Wednesday, February 27, 2013

Closing Comments 2-27-2013

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.

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