Tuesday, June 26, 2012

Grain Market Comments 6-26-2012

Another very volatile session behind weather concerns for the grains.

New crop corn managed another 30 cent or so gain after having gained 40 cents yesterday, wheat was mixed on the day weaker for most of the session but at the end of the day mostly higher by 3-8 cents, beans where a little weaker down about 12 cents on Nov, outside markets where on the quiet side of things with equities near unchanged, along with crude, and the US dollar all just plus or minus a little bit.

It is after 5:00 so our markets have opened back up and presently they are down 3-5 on wheat, beans unchanged, and corn off 6 cents.

All about weather as it is very hot and dry in many places that are pollinating corn.  With the huge rally we have had and the fact that we have a crop stocks and acre report that seems to be limit move one direction or another some good risk management is really needed in the very near term.  The problem with weather markets is they can run really unlimited; but they can also fall as fast as they go up.  Overall I think we would much rather see a rally behind solid demand versus supply destruction which is happening presently.

You could paint a couple different outcomes come later this week with the report.  One possibility is we see a bearish report that has increased stocks, perhaps increased acres, and then maybe around the same time we see moisture hit the eastern corn belt and then add in a little weakness in the outside markets and you perhaps have a perfect storm for disaster for our prices; we could easily be lower then we where when our rally started a few weeks ago.  Likely no, but possible yes.

Another possibility is we have a bullish report; acres are light, stocks lighter then trade estimates, along with supportive outside markets that stabilize the equities while the dollar weakens up and it remains hot and dry lowering our production even more.  Now with that perfect storm to see new all time highs for corn wouldn’t be a stretch;  who knows how high we could go.  Longer term the dry weather and supply destruction would probably be the worst thing as it could break some end users such as ethanol plants and kill the demand much more then we could think.  Today with the firm market it seems possible and probable; now weather it really is or not remains to be seen.

The other possibility is just a neutral report where corn prices kind of chop around like they have the last year.  Hopefully this is what happens as it gives us some chances to make good sales but also allows the end users to be profitable without destroying demand.

Bottom line is I don’t know what storm our markets will brew up next.  I just want to be comfortable no matter what the outcome is.  It might mean making sales here and there and it might mean doing things like buying puts or using min price contracts when I am developing my marketing plan.  Bottom line is we waited for months for a weather scare to give us a selling opportunity.  Today that opportunity is in front of us.  Are you going to be pro-active in some shape or manner that is making good solid business decisions?  Or will the marketing emotions of fear and greed rule out?

If you need help with your marketing plan please give us a call.

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