Monday, July 30, 2012

Country Hedging's Mid Day in the Markets 7-30-12






Midday In The Markets

GRAINS
Grains are trading higher on a hot and dry weekend and forecasts are showing that trend will continue this week.  Moisture for soybeans will become ever more important these next few weeks while corn is beyond benefiting from rainfall.  The trade is expecting another drop in crop conditions in this afternoon’s USDA report.  December corn hit a contract high this morning of $8.17 ¼ and is currently up 20c to 8.13.  Wheat has been following corn higher while also being supported by news of global supply issues and Russia looking at suspending grain exports due to low production.  Soybeans are also stronger with the front and deferred months trading about 30c higher.  Corn and wheat export inspections topped expectations with corn at 21.44 million bushels and wheat inspections at 18.6mb.  Soybean inspections were in line with expectations at 15.5mb.


LIVESTOCK
A USDA meteorologist reported that 75% of all cattle herds in the US are located in areas that are experiencing drought.  Live cattle futures are trading much higher than cash prices as beef demand has slowed down and signs of tightening supplies.  Currently nearby live cattle are trading up  .575 to 120.175.  Feeder cattle are trading mixed with another surge in corn prices.  August feeder cattle are .850 higher at 138.600.  Lean hogs are trading mixed today with a rally in corn prices leading deferred months higher and lower pork cutout values that were released after the close on Friday are initiating selling in the August contract. 


ENERGY & FINANCIALS
US stock markets are paying attention to today’s meeting of the ECB’s President, Germany’s finance minister, and the US Treasury Secretary.  They are expected to release a statement at the conclusion of the meeting providing insight into how they plan on turning around the declining global economy.  Spain announced today that its economy has contracted for the third straight quarter.  Crude oil has been hovering around $90 today, but is currently down 44c to 89.69.  The Dow is trading above 13,000 for the first time since May.


Lance Kuhlmann
800-328-6530

Country Hedging, Inc.
The Right Decisions for the Right Reasons

Overnight Highlight's from Country Hedging's Tregg Cronin





Outside Markets: Dollar Index up 0.110 at 82.819; NYMEX-WTI down $0.11 at $90.02; Brent Crude down $0.45 at $106.02; Heating Oil down $0.0098 at $2.8797; Gold up $0.80 at $1620.00; Copper down $0.0025 at $3.4235; The Yen, Loonie and Aussie are firmer while the other major currencies are weaker; Cotton is weaker while the rest of the softs are better; S&P’s are down 4.00 at 1378.50, Dow futures are down 23.00 at 13,009.00 and Treasuries are a bit firmer.

While not as impressively so as last week, financial markets are better for the most part this morning with borrowing costs in Europe steady to slightly easier, equities on a firm note and overall optimism heading into this week’s European Central Bank meeting as well as the Federal Reserve’s FOMC meeting.  Investors are under the general impression the ECB will take action of some sort while the FOMC could opt to continue monitoring conditions.  Euro-area economic confidence dropped to 87.9 in July from 89.9 in June, the lowest since September of 2009 and below estimates.  The US economic calendar is light today with just the Dallas Fed Manufacturing Survey out mid-morning.

Rains in the last 24 hours fell mainly in NE and along the MS-River.  Totals in S-NE were as high as an inch in some places although coverage on the state was about 50% with most areas seeing lighter totals.  MN/IA/MO/IL saw scattered precip between 0.10-0.40”.  Additional rain is moving across NE and into IA/MO this morning.  NOAA forecast maps keep the majority of the Midwest dry this week with the best precip in the SE-US.  By Thursday, rains are seen falling in E-SD/W-MN/NW-IA with the heaviest totals in SD and around 1-2.00” for the weekend.  Temps warm back into the mid/upper 90’s this week for the majority of the central corn belt.  Omaha will be 97-101* this through Friday.  Extended maps are showing chances of rain in the central/east corn belt during both the 6-10/11-15, but this was on the wetter GFS maps which have been overly optimistic the last 30-45 days.  The euro model sees rain in IN/OH/KY/TN while the WCB would be dry.  NOAA sees hot and dry during the 6-14 day.


Generally disappointing rains over the weekend in IA got the markets up and running overnight with soybeans leading the surge higher with gaps posted on daily charts.  The weather forecasts for IA/NE are not conducive to setting and filling soybean pods with little to no rain the next 10-days during crucial development stages.  Last week, the markets were under the idea with some rain, we could stabilize this crop around 38-39bpa.  With current forecasts, it will be tough to keep the national average from heading towards 35-37.  December corn also posted new contract highs at $8.17 ¼, busting through what was stiff resistance.  This really is all about weather and determining how small our supply actually is.  Once that is accomplished, we can focus on the demand we are rationing.

Beijing announced it will auction 400,000MT of soybeans from state reserves on Thursday.  Wires said state soybeans are around 10% cheaper than imported beans.  The government has sold 1.1MMT of state reserves soybeans since April, and have around 10MMT of reserves left according to CNGOIC.  This is the function of this market: get China to dip into reserves.  India’s monsoon rainfall was 21% below the long-term average as of Sunday.  Russian milling wheat was up 0.3-0.6% last week while feed wheat was up 1.3%.  Crop conditions on this afternoon’s USDA report are likely to show another 1-3% drop on corn while beans could possibly stabilize.  One of Australia’s largest grain handlers is forecasting Western Australian production down 40% at 9-11MMT vs. 15MMT LY.

Open interest changes had corn down 7,800 contracts, beans down 15,590 and meal down 3,050 on Friday.  Wheat was up 1,010 and soy oil was up 3,500.  Chinese markets rallied sharply overnight with soybeans up 61.75c, meal up $19.70, oil up 122c, corn up 7.50c and wheat up 8.50c.  Paris Milling Wheat is up 2.72%, Rapeseed up 1.85%, Paris corn up 2.34% and UK Feed Wheat is up 3.09%.  Basis going home on Friday was generally under pressure, especially spring wheat which is going to have values rivaling winter wheat if it’s not already there.  The better than expected yield and quality is putting the buyer in the driver seat.  Don’t expect a firm basis tone in the wheat market until export demand picks up or Canada finishes their harvest in Sept/Oct.



