Below are closing comments and a wheat chart
First off is a KC MAY wheat chart.
This shows that we have had a small bounce the last couple
days. Yesterday actually leaving a
bullish reversal; as we traded to the lowest level since June and closed
higher. We also have had a very oversold
market as noted by the STOCH; one that looks like it is trying to turn positive. If we could get another 20-30 cents we would
then see some that recently shorted wheat be in the red and that might spill
over to a little short covering. Overall the market has been one of those “catch
a falling knife” type of markets; but at least today yesterday’s low provide us
a possible support area.
When things closed out today we seen corn close unchanged on
the May futures, up 4-5 on the March futures, and Down 2-3 on the Dec
futures. Soybeans closed up 8-10 cents,
KC wheat was up 2, MPLS wheat was down 2, CBOT wheat was up a penny, the stock
markets had a strong bounce with the DOW up 175 points, and the US dollar was
down about 300 at 81.53 on the cash index.
Overall not a bad day for the grain markets; but wheat is
still failing to show any real strong signs that it is going to bounce. Charts look a little better as noted above;
but we are not getting ran over with demand and that old saying the trend is
the friend sticks out in wheat. The
trend is down and has been down for some time; we really need a catalyst for
that to change. The last major catalyst
that we had was snow in the Kansas and some of the other HRW growing areas and
moisture that helps out the prospects for a crop is not a catalyst for higher
prices.
On the positive side we have seen wheat basis continue to
firm; but part of that is due to slow moving rail roads and the balance is
simply due to a lack of producer selling.
The strong basis we are seeing has little demand behind it; at least not
export demand. Which is really were we
need to see some demand at. We export
too big of percentage of our wheat to have a bullish wheat market without solid
export demand. Some of the headlines
recently indicate we are getting some exports sold and I expect good export
numbers tomorrow; but we really are not getting the swing hard red winter wheat
export business that we need to be. We
have recently got some feed wheat export business but as I have said for months
we need to get HRW export business before we can get bulled up. Doesn’t matter if we are these levels, a buck
higher, or a buck lower; we need export business or we will simply have too
much wheat no matter how ugly or small our wheat crop ends up being. Plus we have to remember that many areas have
seen the prospects for the wheat crop stabilize. Much of the market is trading like the crop
still has a chance to be an average crop; which I don’t think is the case. But if the funds want to trade weather patterns
or rain then how much the rain or snow will actually help our poor condition
crop won’t matter in the short run.
Ethanol production numbers were out this a.m. and they saw a
bounce of 1.9 percent from last week which puts us right about at the level needed
on a per week basis to meet current USDA projections. More positive I thought was the fact that we
only lagged last year by 8-10 percent; which is the first time in several
months that we have only behind 10% less than a year ago. Keep in mind that the USDA has been
forecasting a 10% drop from 5 billion bushels to 4.5 billion bushels and for
months we have been between 12-18% less than last year at this time.
Corn basis also continues to be firm; but we are also
finding some markets that have coverage.
I know of three different ethanol plants that a covered past April. The strong interest is really for the deferred
slots; but those are also the slots were the margins are a little more unknown.
We did sell some sunflowers to the crush yesterday. Typically this time of the year sunflowers
don’t go to the crush; but these did. We
sold them with no oil premium or discount and at par to a 75 cent premium over
some of the lower birdseed bids that are out there. I view that as a good sign; I prefer to see
much more go to the crush before I get bullish.
But if the crush can take some product out of the pipeline right now;
perhaps that means that later on when producers get busy that the birdseed
industry has to pay a little more of a premium.
Right now as things sit today we simply have way more supply then we do
demand.
Don’t forget we are still offering free delayed price for
corn, winter wheat, spring wheat, and sunflowers. But also keep in mind that we do have rather
strong basis levels. I think we see lots
of wheat move on any bounce at all especially from the farmer down south that
got some snow in Kansas. So perhaps one
might want to be looking at locking in basis; after all we are on the historically
high side of things; and more than likely a basis contract will work great if
we see the board decide to rally. I
would have similar thoughts on corn; but keep in mind that corn has much more
of a marketing left then wheat does.
Please give us a call if there is anything we can do for
you.
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