is the inverse in the grains.  Most have a big inverse between old crop and new crop so if you are storing grain your cost is very high.  It is a good demand sign when things are worth more today then they are tomorrow so to speak but it is also a huge risk when marketing grain as a general rule you don’t want to sit on product threw an inverse.  Every day that goes by we get closer to new crop and the risk becoming greater as along as the inverse is out there.  Bottom line the markets are close to saying if you want to own the grain own it on paper as it doesn’t make sense to sit through the inverse.

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