Call things better today as crops are still getting smaller, financial markets have an optimistic tone and demand hasn’t slowed enough on anything to warrant a top.  Output prices are climbing just as fast or faster than input prices for end users of corn and meal, making this rationing job one of historic proportions.  Scale up put protection or sales in areas where production is better known should be on the decision block.


Trade as of 7:15
Corn up 19-22
Soy up 29-38
Wheat up 14-18



Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Tuesday, July 24, 2012

Mid Day update from Country Hedging's Chris Steinhoff





Crude oil is 25 cents firmer…gold is down $1.00 and silver is  down 15 cents, so your bling bling at pawn America is holding steady…DJIA is 104 points lower…Risk off as the wall Street geniuses with the ivy league education have

Corn----profit taking and radar!!! And we go limit down on CU. Will rain really help the corn crop in the ECB? Well I guess it won’t do any harm but I really have my doubts whether the corn crop is getting bigger today. We rallied 3 bucks with only nominal sell off profit taking, but we are seeing it now, plus flushing the weak longs out. Scattered rains are falling this morning across N and some E growing regions. Certainly goes along way in MN to making a crop, but other areas that have been dry for weeks and months need a wee bit more rain to do much good. Many guesses from the “experts” now are in the 130bpa range and production near 11bb and harvested acres may need to be adjusted lower. But at some point acres lowered may actually stabilize yield estimates. Reports from country all depend on what road is driven and who’s looking, but not all looks terrible and not all looks good. Will not really know until combines roll, and that is beginning in parts of MO already. Cash markets are soft in many areas and some try to transition to new crop values. U/Z is 9 weaker at a 20 inverse. Ethanol plants keep getting by and we haven’t heard of massive  shutdowns anywhere, just a scattered plant here and there. Pollination will be the key and the field surveys for the Aug USDA report may be the timing of the worst news we have factor in and it will be a Friday!

Beans---limit lower with synthetics on SX  down around $15.40+/- as I write this. China is eerily, eerily quiet and the market can ill afford to let demand get a shoulder off the mat. Rain helps beans but can it salvage an average crop out of a crop that has been pot and dry for weeks? Plus SA doesn’t have any beans to sell. Hearing some marketing advisors are saying buy calls as beans are headed to $20-25. Hold on for that ride. SX:CZ is 2.05:1 so there is HUGE potential for a bean rally if corn is steady and someone wants to push that toward 2.5:1

Wheat---sharply lower as a follower of corn as the heat fundamentals have not changed dramatically overnight, could be maybe wheat rallied with corn too far. Cash prices for HRW and DNS across the N Plains are $8.00 to $9.00 and farmer is a seller but maybe should be a bit more aggressive at selling off the combine. Sweep the bin and play the rest of the summer. Not much else really going on. MGEx is finally not inverted, at least thru MWK.

Call if you need anything

Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

Overnight Highlight's from Country Hedging's Tregg Cronin 7-24-12


Outside Markets: Dollar Index up 0.072 at 83.778; NYMEX-WTI down $0.17 at $87.99; Brent Crude down $0.31 at $102.94; Heating Oil down $0.0114 at $2.8075; Livestock markets are mostly firmer; Gold down $3.10 at $1574.00; Copper is down $0.0200 at $3.3610; The Yen and Aussie are firmer while all other major currencies are weaker; Cocoa and Cotton are firmer, while all other major currencies are firmer; S&P’s are up 3.00 at 1340.75, Dow futures are down 15.00 at 12,630.00 and Treasuries are lightly mixed.

Equity futures are mostly steady, although most everything was lower in the overnight until German Chancellor Merkel came out in opposition to Moody’s knocking Germany’s credit rating outlook to negative from stable.  She reiterated Germany will remain in stable financial condition through sound fiscal policies, and markets seemed to like it.  It didn’t push any confidence towards Spain, however, with their 10-year Treasury yields rising towards 7.53% and their Credit Default Swaps up to 640bp.  Balancing the gloom from Spain was China’s manufacturing sector clawing back towards growth in July.  The HSBC PMI for July rose to 49.5 from 48.2 in June.  This would seem to suggest the monetary easing done the last several weeks is having an effect.

More rains fell overnight in the upper Midwest, dropping in MT/ND/SD/MN with nice rainfall occurring in the Twin Cities this morning.  A path from Alexandria, MN to Rochester has already received upwards of 1” with no signs of the system quitting anytime soon.  The 5-day forecasted precip map shows the current system to continue across the Great Lakes Region and drop down into the ECB with IN/OH/WI/MI receiving 1.00-2.50”.  IA/MO/NE/KS should be quiet aside from the occasional pop up shower.  Temps in the corn belt yesterday were hot with 90’s in the north of I-80 and 100’s elsewhere.  The weekend should once again be dry, with chances of rain in IA/IL by the first part of the week, although coverage amounts differ.  Temps will cool into the mid to upper 80’s for most areas next week with some low 90’s possible in the West.  The 11-15 map is showing a general drink for the corn belt, but not much confidence at this point.  NOAA’s maps were notably hotter and drier than the privates we subscribe to.  Australia is dormant.


Additional selling pressure showed up at the overnight open last evening, and has carried through this morning led by the soy complex.  Soybeans once again found themselves down as much as $0.57 after dropping near limit the prior session.  The maps turning a bit more favorable definitely has some thinking this soybean crop is still salvageable, although one must certainly acknowledge the run we were on and how badly we needed a correction.  Private scouts continue to cut yields, and most are giving almost no yield chance to double crop acres.  If, and it’s a big if, the rains fall as scheduled, it would seem we can stabilize this crop, but few think we can push yields back above 40bpa which is where they need to be to stifle this rally.  Dec corn saw only moderate losses overnight.

The crop conditions declines yesterday were supportive for corn, although it seemed as though the drop on soybeans wasn’t enough to please the trade.  In overnight headlines, The Ag Minister of Kazakhstan cut their export forecast to 10MMT, down from 12.1MMT last year.  They were likely to harvest 12.8MMT, not the 14MMT previously forecast.  It would seem FSU crops are not done declining.  The government also scrapped transportation subsidies due to rising commodity prices.  Russia has exported 902,000MT of grain in the first 18 days of the marketing year consisting mainly of wheat.  More chatter overnight about the Pacific moving into El Nino and this affecting Aussie and Indian crops.  FWIW, El Nino is typically associated with above average South American crops.

