Thursday, January 3, 2013

Closing Grain Market Comments 1-3-2013 are the low's in for the grain prices?

Grain markets closed mixed today in a rather choppy light volume session.

When things where all said and done corn was down 2 in the front month, while deferred months were off 3-7 cents, beans were off 6, KC wheat was unchanged, CBOT wheat price was unchanged, MPLS wheat was up 5 cents, equities gave back a little of yesterday’s gains with the DOW off 21 points, the US dollar showed lots of strength, crude was off 25 cents, and Gold prices were hammered down $25 an ounce.

Not a horrible day for the grains with everything considered.  First off we had a very strong US dollar and risk off type of attitude; followed up with some news that China had cancelled some more beans and some analysts increasing the South America soybean production.

The wheat charts today leave us with a  little bit of hope.  Perhaps thin and limited hope; but at least something.  Wheat markets made new low’s for the move today and then close unchanged to a hair firmer; that left some reversal’s and also some doji like candlesticks on the charts.  Charts are also very oversold; so even though today’s price action wasn’t the best it did leave a light glimmer of hope of some sort of dead cat bounce.  Fundamentally supportive should be the fact that we are very competitive in the wheat export game; I haven’t seen much business around but the last numbers I seen for values indicated that the US was the cheapest source right now.

Bottom line is today’s price action was by no means a market changer; the trend is still down.  But I don’t know many that would really want to jump on the short side right now either.  More so I have seen speculator’s and advisory services talk about taking profits in these areas; moving from bearish to neutral at these levels.  I also thought that the spreads price action was very supportive for wheat and corn today.

In wheat and corn you seen the front month gain on the deferred months and that is typical a sign of some upfront demand.  When the market isn’t willing to pay you to store the product it means they want to product sooner than later and that is fundamentally friendly.  Once again I don’t think that is enough to get super bulled up but it is another positive check mark that we made today.

One negative thing I did see today is that I got a winter wheat train rejected for being too high of protein.  Worse yet is that 3 different buyers rejected it.  That is frustrating and challenging.

Another negative today has to be the close; wheat lost between 3-7 cents in the last minute or so trading; corn was also under big time pressure in the final 60 seconds of trading.  Any way you shake it our close was the type of get me out trading; hopefully something that turns out to be the last liquidation but only time will tell.  Also we need to really get some more friendly headlines.  China cancelling beans and the SA bean crop getting bigger are not bullish headlines. 

Next week’s USDA report could bring some bullish headlines but there is also a chance they are more bearish headlines.  These stocks reports have limit moves 12 out of 13 or so if memory serves me right.   The January report in particular limit moves every year since 2008 for one commodity or another.

 My bias is to the upside in that report; but maybe that comes from my position where I seem to cheer for higher prices and listen to a lot of producers that are naturally bullish.  What happens if the report is bearish; how much more is there possibly to the downside?  I would like to think that there is not a lot but the reality is that there is plenty of downside risk especially looking at historical values.  So if you are not comfortable don’t be afraid to looking at marketing or protecting these prices.  Do I really want to spend a lot of money on put options after the price whack we have took?  No not really but it might get some guys comfortable and that is worth a lot by itself.  I think the move that I like best right now is min price contracts because that component includes locking in basis and basis is also historically on the good side.  Not great but we are probably close to the spot where we have more downside basis risk then upside basis potential.

The birdseed market remains very slow; with little interest from buyers but I would note that I can’t buy many sunflowers at levels we are presently at either.  Very thin on both sides; hopefully it picks back up next week when everyone gets back.

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