Tuesday, November 6, 2012

closing comments election day.......what effect will it have on grain markets?

Markets closed firmer today.

Corn was up 5-6 cents, beans up 12-13, KC wheat 10-11 higher, 8  for MPLS, CBOT wheat was up 11, DOW Jones was up 133 points, crude over 3.00 a barrel higher, and the US dollar was off slightly.

Election day.  A good bounce lead by wheat and it’s struggles in the US as well as the world.  Wheat conditions horrible in the US along with contract highs for Paris Milling wheat helped push markets higher.  Wheat conditions are at or near the worst in history.  Keep in mind things are early and the potential is still there but a small crop along with a smaller world carryout and you have a potential bull market out there.

After the election is over hopefully we can get some fund involvement into our markets.  A tie or something that is undecided could make markets nervous; but just knowing what the playing field will be should be supportive to our markets or at least no longer be a reason to have risk off.

We will have a USDA report out on Friday.  Market is looking for an increase in corn carryout despite the market looking for a decline in production via less harvested acres.  The increase in carryout is coming from soft demand.  There seems to be some potential for some corn export business later in the marketing year with some of the “cheap” corn offers coming up.  We are no longer seeing Argentina corn coming into the US and there is some chatter that the US will later be in the game; but today we are not getting any business so ideas are that the USDA cuts exports and potentially ethanol demand behind poor margins.  Now if they do cut them on this report and we see a major price break perhaps that doesn’t allow the cuts in demand to happen.  Bottom line is market should still be range bound; tight enough supplies to keep a major price break yet not enough demand or headline story for the funds to really run things up.  At least not yet.

For wheat on the report the market is also looking for a slight increase in carryout; via soft demand.  We simply haven’t got much exports and wheat’s premium to corn should slow down any wheat feeding.  The world numbers could tighten up behind a smaller Australia crop; so overall market is looking for a neutral type report maybe slightly negative US numbers and slightly positive world numbers.

For the beans the market is also looking for a somewhat bearish report.  But for a different reason then the corn and wheat markets.  The expectations are for an increase in soybean production; most of which likely will see demand off set; but overall a small net increase in carryout is the expectation.  There is some talk that with the ideal weather that parts of South America will have that we could actually see an increase in production down there as well; but I have also seen plenty of other reports of too wet and areas too dry that cause me to think the USDA won’t do much with that crop as of yet; after all I think their production numbers are fairly aggressive especially when you consider the fact that many of their increased acres are not exactly the best acres either.

As for marketing our markets have been rather sideways for some time.  Don’t be afraid to take a little risk off the table near the top end of the recent ranges.  For wheat that means making some cash sales between 8.50 and 9.00 or so.  For corn 7.00-7.25 should be a good spot to make some cash sales.  I think all of our grains have some potential but there are always black swans plus as we sit today we have no head line story for the funds nor do we have the demand to really take this thing explosively higher.  So don’t forget to get yourself comfortable in your grain marketing.

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


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