Tuesday, October 9, 2012

morning comments 10-9-12

Markets are trading firmer on Tuesday Oct 9th.

Around 8:15 we have KC wheat up 7-8 cents, MPLS wheat up 7, CBOT wheat up 9, beans are up 14, and corn is up 4-5 cents.  Outside markets have a firmer US dollar, equity futures up slightly, and crude is up 90 cents a barrel.

Not lots of new news lately; more position squaring ahead of the USDA Supply and Demand report which is out Thursday morning.  Yesterday’s holiday delayed export shipments and the crop condition progress reports until today.

The other news out there seems to be more of the same; firming wheat basis, bigger than expected yields (mixed by some but bigger than expected is leading when it comes to headlines along with more and bigger grain piles then expected), fund still holding rather big positions in corn and beans, concerns over world wheat situation as crops get smaller in Australia.

As for the report estimates for corn yield are 122.8 which is basically unchanged from USDA.  I have seen production number all over the board with some thinking less harvested acres and others thinking bigger yields.  But overall not much expected change for corn production; the last overall estimate I seen was 10.6 billion bushels versus the 10.727 that the USDA has in Sept. 

Probably as big if not bigger than production will be where ending stocks are projected and what the USDA does with demand; exports have been lacking yet the stocks report at the end of Sept showed a smaller starting spot than what was expected; average estimate for ending stocks is 656 million bushels for the 2012-2013 marketing year versus 733 in Sept.  Keep in mind that the USDA was already projecting over a billion bushel of demand cut from last year. 

As for beans production ideas are 2.76 billion bushels versus the USDA at 2.634; with yields at 36.9 versus 35.3 last month.  Lots of debate of yield here but some estimates are closer to 40 bushels per acre.  Once again as big as production will be were the USDA pegs carryout at and what they do with demand.  We are well ahead of the needed export pace so there is potential that we see any increases in production are offset by demand increases.  Carryout estimates are at 135 versus 115 last month; I should mention that the September stocks report showed more than expected as well; which should lead to a bigger starting spot.

Wheat is pegged at 627 million bushels versus last month’s 698 million bushel carryout.  We had a bullish stocks report that indicates good feed demand; while production didn’t have major changes.  Lots of eye’s will be on the world numbers here and spillover to our exports.  We are currently running behind the needed exports yet we have our competitors getting less available to export.  Year over year world wheat numbers are getting friendly; but enough for another leg up?  In my opinion not until we actually see some of that demand hit our markets.

Going into the report we have to realize that even though there is plenty of upside potential should things go good there is also plenty of risk.  Who know what type of curve ball or change up the USDA has up their sleeve this time? 

Bottom line with the extreme volatility we have seen the past several months and all of the unknown in our markets as well as the world economies make sure you are comfortable no matter what the USDA says come Thursday.  For those that where pro-active making sales early it might mean catching up a little bit and working on getting your average a little higher; for others it might be doing nothing as everyone situation is different; bottom line is heading into a report that could move us tremendously either direction one needs to be a little pro-active when it comes to risk management.  One can be bullish and have tons of great reasons to be bullish but the market is the market and it tends to follow what the USDA says right or wrong.  If you need help with a marketing plan or want to look at some strategies to help protect one heading into the report please give us a call.

The birdseed market is still showing little interest in sunflowers; but the good news is the crush market should put a min price we see as right now those two markets are near par.  With beans firming and looking like they have maybe made a seasonal low perhaps sunflowers are close to one also.  The birdseed market really needs to have a good wet snowy winter along with a good economies if we want to see a huge rally later.  The thing that is a little scary is way too many are putting all there sunflowers in the bins thinking that 30-40 cent sunflowers is a given; we can’t get things too out of balance or we will simply have some many sellers on a small bounce that a big bounce just might not be in the cards.  One positive I see is the flowers flowing to the crush and the birdseed end users not buying at what could be the seasonal low; their lack of coverage gives huge potential; but the huge amount of unsold product with bigger yields is also going to be a risk.  At the end of the day it could really end up being a weather market; good wet weather that leads to good demand we go higher; otherwise perhaps we see long tail effect?

Bottom line for sunflowers is risk management is recommended; many didn’t sell many the past 2-3 months because of the unknown in yield; I don’t really want to make tons of sales at what could be the bottom yet if one isn’t any were sold near the percentage they should be there is still nothing wrong with making a profitable sale.

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


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