Open interest changes yesterday included an increase of 8,860 corn, 4,140 wheat, and 1,540 soy oil.  Beans were down 6,110 and meal was down 4,200.  Chinese markets dropped sharply overnight with soybeans down 70.25c, meal down $18.20, oil down 186c, corn down 6.75c and wheat up 1.25c.  Paris wheat is down 23c, Rapeseed is down 28c and UK feed wheat is down 20c.  Overnight headlines said the US won’t be the only one with a below trend corn crop as yields in the EU are forecast to be down 12% from last year to 6.73MT/ha.  This would be the lowest yield since 2007.  France and Germany, the wheat exporters of the EU, are in better shape and have been raising crop estimates, however.  Doane Advisory Service kicked off their annual crop tour yesterday and said yields in IL were 27% smaller than a year ago and 21% below the final USDA forecast in the three crop districts they looked at.  Yields ranged from 70-202 within a 30 mile stretch.  Soybean yields were forecast down 16% from last year and 27% from the USDA’s guess in Jan.  



Call things weaker today as we continue to consolidate the rally from the last couple weeks and as rains fall across the upper-corn belt.  The market believes the soybean crop is still salvageable, and as long as that is the case, we can take premium off.  We’ve been goaded into believing wet maps before and it has proved to be for naught.    Bottom line is soybeans have an incredibly tight balance sheet with trend line yields and those look less likely today.  Make good sales along the way, but the final note hasn’t been sung yet.



Trade as of 7:10
Corn down 8-13
Soy down 29-34
Wheat down 9-18

The Spring Wheat Tour begins today so expect yields from ND throughout the session with the tour wrapping up on Thursday.





Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Monday, July 23, 2012

Market Comments - 7-23-2012 - Key Reversals on the Charts? Top in for Grains?


The grain markets closed weaker today behind a very volatile trading session; lead weaker by beans, some wetter forecasts, and weak outside markets.

Corn closed down 10 cents, beans where off 64 cents after trading limit down at one point during the session, KC wheat was off about 27 cents, MPLS off 26, and CBOT wheat was down 31.  Outside markets had crude down over 3.50 a barrel, gold off 7.00 an ounce, the equity markets weaker with the DOW down 101 points, and the US dollar made new calendar year highs today.

So was today just a pause before going higher on the grains? Or was today it?

I don’t know and as always all I can really preach is good risk management and doing things that make one comfortable whether our markets go up, go down, or chop around sideways. 

The market has left us some different clues as to what the future may hold; but we are not going to be able to outguess with all of the factors effecting prices on a consistent basis; nor do we recommend anyone trying to out guess the market; after all that is why it is called the market and is a price discovery system; a very volatile one at times; but nonetheless a price discovery system.

Some of the clues the market left today are both bullish and bearish.  The bullish side of things; is the fact that each day our crop has got smaller and for many areas it is too late for some of the crops.  Yield estimates for corn are falling each day by virtually everyone in nearly every area.  So just because supply is so unknown and we have previously built up such strong demand prices potentially have no limit as to where they could go.

So there is the most bullish thing we have; the unknown factor or fear of not enough supply factor.  We do have to have our prices get to the spot where end users are not using the same amount they would have if our prices where say 5.00 on Dec corn; as we simply don’t have enough product to meet the “normal” demand. 

Until we really can put a solid figure on supply it is hard to determine if we have curved enough demand and until that happens many in the industry feel the only place to go is up.  Goldman Stachs had a corn price target of 9.00 today and many have been talking about 10.00 or higher corn. 

These projections hitting the headlines are also one of the reasons to be a little cautious; and lead to some of the bearish clues we have seen.  Typically when Wall Street starts talking about prices going higher the top is soon; after all take 2008 and crude oil when it was near 150; I think nearly all the forecasts where for 200 crude; not 30ish like it happened to be just several months later.  Everyone get’s bullish at the top as that is when all of the bullish information is known; but what also happens is there comes a spot when you need to feed the bull so to speak or when everyone that has bought or sold a market already has.

A couple technical red flags if you will did happen today; Dec corn traded to a new high of 8.00 and closed lower leaving an outside bearish day along with key reversal as it touched the 8.00 level that capped the market last year as well as in 2008.  Some of the wheat markets and their charts also left key reversals and outside bearish days.  The key reversal is when we make new highs for the move and close lower and the outside bearish day is when we take out the previous sessions high’s and low’s while closing lower.  Both strong technical signals that we perhaps reversed. 

Another bearish warning sign has to be demand; most corn bids rolled to the Dec at no spread.  I still have ethanol plants trying to sell me back corn as they have slowed their grind.  The profit portion for corn end users isn’t exactly great as no one can make much if anything at these levels.   Does it mean we can’t go higher; no but I don’t see a picture in my mind that doesn’t involve ethanol plants going either belly up or at the very least shutting down for an extended period of time.  Which is scary because we could very easily curve demand more then we have cut supply.  I doubt it; but very possible and historically it wouldn’t be a first.

The US dollar making high’s for the year after gapping higher on Sunday night is also a little caution flag for the grains.

Bottom line is continue to get yourself in a comfortable situation whether or markets go up, go down, or chop around.

If you need some help with your risk management please feel free to give us a call.

Thanks

Overnight Highlight's from Country Hedging's Tregg Cronin 7-23-2012

Below is from Country Hedging's Tregg Cronin


Outside Markets: Dollar Index up 0.176 at 83.654; NYMEX-WTI down $2.61 at $89.20; Brent Crude down $2.90 at $103.93; Heating Oil down $0.0676 at $2.8567; Gold down $10.80 at $1571.70; Copper down $0.0915 at $3.3570; The Yen is firmer, but all other major currencies are weaker; Most all of the softs are weaker; S&P’s are down 15.50 at 1343.00, Dow futures are down 151.00 at 12,622.00 and Treasuries are firmer.

Financial markets are getting rocked this morning as investors grow weary of Spain’s worsening economic picture and as their borrowing costs push to new Eurozone records over 7.50% on the 10-year.  Six more Spanish banks are said to be getting ready to tap bailout facilities in coming days.  RBC Capital Markets said in a statement they have advocated staying away from Spanish and Italian markets and they see no reason to change this view.  This will push borrowing costs higher and increase the likelihood of an emergency EU-Summit and further bailout funding.  Energy markets are responding in kind as well, slashing off significant premium following the strong runs they had last week.  The CRB-Index should trade sharply lower today after hitting the highest levels since May.

