Friday, October 12, 2012

market comments 10-12-12

Day after the report markets are consolidating and trading a little weaker around 9:00.

Presently corn is off a nickel, KC wheat is down 7, MPLS wheat is off 5, CBOT wheat is off 8, and beans are down a dime.  Outside markets have a weak US Dollar, equities are up with the DOW up 65 points, and crude is up 50 cents.

The story yesterday was the friendly USDA report.  The story today is a little consolidation and demand talk.  Corn demand really is soft and some of the commentary I listen to think that any rally won’t be lead by corn despite yesterdays friendly report.  They think that if we have a rally it will have to be lead by bean demand in the short term; perhaps a South America weather story; or if we can eventually see some demand from the smaller wheat crops around the world it could be lead by wheat.  I tend to agree; I don’ think corn can go super cheap any time soon just based on the tight balance sheet; but I think the market is comfortable too and if corn is going to rally it could be several months and that only happens if we see nice solid profitability from those that buy corn or see some sort of solid demand. 

Bottom line is I think for our markets to take another leg up some demand will be needed or a headline story like weather that the funds can jump on board.  I am not saying I want to get bearish here by any means; but I think we need to realize that if demand doesn’t stay solid and we don’t give funds a reason to buy in but give them a reason or headline to sell that there is some (plenty) of downside risk.

One of the reason for the demand comments this a.m. is because of the once again horrible corn exports.  Under 1 million bushels of corn; which is just horrible.  Beans continue to be good; but not nearly as good as they have been coming in at 18.4 million bushels; well above what we need on a per week basis but less then ½ of what we did a week ago.  Wheat came in at 10.3 also much less than needed and a decline from last week.

Recap from yesterday is corn carryout at 619 million bushels………very bullish; but we still need to see solid demand.  World corn carryout at 117.27 mmt; also very bullish and tight well below trade estimates and probably biggest positive from yesterday.

Bean carryout at 130 million bushels; bullish but an increase from last month and bottom line here is production increased big time; that was met with demand.  The bigger supply says we don’t need to ration off as much demand; so some think the bean number isn’t super bullish but yet bearish just from the 200 million bushel production increase.  World numbers at 57.56 well above last month and above trade estimates. 

Wheat at 654 million bushel carryout; above estimates but below last months.  Says we do have plenty of wheat in US but tighter then past years.  World wheat in line with trade estimates at 173 mmt; but a decrease from last months 176.

Overall a good report; a little disappointing on the wheat and bean price action and even more disappointing today as now around 10 our markets have took another big let down.  The report gives us plenty of upside POTENTIAL but we need solid demand and a reason to get money flow or the funds involved; without demand or money flow most grains are more than fair priced.  Bottom line don’t be afraid to make some sales here and there on bounces as with all the above mentioned unknowns and other black swans practicing good risk management is all one can really do.  Keep in mind there is nothing wrong with making sales that make sense.

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

Jeremey Frost
Grain Merchandiser

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