Tuesday, September 18, 2012

Closing Grain Market comments 9-18-2012

Markets followed up yesterdays weakness with more weakness today.

Corn was off 8 cents, beans were off 29 cents, KC wheat was off 12 cents, MPLS wheat was off 6 cents, crush sunflowers where unchanged, CBOT wheat was down 15 cents, equities were unchanged as the DOW was unchanged, the US dollar was near unchanged to up slightly, and crude was off about a dollar a barrel.

Not a lot of new news today; just more of the same from yesterday.  Light harvest activity and hedge pressure, ton’s of fund liquidation along with technical selling, trade dispute between China-Japan and just a lack of overall new bullish news.  Nothing has really changed from a week or two ago other then maybe yields are slightly better than expected on potentially a few more acres.  But fundamentally have we seen a major change; I would say no we haven’t.  First of if and it is a big if our supply is bigger it can easily be offset with the rather robust demand we have seen; keep in mind that the USDA is saying on paper that demand is cut big time and we really haven’t seen that yet.

Now keep in mind there are some arguments out there that the funds still have plenty of ownership and some ideas are the crop is a lot bigger than the USDA pegged it at.  I am not in that camp but keep in mind things tend to get over done especially in our markets.  So over the next month or two a further and possibly accelerated price break can’t be ruled out.  So as always make sure to practice good risk management that leaves you comfortable at the end of the day; after all we are still at rather good prices and just because one didn’t pull the trigger at the highs doesn’t mean that one’s game plan going forward should be a deer in the headlight style; it still needs to be pro-active.  After all if anyone knew for sure what these markets where going to do on a daily basis they wouldn’t be where they are at.  So getting one’s self comfortable no matter the future price direction is very important; if for nothing else peace of mind.

As for other news out there we have seen harvest start to progress; corn in the US is 26% harvested and starting to pick up speed with no real weather threats to slow it down.  Locally we are taking in a lot of 13-20 moisture corn; with yields near expectations.  It does feel like basis is slightly firmer for corn in many areas. 

Wheat basis is firmer the past couple of days with the declining board; but I still haven’t seen the great export demand that we need.

I did see a comment that Russia may discuss a duty on grain shipments that would take at a predetermined price level.  It should also be noted that many of the estimates for wheat put the exporting countries at the tightest stocks to usage ratio since 2007/2008.  Bottom line is we are getting closer to export business and this should help out basis and potentially leaves wheat with a major bull story as we move into the new year.  But before one gets too bulled up remember this not new news it is part of the reason we traded 9.00 plus wheat last week and before we can make a major leg up we really need to see the demand show up.  Plus this is one that we simply have too many too bullish; in one of the commentaries I read I seen where the funds had 100% long in KC wheat versus 0 short.  That just doesn’t work; you have to have some balance and some arguments on both sides of the fence or you will eventually run out of buyers and then they typically all become sellers.

The birdseed market has been choppy the past couple of days.  Millet market is on fire; we now even have some very attractive new crop bids.  I even have a couple of buyers that might look at an act of god contract for millet planted early to be harvested in July or August next year.  Talking to some of them they are afraid that these high millet prices could really wreck demand.

Sunflower prices should benefit from the high millet prices; it should add more demand to sunflowers.  But this won’t be an overnight thing; it will take some time.  Most sunflower buyers still think they will buy cheaper at harvest on idea’s of a big crop.  I agree the crop is ok and good further north.  But I really think the buyers are underestimating the current situation of most of the American Farmers.  The financial situation is better than ever before and many have really increased on farm storage.  I think the days of weak harvest basis and harvest pressure are gone or at least not nearly as bad as they used to be.  The game has changed and this should and will continue to add to the volatile price patterns we have seen.  This doesn’t mean to get all bulled up on the ideas that producers control the markets; it just means to keep in mind that the game changes every year as do the playing conditions and the players.  It means good risk management needs to be done; for both producers but for buyers too.  An end user not using good risk management also helps create lots of volatility to our grains.

Don’t forget we are offering free delayed price on some of the row crops; make sure to give us a call for more info.

Lastly a few weeks ago we starting sending out a mid day voice update.  If you want to get on this list please give us a call; it is a quick 90 second update on where the markets are and some of the reason behind the price moves.

Please give us a call if there is anything we can do for you.


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