Rain totals over the weekend were heaviest in SD/MN/MT and more rain fell south east of the Ohio river.  Totals were heaviest in S-SD where the southern part of the state saw localized totals up to 2.5”.  This rain was needed very badly, especially ahead of the extreme heat the next 3-days.  More rain is falling across SD this morning.  5-day forecasted precip maps show much of the northern corn belt to receive a good soaker the next 1-3 days.  Heaviest totals should be in MN/WI/N-IL/N-IN/MI/OH.  Temps the next 3-days will be over 100* for almost everyone south of I-80.  6-10 days maps show chances of scattered precip around, but no soaking event.  The 11-15 has some rain in the WCB and in WI, but again no concentrated event.  Temps are expected to remain normal/above, but nothing extreme like this week.  90’s will be common place in the WCB.  The 11-15 sees some additional ridging to occur bringing average rains to MT, the Dakotas and north of I-80, but dry to the south.  Less than ideal, but the rains this week should help stabilize things.


Some pretty heavy profit taking hitting our space overnight, thanks in large part to the outside markets and a general sell mentality, but the maps taking on a bit more favorable tone is probably also contributing.  As many have said, rains cans till help the soybeans at this point and the corn in the west, but the temps the next 3-days will do their best to push things backwards further.  Condition ratings are expected to drop another 3-5% on both corn and beans.  The constant talk of demand destruction already taking place isn’t making anyone happy either.  These crops are still in the discovering phase, however, and until we discover how small this crop is, it will be difficult to take prices considerably lower to where end users are willing to step up.  Big ranges last night: corn 33c, beans 56c, wheat 37c.

In headlines, JP Morgan said July rain has improved yield prospects across eastern Australian canola and wheat areas.  JP is estimating total winter crop production in the three eastern states is now estimated at 19.7MMT vs. ABARES latest guess at 18.4MMT.  Western Australia is equally as important, however, as the majority of the exporting facilities are located on the west side of the island.  The Chinese Customers Administration said June soybean imports were up 31% y/y to 5.62MMT.  June corn imports were 528,647MT and wheat imports were 216,742MT.  Jordan finally bought the 100,000MT of wheat they retendered for twice at $343/MT from Ukraine for Aug/Sept delivery.  Also, Ukraine was reported to have harvested 15.86MMT of grain as of July 20th, about 72% of the total are seeded.  Yields were 2.22MT/ha.  This compares with 19.33MMT last year and a yield of 2.89MT/ha.  Spring planted acres were up 17.1%.  The Financial Times carried a story about US meat companies importing Brazilian maize due to its competitiveness.  Link below.

Open interest changes during Friday’s session included an increase of 4,400 wheat, corn up 9,780, beans up 680, meal up 180, and soy oil down 5,260.  Chinese markets were mixed with beans up 9.25c, meal down $3.80, soy oil down 122c, corn up 0.25c and wheat down 11c.  Malaysian palm oil was down 52 ringgits, Paris Milling wheat is currently down 19c, Rapeseed down 16c and UK feed wheat is off 19.0c.  There was some heavy length added by the speculative funds in corn and wheat last week, and I’ll have a better breakdown in tonight’s comments.  Also worth noting spec funds are now long natural gas, something which hasn’t been the case since 2007.



Things are likely to be weaker the majority of today, and then we’ll get a look at crop conditions after the close and see if this crop is still slipping.  There are some very good looking fields in the upper corn belt, and the weekend’s rains as well as those forecasted should go a long way to stabilizing some of those.  The more confidence a guy has in his crop, the more aggressive he should be taking advantage of these record prices.  The market is not going to pay you to store the crop this year, so keep that in mind.





     
Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Mid Day update 7-23-2012 from Country Hedging's Chris Steinhoff


Risk off, herd selling day, Wall Street casino sells but buys US$ which Is up 0.240 points…DJIA is  141 points lower…gold is $8.00 lower so your bling bling is worth less at the pawn shop today.

Corn---lower early but coming back. New all time highs are again possible until we can get some definition of crop size. Corn has rallied  $3.00 in 30 days, so due for  lower correction at some point on profit taking as there are some BIG profits to take. Crop IS NOT GETTING BIGGER today. The crop has sustained 90+degree highs for weeks with scattered rain events. Crop conditions are likely to see sizable declines again this afternoon. IS crop size 123.6bpa?(my guess) or is it 130 or 138bpa???? Need to slow demand like never before. Exports have slowed and ethanol grind has slowed and livestock feeding will eventually slow, but supply is a moving target on July 23 and most likely getting smaller as it appears the seed companies indestructible genetics they have been promising for years actually need some rain and cooler temps(in other words they need perfect). Farmer is getting bullish where he is going to have some crop. Farmer always seems to miss the last $1.00+ of most rallies and they are definitely slowing their selling and increasing their buy backs. Spreads are weaker as CU takes a hit, so does CZ.  Still hearing Brazil corn to US. Cash markets are soft and rail bids are tough. Can we locally have an over supply and have a short crop?

Soyabeans---down hard and the shoulder is not coming off the mat yet today, but today goes until 2pm. Weather may become too late for beans as well. Mother nature has been early since March, trees leafed early, blue grass seeded early, corn tasseled early, so why won’t beans be done growing earlier than normal???? Plus traders love to trade the bean/corn spread. And there is room yet for them to buy beans vs corn. currently at 2.07:1…Farmer selling is also slowing as they await $20.00 to average all their “bad” $12.00 sales…China demand? Can we slow demand like we may need to? Market is inverted on tight supplies.

Wheat---spring wheat harvest gets a strong start. Hearing higher protein to this point. Yields better than the farmer thought they would get.  World demand remains routine. Futures have rallied $2-3 in a month. Really didn’t have a reason for the rally so do not need a reason for the sell off. farmer selling is slow. Tin piggy banks will be full when harvest is over in most area. Farmers also becoming forgetful when an open order fills(they forgot about that offer) etc etc. Same old same old.  MGEx is inverted on strong demand, or whatever…KC and CME also losing their carries.

