Monday, March 18, 2013

Closing Comments 3-18-2013

Grain markets closed mixed today despite the rather horrible start.

Corn closed positive with the May contract up 3 cents, KC wheat was down 7 cents, MPLS wheat was off 7, CBOT wheat was down a dime, soybeans had the May contract off 16 cents, while Nov beans were down 3 cents, equities got beat up a little bit with the DOW off 62 points, the US dollar was stronger up 369 on the June futures at 82.835, gold up 12 an ounce and crude up about a quarter.

Not a bad day for the grains as we managed to bounce off of the lows for the most part.  The weakness came from a risk off type of attitude; mainly from the Cyprus situation.  To my understanding they are looking at a one-off tax on bank savings accounts ……….“Accounts with more than €100,000 will be taxed at 9.9%, those with less at 6.75%, raising an expected €5.8 billion for the near-bankrupt nation.”

That spilled over to lots of equity weakness in parts of the world; but it also put some pressure on the Euro helping firm up the US dollar and the risk off type of attitude.  One thing I did find interesting was one of the CNBC guests mentioning the fact that it might mean more money flowing into our stock market.  To me it looks like a move that should make guys nervous……….some of the bears wondering if this will be the first domino to fall?

As for grain news the biggest thing I seen today was locally the railroads have done a 360.  Just a few short weeks ago they seemed to be a week or so ahead of time; but today when I came in expecting cars at 3-4 locations I found none got spotted over the weekend.  Some were suppose to be spotted late Friday night or early Saturday morning; but today the rail road said it looks like closer to Wednesday.  If the railroads are all performing like that I would expect some sort of basis spike in the short term.  But perhaps it just stops some of the spot basis bleeding as things have been under pressure for winter wheat, spring wheat, and corn spot basis for the last week or so.

Actual news out this a.m. included export shipments.  Beans were still above the number needed on a per week basis at 8.9 million, but that is a big down turn versus the two previous weeks of 40 million and 17.8.  Bean crush demand as noted by Friday’s crush numbers is still super strong and the actual demand that needs to be curbed in the next 6 months is higher than it has ever been year over year.  Basically it feels like the soybean market is or has turned from a demand game with China to a US Crush demand story.  To me that means that some of the work might have a better chance to be basis work over the board…… China buying is headline story; while crush demand probably isn’t a headline story to get the funds wanting to get super long……..I guess only time will tell on this.

Wheat and corn exports were very close to the numbers needed on a per week basis.  With wheat slightly above and corn a couple million bushels below.  Neither are really bullish nor bearish in my opinion.

There were some rumblings that a couple Valero ethanol plants might be opening back up in the very near future.  Also talking to a Valero buyer; it does sound like they have some interest in some of the replacement grains such as milo.  I don’t think they have committed to buying much if any; but it shows that margins have improved and they intent to try and weather out the storm until new crop.  Having said that he didn’t have much interest in all on my corn offers for June versus the May.  That is both good and bad; first off it doesn’t feel like ethanol plants or many buyers have much coverage for the June-August time period; as they simply don’t want to pay a carry for it and why would an elevator or producer sell for a discount in a few months when they can move and get paid now? 

But that is both good and bad; depending how it plays out.  First off guys without coverage can decide not to run a little easier than one with a book one.   Buyers will also try buy more nearby and get others to push out or delay the delivery and that can act like guys have some deferred coverage.  Some of the export markets and feed markets are showing some carries in their bids; but their bids are also not the nearby market.  Overall to me we have stages set for some basis volatility when producer move into the field and as we go into summer and wait for new crop.  If plants and other end users decide to buy things should push up; but once coverage or a replacement is found basis has potential to get very ugly in a hurry.  Bottom line is that the last guy to sell to the guy that needs the product likely gets a great basis; but the next guy could get 10 cents to 1 buck (maybe more) less.

Wheat basis to me has felt a little top heavy; but perhaps rail road performance will give it one more bounce.  I would be a little cautious with the extreme amount of wheat that needs to move in the next few months.  Demand is better and might allow basis to hang in there a little bit on a board rally; but any major board rally probably slows demand down and brings way more supply then we need. 

The birdseed market is on the soft side; but we have seen a little pick up on orders off of contract.

Don’t forget our Harvest 4 Hunger food drive is still going.  Please give us a call for more information.

Jeremey Frost
Grain Merchandiser
Midwest Cooperatives
605-295-3100 (cell)
605-258-2166 (fax)

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