Tuesday, January 22, 2013

Closing Comments

Markets closed mixed yet very disappointing today despite friendly outside markets and a very strong opening last night.

With everything was said and done corn was up a penny, beans closed up 23, KC wheat got hammered down 13 cents a bushel, MPLS wheat was off a dime a bushel, SRW (CBOT) wheat was off 12, equities bounced with the DOW up 63 points, crude up about 60 cents a bushel, and the dollar was lower.

Grains started off very strong last night from weather in South America and talk of Russia removing their import duty on wheat.  After the pits opened I seen a couple wires indicating that Russia would not remove any import duties and that along with all the export business over the weekend that the US didn’t participate in seemed to weight on the wheat market.  Also to note is some of the areas didn’t get hit quiet as hard with the cold snap.

Wheat charts took a step back today.  As most left reversals on the charts; some key reversals as wheat made new highs for the move and then closed below Friday’s lows on some of the charts.  So outside bearish reversal days……….yuck.

South American weather helped the soybean market out today.  Finally getting that weather scare; but I don’t know that it will really materialize to enough damage.  I guess that remains to be seen; so far things have been ideal but the recent weather in some parts and the 10 day forecast in parts of Argentina have caused some to think that perhaps there is some downside to the big production number. 

Basis felt rather weak today for wheat as mills seem to be plugged.  I have said for some time that we really need some export business and that remains very true.  We simply have plenty of wheat for the demand that we have.  Yes it is very dry and production can come down but it might not matter if we don’t find some demand.  I read something today that indicated that the average ND farmer still has 60% or so of this last years wheat crop to market.  That simply isn’t bullish.

The other thing we have to keep in mind before getting too bullish wheat from the drought is what will wheat do if we plant a huge corn crop with normal or above normal yields?  I don’t think we can have 10.00 wheat if we have 3.00 or 4.00 corn. 

So wheat might be a little pickle.  As we need to find demand; which doesn’t seem to be happening.  So the real story is probably new crop; but when can the new crop story really hit?  About the time when the market will really be focusing on corn getting planted and conditions. 

Bottom line is I think everyone knows of lots of bullish arguments; but most of them center around dry weather.  We need to be prepared if we don’t see that happen; as if we have any corn crop at all we will need to find a lot of demand in a hurry or the downside potential is scary.  So recommendation of using good risk management is still the present thoughts.  If you need help please give us a call.

The birdseed market seems to have a little interest; but overall rather quiet.  I would have thought I would have had more calls from buyers today with the strength beans had. 

On the bean market; if we could get some more spot business we could make things very interesting and get things very tight in a hurry.  But more than likely a weather scare rally will turn out to be a fear rally and thus a rally that should be sold.

Jeremey Frost
Grain Merchandiser

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