Call if you need anything…aug precip outlook, then newest drought monitor and drought outlook(doesn’t look too good)


Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

Wednesday, July 18, 2012

Mid day update from Country Hedging's Chris Steinhoff 7-18-12


Crude oil is up 60 cents, ethanol is down a penny…DJIA is up 60 points

Corn---930 am and BOOM, volume increase and corn goes from lower to up slightly, then backs off again….Crop making rains are scattered across MN and WI with reports of many 1-2” amounts. Otherwise the US supply question remains unanswered as longer term forecast remain hot and dry and the crop struggles. Profit taking has to occur once in a while as CZ has run almost $3.00 since mid june. Weekly ethanol production was down 19,000bbls, but not nearly enough for the rationing that needs to be seen in the upcoming months until the US supply is known. Spreads should remain firm until we at least figure out the US supply. Biggest problem it is only July 18 and we are a long way from knowing anything. Some selling corn against beans and it seems corn is anchored alittle by wheat today. farmer is slow

Soyabeans----finally time for beans to take a leader roll as weather isn’t any better for the bean crop and we are beginning to run out of time for that salvation rain too. Buy beans against corn today, and still plenty of room to run.  Scatterd rains fall across northern growing areas which is a HUGE benefit. Extended forecast look to be mainly very warm and mostly dry. Can Chinese demand be slowed? Does US exporter have the new crop sales covered? Will the US crop make 40bpa? A lot of questions with few answers in mid july. Spreads should remain firm until we know some of these answers.

Wheat---harvest moves north and yields are typically better than anticipated. Will we need to feed wheat because we will not have the corn? Export business is routine. Black Sea region will not have as much grain to sell for a while. Too dry in many areas if we needed to seed winter wheat today.  Farmer doesn’t sell much

***after today I will be gone the balance of the week as I have 5 inlaws visiting until Sunday

Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

Overnight Highlights for 7-18-2012 from Country Hedging's Tregg Cronin





Outside Markets: Dollar Index up 0.289 at 83.321; NYMEX-WTI down $0.47 at $88.74; Brent Crude down $0.29 at $103.69; Heating Oil down $0.0058 at $2.8364; Cattle steadyish and hogs weaker; Gold down $12.10 at $1577.40; Copper down $0.0015 at $3.4530;  The Yen is firmer, but all other major currencies are firmer; Cotton and Lumber are firmer, but all other softs are weaker; S&P’s are down 4.50 at 1354.00, Dow futures are down 33.00 and Treasuries are slightly bid.

Financial markets are fairly subdued this morning as we await the second testimony in front of Congress from Fed Chairman Ben Bernanke.  At first, markets didn’t like the somewhat hawkish tone he took yesterday, and started to sell off.  By the close, however, investors seemed to realize his stance hadn’t changed all that much and instead focused on some better than expected Q2 earnings.  In other news, the Bank of England policy makers may reconsider the case for an interest-rate cut after assessing the European debt crisis.  They did vote to increase their bond buying program by 50 billion pounds.  The Czech Republic’s borrowing costs fell to an all-time low at today’s auction.  The average accepted yield on the 2021 security fell to 2.316%.  Their rating is A1.

Some badly needed rains fell in parts of the northern plains last night with KELOLAND reporting 1.0” amounts in Winner, SD and as much as 3.0” between Aberdeen and Webster, SD.  Elsewhere, areas along the ND/MT border picked up between 0.10-0.50” with localized amounts near 1.0”.  That system continues to track across SD and MN this morning and should impact WI later today.  5-day forecasted precip maps show WI getting 1.4” by Monday while IN could see a broad 1.0” and areas SE of there should also see meaningful rainfall.  IA/IL/NE/MO should be quiet.  Not a ton of change on extended maps with the 6-10 seeing scattered precip across the Midwest, but nothing of huge totals.  The 11-16 calls for weak riding to bring average/below precip and average temps.  Dry weather continues to dominate Australian wheat growing areas and should continue to do so the next 10-days.  Most areas are in good shape following decent precip recently, but the forecast is not a good one.


Similar to the day before, grains are starting out on a weak note, enduring a bit of profit taking as prices pushed to either new contract highs yesterday or remained near the highs for the move.  Wire services continue to be flooded with stories about supply and demand, which is keeping grains uneasy enough at the moment.  Lots of price forecasts are being thrown out this morning including Newedge saying corn may rally to $8.50 as production continues to drop.  Their yield forecast fell to 134.9bpa.  Accuweather dropped their yield forecast to 138bpa.  It would seem corn prices above $7.50 are pricing in a yield below 140, but not quite towards 130bpa.  If we can’t get a pattern change over Iowa the next 10-days, we should make a push through all-time highs at $7.99 ¾.

Headlines last night included India saying it will consider limiting the quantity of food commodities that traders can stockpile as the weakest monsoon in three years fuels a food price rally.  At the same time, 60% of their growing region has received below average monsoon rains.  A survey for the Cattle on Feed Report Friday says feedlots placed 1.5% less cattle than a year ago, inventories will be 2.56% higher, and marketings will be down 5.977%.  Many think feedlots pulled back on the reigns already last month, but declining pasture conditions probably added more cattle than people realize.  The Australian Bureau of Meteorology said there is a 60-70% chance Australia will receive below-median rainfall the next 3-months due to El Nino.

Pork prices in China fell last week, but have been showing signs of stabilizing.  Average wholesale price was $3.20/kg, down 0.7% w/w.  Last week’s prices were still down 23.5% y/y.  As US pork prices continue to fall, may be easier for China to import pork as opposed to bring in feed supplies such as corn and meal.  In export news, Jordan once again canceled a tender for 100,000MT of wheat (second time now).  Japan was also said to have canceled a tender to buy 320,000MT of feed wheat and barley due to high prices, but have since retendered.  Russia harvested 17MMT of grain up to July 17th vs. 14.64MMT last year as the drought ripened things faster this year.  O/I changes yesterday included an increase in corn of 11,970, wheat up 380, soybeans up 5,320, meal up 4,160 and oil up 1,060.  Chinese markets were slightly weaker overnight with soybeans down 6.50c, meal up $3.00, oil down 43c, corn down 3.50c, and wheat down 6.50c.  Paris wheat is currently down 1.50%, Rapeseed down 0.77% and UK feed wheat is down 0.91%.


Call things lower today as we chop around and continue to consolidate the recent gains.  It certainly doesn’t feel like the top is in considering the weather pattern is far from changed and the supply hasn’t stopped going down.  Demand stories are popping up on corn daily, but until we determine the supply, we can’t assume the rationing job has been completed.  Soybean and wheat have their own stories to keep them supported, but it does feel like one big trade.  Constantly assess available supplies and % marketed.


