Wednesday, October 17, 2012

Morning Comments 10-17-12

Another small little bounce is happening Wednesday morning; as of about 9:20 markets have corn up 4, beans up 7, KC wheat up a nickel, MPLS up 8, and CBOT wheat is up 5.  Outside markets have the US dollar once again weaker with the cash index at 79.01, gold up $4 an ounce, crude up 50 cents a barrel, and equities are quiet with the DOW off 10 points.

Another lack luster news day.  One thing out was the press release of the CME group purchasing the KC Board of trade.  Not sure what effect it has other then making spreads a little easier to trade.

Weather has some moisture in the eastern parts of the corn belt; but it remains very dry in the western and many areas such as ours are not seeing much for wheat emergence.  Ending Australia wheat stocks are seen at 7.1 MMT and production numbers continue to come down; most very close to 20 MMT versus the USDA at 23; some chatter is it could slip down to as low as 18 mmt.  But still for this to be super bullish our price we need it to translate into demand.

That is the big story for all of our markets now; demand. Supply is virtual known; perhaps not 100% but it is much more defined than it was before harvest.  Demand should now take the lead to where prices go.  Solid demand with good profitability for guys like ethanol plants and we open the upside.  A lack of demand and profitability struggles don’t add up to higher prices.

Bottom line is huge market potential remains should we end up getting bullish cards like less harvested acres, smaller supplies, or increased demand from the price break.  While at the same time huge risk remains if weather goes perfect in SA, our crops are actually bigger than expected, or the funds just continue to lack a headline reason to get involved.

Basis is firming on spring wheat and spring wheat is leading the markets today; the front month in particular as spreads firm in MPLS.  Also there has been talk of some Chinese buying of Canadian spring wheat.

The sunflower birdseed market remains very quiet; not much for demand there.  Plenty of buying needs to be done; but until prices stabilize or the buyers sense demand picking up look for the buyers to lay in the weeds trying to buy as cheap as possible.  Keep in mind that one of the worst things an end user can do is to be long and wrong or have higher priced product then the next guy on the shelf.  So don’t look for sunflower prices to stabilize until we give end users a reason for them to.  Perhaps that reason could be beans bouncing or stabilizing or orders/demand picking up, or realization that harvest is about over and there coverage is behind the eight ball.

Millet remains firm; but also very thin.

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

Don’t forget this afternoon at 3:30 we will have our weekly MWC Marketing Hour Round Table meeting.  Join us for charts, strategies, and generic grain market talk.


Jeremey Frost
Grain Merchandiser
Midwest Cooperatives

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