Markets got hit hard today.
Corn was off 20-21 cents, beans where off 46, KC wheat off
32, MPLS off 26, CBOT wheat off 29, crude, the US dollar, and equities where
all near unchanged.
Bad risk off day for the grains; a spill over from Friday’s
report with technical selling lead by the bean market. The weakness for beans is also coming from
South America weather and Friday’s report that showed a big increase in
production. Beans are now at their
lowest level since late June; basically gave back nearly the whole drought
rally.
One positive we have is that if ECON 101 still works lower
prices cure lower prices; so demand for our grains probably hasn’t been hurt by
the lower prices. But one question you
have to ask is; can end users buy the product easier today than they could last
week? You did have ethanol go down a
little today along with corn; and with a softer board it probably takes a
better basis to see corn come out. I
have seen many say over the past couple months the lower we go on price breaks
the higher we go later and I am not sure if that is the case if the product
actually won’t trade lower. As example with
our recent price break producer selling has really slowed down; so lower prices
might not be completely helping the end users if they can’t get the product.
As for news today; we really didn’t have any new highlights
to cause the markets to get beat up so bad; just a combination of Friday’s
report, South America weather, and Technical selling. One thing that could have lead to more
technical selling today and fund liquidation in general was the holiday. Many banks where closed so wire transfers didn’t
happen and if one was long out of Friday’s report and had a margin call there might
not have been many options depending on how firm the margin calls where.
Export shipments and crop progress was delayed due to holiday. Look for the same theme however of very good
bean shipments with wheat and corn not so good; part of that is just the fact
that the whole infrastructure isn’t able to handle all three commodities at
once. Take a look locally at the
elevators; we don’t ship much if any wheat during fall harvest and we never
ship any row crops during wheat harvest.
So I don’t view the lack of shipments too important for corn and wheat
right now; we are not at the historical time when we see heavy shipments. Sales however really need to pick up sooner
than later and this weeks bean sales will be important as well; because last
week they were not very impressive.
Basis didn’t feel any better today despite the weak board; I
would say it was firmer either just undefined for most markets(corn, winter
wheat, spring wheat, milo). The MPLS
spot floor didn’t even have a single car for sale. Seasonally we are nearing the time when wheat
basis heats up into Holiday Baking season; so perhaps now isn’t the worst time
to have some basis offers out there. But
to really see basis get wild we need to see some export business happen; the
same thing we need to happen if we want to see the wheat board run. Until it does wheat is starting to look a
little over priced when you consider how far off the summer highs beans are it
makes wheat sales look good. Don’t get
me wrong there remains plenty of upside potential for wheat; but without the
funds backing it along with a headline
story and solid demand wheat is more than fair priced. Keep
in mind that early September KC wheat was a 8.35 discount to Soybeans on the
board; now that discount is only 5.18; so reality is that even though there is
some potential upside for wheat there is also plenty of downside risk should
corn and beans continue to see pressure.
The birdseed market is also very soft; demand is light and
the soybean complex isn’t helping out at all.
End users lack coverage but also are showing very little interest.
Please give us a call if there is anything we can do for
you.
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