Trade as of 7:15
Corn down 2-5
Soy down 3-5
Wheat down 2-9    



Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Steinhoff's over night comments


Below is Country Hedging's Chris Steinhoff's overnight comments


Crude oil is 30 cents lower, ethanol is 2 cents lower…gold is down $10.00, silver is 28 lower…Dow, Nasdaq and S&P futures are weaker…US$ index is 0.270 firmer

Corn….two sided trade overnight but lower this morning on a bout of profit taking and appears to be sliding further as the work day begins
                …scattered but unconfirmed rumors of China cancelling corn cargoes
                …very little rain fell yesterday/overnight…temps heat back up
                …crop is most likely smaller today than it was yesterday….
                ….signs of demand slowing may not be enough, it may be a market where we need to  put people(end users) out of business
                What price is that? $8.00, $9.00 or even $10.00…may depend on how small this crop gets
Trading 4 to 8 lower…profit taking

Soybeans….not much rain and running out of time as the crop will be earlier than most think and rains may be too late when they come
                …beans also see supplies become tighter faster than demand slows
                …China is always a threat to buy something
                …US meal sales have been very strong….china crush margins have been negative for months
Trading 2 to 5 lower

Wheat…winter wheat harvest is on downhill slide with yield reports consistently a little better than expected
                …spring wheat harvest begins in earnest in SD and scattered in MN and ND
                …expectations are for a good yielding crop…..protein expected to be high
                …japan seeks 120tmt feed wheat
                …Australia sees 9 month wheat exports at 14mmt, up 16% from year earlier
Trading 5 to 10 lower…

Thursday, July 12, 2012

afternoon grain market comments from Country Hedging's Tregg Cronin 7-12-2012


Below is from Country Hedging's Tregg Cronin




No full write up today, but some comments worth sharing:


First up, both weather services we use were less aggressive with rains in the central belt this weekend.  One is looking for spotty rains across E-IA/IL/WI/MI/N-IN now thought to be less than 0.20”.  The Northern Plains should be quiet the next 5-days.  The other said they reduced their 1-5 day coverage 5% to 40% through Monday.  Then the heat gets turned back on beginning early next week with Chicago forecast to hit 100* on Tuesday.  10-day highs for select cities below:

Sioux Falls: 87, 92, 91, 92, 92, 93, 89, 92, 94, 92
Omaha: 91, 95, 97, 95, 95, 95, 94, 95, 98, 96
Des Moines: 90, 93, 94, 96, 96, 95, 93, 98, 95
Decatur: 92, 90, 89, 93, 93, 93, 93, 92, 96, 95
Marshall, MN: 88, 89, 91, 90, 91, 88, 89, 93, 88
Indianapolis: 91, 85, 86, 90, 91, 91, 90, 89, 91, 94
Madison, WI: 91, 94, 92, 90, 94, 94, 91, 89, 93, 95

Very few overnight lows below 70* it should be pointed out, and even during the chances of rain for the ECB, most fail to move below 90* for a daily high.  Worth pointing out the sharp rebound in Nat Gas prices around midsession when the maps came out.  Hotter next week? 

More and more anecdotal reports from the WCB about how dry things are getting with S-SD talking of chopping silage already before nitrates move into the plant and render it useless.  SW-MN is also hurting bad for a rain, and according to boots on the ground need one in the next 10-days or else….  Scattered headlines had the wheat market moving higher today including the Russian Grain Union stating the entire Russian grain harvest would be below 80MMT.  This likely implies a wheat crop around 46MMT vs. the USDA’s latest guess at 49MMT.  Paris Milling Wheat finished up 3.0% today, and one trader said there was talk of Black Sea export controls, but those seem unlikely at the moment.  Keep in mind, however, it was late July/early August when Russia banned exports in 2010.  We made our blow off top the first week of August, sold off until November before rallying into the 2011 highs near $9.00 basis Chicago Wheat.   There were also rumors running around Indian wasn’t going to allow wheat exports, presumably because of high food inflation.  Lastly, contacts suggested China was sniffing around for cash wheat for feed stock, but basis moves didn’t imply same.

Corn yield ideas continued to move lower today with Rosenthal Collins dropping their estimate to 135bpa while NewEdge cut theirs to 139.9bpa.  As noted in yesterday’s commentary, RJ ‘O Brien’s two analysts are using 140-141, but both said when taking a look at state yield data, it doesn’t take much imagination to move it below 140bpa.  Another interesting tidbit from today’s session was DTN took a look at comparable drought year’s and the differential between planted and harvested acres.  In 1988, 2002 and 2005, harvested acres were typically 10% less than planted vs. the current year’s 9.2%.  If the 10% is used, another 312mbu can be shaved off our production.  For every half a million acres which come out of the harvested column, subtract 73mbu if we take the 146bpa as fact.

As noted in this morning’s comments, China did hold a successful state reserve auction on soybeans overnight where 99% of the 394,000MT offered were purchased at a price between $16.87-17.11/bu.  Their markets were down 41c.  This is the function of the market: go to a price which discourages the buying of US soybeans.  As evidenced by Brazilian basis levels today, up 20c to +200Q, it will be US beans they have to stop buying as South America doesn’t have any.  Speaking of exports, soy complex exports continue to be incredibly strong.  In the last week, exporters sold 12.2mbu, way above the 2.5mbu needed per week.  The USDA will have a difficult time justifying further demand cuts if this keeps up.  Bean Oil and Meal were also very strong, wheat was mediocre and corn was weak.

Traders were making note of RIN prices today, which have rallied to $0.0345/gln from around $0.01/gln at the June lows.  When these start approaching $0.10/gln it will be significant and worth noting as the rationing process of corn rolls on.  Barge freight continues to push higher as low water inhibits grain movement.  CIF corn bids were slightly weaker on the front end, but 1c firmer for new crop.  More chatter about Brazilian maize trading into South Carolina with the first vessel said to be on the move.  Again, more instances of rationing.  The spread between live cattle and feeder cattle continues to blow wider thanks to rallying corn, improving cattle crush calculations.  Still not a business a guy wants to leap in to with both feed, but better than something that isn’t so great.

