Grain Market Comments Day ahead of USDA Report

Grain Markets closed mixed to weaker the day before the monthly USDA Supply and Demand report.

Old crop corn was off 6 cents, new crop was off a dime but traded another 3 cents lower at the 2:00 time, KC wheat was off 3 cents, MPLS wheat had nearby up 10 cents, Sept MPLS was up 2, CBOT wheat was unchanged, equities and outside markets reversed and closed down very hard from last night’s highs; the DOW was off 143 points, crude off 2.50 which is over 5.00 a barrel off of it’s highs, and the US dollar near unchanged at 82.60 on the cash index well off of the 81.72 lows it had.

Very disappointing is how I would describe today’s price action; starting with the outside markets as it looks like the market finally got a bail out that it didn’t like.  Doesn’t happen very often; but probably due in my opinion as bail outs with fake money might not be the answer.  Bottom line we saw the US dollar make a new low for the past couple of weeks; but turn around and close positive leaving a bullish key reversal on the charts.  July beans left a near doji; but also made a new high for the recent move and closed lower another technical key reversal on the charts.  Crude over 5.00 was good for the charts either; not a key reversal; but not anything good for the technical picture.

Now perhaps we get a bullish report in the a.m. and our outside markets recover behind the latest bail out overseas; but I think today’s price action should really remind US to practice good risk management when making our grain marketing decisions.  December corn didn’t trade positive at all today or last night and I seen yesterday afternoon where some called it 10-15 firmer for Sunday night’s session just because of the hot and dry weather that many are having.  Yet a little system that left a little coverage for parts of Iowa had new crop corn under pressure all day.

So keep in mind that even if everyone you know or everything you read says that the market should or will go up; the market is the market and it doesn’t have and seldom does listen.  Some say it is the markets job to do as much damage to as many as possible.  Now this might not be true; but our grain market prices really do seem to move in an unpredictable pattern.

This afternoon we had crop conditions out and we seen a big decrease with G/E conditions falling to 66% down from last week’s 72%.  Perhaps a little bit more then expected; maybe it helps open the possibility that we see a decrease in yield on the USDA supply and demand report that is out in the a.m. 

Spring wheat conditions decreased by 3% in the G/E and soybean conditions decreased by 5%. 

Below are the estimate for tomorrow’s USDA report. 

The big numbers will be corn carryout; I think the others are still followers; but the USDA could also throw out a curve ball at any time.

Overall you can see that for present marketing year the trade is looking for stock decreases for wheat, corn, and beans.  When they are looking for a bullish report and we get a neutral report it could open the doors for negative price action.

The same can be said for next year’s ending stocks; once again the trade estimates are looking for decreases in carryout versus the May numbers; over 100 million bushels for corn.  Which could happen and based on some comments production and yield could be a lot lower then what is forecasted as many are very dry.  But before this afternoon’s crop conditions report one might have mentioned the fact that the USDA could have left corn yield unchanged or even took the yield number bigger on the same ideas they had in the May crop report.  That we have a crop in nice and early with good emergence and good crop conditions as reported weekly. 

2011/12 Ending Stocks Estimate (billions of bushels)
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	?	0.821	0.688 - 0.901	0.851
Soybeans	?	0.189	0.130 - 0.218	0.210
Wheat	?	0.753	0.727 - 0.775	0.768

2012/13 Ending Stocks Estimate (billions of bushels)
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	?	1.750	1.223 - 1.950	1.881
Soybeans	?	0.143	0.052 - 0.220	0.145
Wheat	?	0.714	0.647 - 0.772	0.735

2011/2012 Global Ending Stock Numbers
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	?	127.630	126.000 - 128.800	127.560
Soybeans	?	52.090	51.000 - 53.000	53.240
Wheat	?	197.124	196.000 - 198.835	197.030

2012-2013 Global Ending Stock Numbers
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	?	149.745	145.000 - 154.000	152.340
Soybeans	?	58.140	55.700 - 62.000	58.070
Wheat	?	184.791	180.800 - 190.674	188.830

I think that we can all find plenty of reasons for the numbers to be much more bullish the then average trade estimate; but we need to realize that there is also the chance that the numbers come in more bearish or simply come in not as bullish as the market is expecting; plus I don’t know how anyone can be super bullish the overall economic picture; 2008 has to be in the back of one’s mind.  One thing that should be at the top of the bearish list has to be old crop corn export shipments; they have been poor well below what is needed on a per week basis to meet present USDA projections.  Today’s corn shipments where 17 million bushels which is nearly 20 million below what is needed on a per week basis.

It might be a little late to protect one from the crop report in the a.m. but it isn’t too late to stay aggressive or pro-active and put yourself in a good comfortable spot for your grain marketing.  If you need help writing a grain marketing plan please give us a call.

Don’t forget that the markets will be open tomorrow when the report comes out; this could make things a little more volatile than in the past?

Thanks