If you noticed yesterday in the comments, any and all protein premiums have been wiped out of spring wheat.  Right now, wheat is wheat.  ND weather has been a bit cooler/wetter than SD weather, so possible high protein isn’t uniform, and Canadian weather likely less threatening than ND for same reasons.  Scales in the country are around -2/+2c a 1/5.  It would seem the elevators in the northern plains are content to let the farmer store grain when there are no carries on the board, and the farmer wants to utilize his new storage.  With that in mind, expect limited carries and small inversions to persist in Minneapolis wheat as has been the case the last several months.  As the market wants the wheat it’s going to have to bid for it and keep spreads firm, but farmers aren’t being paid to store spring wheat, and that is something they should realize.


Grains are up nicely on the week, and should try to carry gains into the weekend tomorrow.  I don’t know too many who want to be short going into a weekend in which rain chances are iffy at best.  Our markets don’t feel like they’re done going up just yet, but the demand destruction taking place is clear and present.  When it matters, it’s really going to matter.  Keep making sales, especially on wheat as historically these prices are near the upper 10-15% of historic ranges and at harvest no less.  A couple pictures to follow:

   
North East, IA near Decorah.










Slรกinte.



Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Country Hedging Mid Day in the Markets 7-12-2012





Midday In The Markets

GRAINS
Grains and oilseeds are climbing higher as we wonder just how small the corn and bean crop are going to be. We’re seeing plenty of buying today; it appears no one wants to be short. Export sales were good for beans. Wheat continues to follow row crops also finding extra support from production problems in the Black Sea and Japanese buying. Soybean spreads are still weaker. Soybean fundamentals are still bullish, but the elephant in the room is how much will China pay for beans if their economy is slowing down? China sold 390,090 mt of beans from reserves today.

Export Sales: In thousand tons
                Old         New
Corn:     172.7     492.1
Wheat:                 311.8
Beans:  332.1     427.1
Meal:    95.7        74
Oil:         34.4        -0.5

LIVESTOCK
Once again higher corn prices and slow demand for beef continue to put pressure on cattle. Weekly export data showed a net sales of 17,300 tons, down 2,600 tons from last week. With a stronger dollar and a majority of “grilling” holidays behind us, exports will continue to hold sway over the market. Also, an abundance of supply as more cattle come off drought-ravaged pastures into the market will be detrimental to prices as well. Lean hogs are trading higher today on firmer cash prices and as packers buy hogs to fill out the week’s slaughter quota. Yesterday’s average cash hog price form Iowa/ Southern MN was $97.30, up $2.26.


ENERGY & FINANCIALS
Stocks continue to fall as investors lose hope of QE3. Not even the good economic data was able to revive their spirits. US jobless claims were down 26,000 to 350,000. Global economic growth is still weighing on the markets as investors wait for Friday’s reveal of more Chinese numbers and any further developments in the euro zone crisis. Gold is down $8.90 at $1,566.80. Crude is down $0.67 at $85.14. The Dollar is up $0.12 at $83.85. It looks like the dollar may be shaping into a “head and shoulders” pattern, so that should give us something to watch as well.





Jenna Roe
800 328-6530

Country Hedging, Inc.
The Right Decisions for the Right Reasons

Overnight Highlights from Country Hedging's Tregg Cronin 7-12-2012






Outside Markets: Dollar Index up 0.181 at 83.749; NYMEX-WTI down $1.00 at $84.81; Brent Crude down $1.18 at $99.05; Heating Oil down $0.0416 at $2.7202; Cattle are lower, hogs are firmer; Gold down $11.40 at $1564.10; Copper is down $0.0510 at $3.3965; The Yen is firmer, but all other major currencies are weaker; Softs are mostly weaker; S&P’s are down 10.25 at 1326.00, Dow futures are down 87.00 at 12,449.00 and Treasuries are a bit better.

Grabbing headlines this morning is the weakness in the EURUSD cross which has pushed the euro down to the lowest level since June of 2010 at 1.2189, while the US Dollar makes 2-year highs.  Nice if you’re going to Europe in the next year.  The other striking thing is how investors are still searching for short term safe havens.  German, Dutch and Swiss 2-year treasury yields are now negative, meaning you’re going to pay those governments interest to hold on to your money just so you know you’ll get it back in two-years.  After early gains, Spanish 10-year yields are back to 6.69% and Italy at 5.87%.  The data out of Europe this morning was factory orders which showed a 0.6% rise in May from April, but France and the Netherlands were weaker than expected.

Rains have fallen across the Dakotas in the last 12 hours, and continue to work East across both states this morning.  Totals so far look like a trace to possibly 0.25” with heavier amounts in the NE portion of both states.  Otherwise, additional rain fell across the Delta, putting the 4-day total at 0.75-3.0” in most areas.  5-day forecasted precip is showing continued rainsa cross the Delta with the northern tip of this system reaching up to S-IL/S-IN/OH and bringing anywhere from 0.50-1.50” in the heaviest areas.  ND and N-MN could also see more rain by the end of the weekend.  The 6-10 day models remain highly divergent with the American showing widespread rain across the Midwest, but the Euro limiting rains to the Delta/TN/KY with some chances in the far NW-Corn belt, but nothing organized.  Continue to stick with the euro until proven otherwise.  The 11-15 shows rains in the central Midwest, bringing rains to most corn belt areas.  Temps should remain above normal throughout the period with warmer temperatures in the upper-Midwest.


After the incredibly volatile session yesterday which saw prices hit lows and then rally slightly into the close, that momentum is carrying into the overnight and early morning session with corn up double digits, wheat up around 7-9c and soybeans posting very slight losses.  It looks clear the selloff was overdone yesterday, especially as the rumors Sec Vilsack was going to address the RFS mandate proved to be false, but the technical damage had already been done.  Fortunately, markets are focusing on the bullish fundamentals this morning.  A further correction shouldn’t be ruled out as these markets can easily set back further while keeping the uptrend in place, but these markets should remain supported by fund interest and eager end users to extend coverage on any big break.

Overnight headlines included Pakistan resuming wheat exports after almost a year as its grain becomes internationally competitive.  Small volume were sold for spot shipments to Malaysia and Indonesia.  13.0% milling wheat is being sold around $295-298/MT C&F.  Pressuring a bit to soybeans was China selling 390,090MT of soybeans from government reserves in an auction Thursday to sharply better demand according to CNGOIC.  The government sold 379,488MT at CNY 4,005 ($17.11/bu) in provinces with a heavy crush presence.  This is the function of the market: get China to sell its reserves down and stop buying US beans.  We’re not at that price yet.  Strategie Grains downwardly revised its EU 12/13 grain harvest by 2.4MMT to 278.8MMT.  Corn and wheat were both cut.

From Morocco we learn their wheat crop has dropped 40% y/y to 5.1MMT due to drought.  Imports are expected to pick up.  In tender results, Japan bought 131,379MT of US milling wheat from the US for Aug 21-Sept 20 shipment.  Our favorite investment bank ($GS) raised their price forecasts on corn to $6.90/bu, their wheat forecast to $7.70/bu and soybeans to $16.25 due to drought concerns.  Their corn yield estimate is now 143.5bpa.  There were 25 Chicago wheat re-deliveries overnight as well as 462 soybean oil.  Open interest changes during yesterday’s session included an increase of 17,070 corn, 16,440 beans, 2,120 meal and 2,370 oil.  Wheat was up 6,810.  Chinese beans were down 41c, meal down $13.10, oil off 122c, corn down 1.50c and wheat down 8.50c.  Paris Milling wheat is up 1.42%, Rapeseed down 0.88%, Canola down 0.83% and UK feed wheat is up 0.60%.


Call things better to begin with today as cooler heads prevail and the bullish fundamentals matter.  Rains this weekend will be falling in areas which could help the soybeans still, but questions have to be raised about the corn, and the WCB crops don’t look on tap for a soaking rain just as temperatures build back above 90 degrees.  Yesterday’s price action caught a lot of people off guard, so make sure you level marketed is where you want it based on your production prospects.


Trade as of 7:05
Corn up 11-14
Soy up 2-5
Wheat up 7-9



Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Morning Note - From Country Hedging's Joel Fitch 7-12-2012




Good morning,

Markets are rebounding after yesterday’s report.  Again for the corn it felt like the USDA was being pretty realistic for what we know.  On the beans I think that they are underestimating old crop exports and could be underplaying new crop demand.  Little more bullish wheat news out of Russia as the Stavropol region is worse than previously estimated. 

Weather today is dropping some moisture in the Delta and up into Tennessee.  There could be light chances in IL, IN, and Kentucky, but Friday is the more likely chance to get anything.  It feels like it only really matters for the beans in a lot of locations.  The 1-5 and the 6-10 are still for above average temperatures and for limited chances of rain in the ECB.  The delta should be improving with the weather pattern. 

Estimates for the corn crop are now ranging between the high 130s and the low 140s.  As we continue to tighten the corn market I think that there is more potential demand to ration.  We traded a good portion of last year with a carryout of near 800 mb and traded below the current corn price. 

Corn spreads have become quite minimal with the tightening of the supply.  This market should invert shouldn’t it.  Especially for the western corn belt, you are going to have to manage with inverses or at least very limited carries.  Depending upon profitability of the ethanol industry corn should want to move East more than usual with Chicago Beyond and the river being a good market.

Export sales were good for old crop soybeans again, we just haven’t stopped demand at these prices and that suggests that new crop demand could be stay robust at these prices as well.  Corn sales were okay 173 tmt old/ 492 tmt new.  Wheat was 312, kinda poor. 

Joel Fitch
Market Analyst
800-328-6530
651-355-3792
www.countryhedging.com

Wednesday, July 11, 2012

Morning Note from Country Hedging's Joel Fitch - USDA Report Recap


Below is from Country Hedging's Joel Fitch

It has a recap on the USDA report that was out this a.m.



Good morning,

Here is the quick and dirty from the report.  The expectations are located below.

Corn ending stocks were raised for old crop to 903 from 851 on a cut to exports of 50 mb.  That is the only change for old crop.  It increases carrying by 50 mb.  For new crop the USDA cut yield down to 146.0 and harvested acres to the expected 88.9 million acres.  Feed and residual was cut by 650 mb down to 4.8 bb still bigger than last year.  Ethanol was cut 100 mb to 4.900 bb and exports were cut down to 1.6 bb.  So they cut demand by 1,055 mb and ending stocks are 1,183 mb.  These demand numbers seem more realistic to me given the likely pricing of this crop. 
World ending stocks were dropped 21.7 mmt.  US is the only major change to production.  Domestic feed, domestic use, and exports fall. 

Bean ending stocks were lowered by 5 mb because exports were raised 5 mb.  This is quite surprising and seems far too small a gain in exports.  Ending stocks for new crop fell 10 mb to 130 mb.  Yield was lowered to 40.5, but the acres jumped as the June 30th report indicated – even though this number is too big due to the drought.  Demand was reduced.  Crush was cut by 35 mb and exports were lowered by 115 mb.  This is probably possible because of the high prices we are achieving in beans.
World ending stocks fall 3 mmt to 55.66 mmt.  12/13 World production is down 4 mmt from last month with the US being the only major change.  Demand categories fall here as well.

Wheat ending stocks were raised for 11/12 by 15 mb.  Minor changes.  12/13 ending stocks were cut to 664 down 30 mb from last month.  Supply change is negligible, but demand is altered feed is cut 20 mb and exports are raised 50 mb to 1.200 bb.
World wheat ending stocks are projected down 3 mmt to 182.44 as production falls 4 mmt in Russia, 2 mmt in Kazhakstan.  Demand projections fall slightly with feed, domestic use, and exports being cut.

By class wheat shows ending stocks tighter in 12/13 for HRW at 266 mb, SRW at 143 mb, and white wheat at 60 mb.  Ending stocks are projected to loosen for 12/13 in HRS at 155 mb, and Durum at 40 mb.  HRW 20% stocks/use, HRS 33% stocks/use, SRW 28.5% stocks/use, White 21% stocks/use, Durum 37% stocks to use.

Overall, while these cuts seem realistic to the production for corn as well as the demand side I think that the USDA is saying that these prices are doing enough to ration demand at the current levels of estimated production.  Soybeans production is too high by 40 mb to 80 mb because of the drought and double crop acreage.  Demand is hard to know on beans.  Price typically rations demand, but with China being the only major demand and the US being the only major supplier it is hard to guess what happens.  We should be back to looking at weather. 






Joel Fitch
Market Analyst
800-328-6530
651-355-3792
www.countryhedging.com