The grain markets closed mixed today as beans and wheat
reversed rolls today.
Wheat was off 7 cents in CBOT wheat, MPLS wheat was down 7
cents a bushel, KC wheat was down 6 cents a bushel, soybeans bounced rather
strong today up 29 cents, and corn closed up ½ cent on the May contract while
July was unchanged, and new crop December corn was up 1 ½ cents. Outside markets had some pressure with crude
off about a buck and the stock markets under pressure with the DOW closing off 90
points.
More and more estimates are coming out for next week’s USDA
report. Keep in mind that these stock
reports have had a history of limit moves.
The one we had this last January was tame; but this is the report were
the USDA seems to find or lose 200-300 bushels of corn regularly. My personal bias on this report is it will be similar
to the January report and won’t be a major market moving event. But just thinking that could be a little dangerous. As to how it shakes out; right now the market
is looking and seems to be pricing in a bullish type report for corn and
beans. So if that trend continues it
might take a very bullish report to not be disappointing.
Besides the stocks report we will also have planting
intentions; but I look for that to take a back seat to the stocks. You can read or listen to hundreds of reasons
for both a bullish or bearish report and when things are all said and done and
the numbers come out the report should be one that says “we are off to the
races because of the tight balance sheet that just got tighter” or the price
slide from the summer highs should now continue because we curbed enough demand.
The bean number might be as important or perhaps even more
important than the corn number; but it is also much more known because we report
exports and crush on a regular basis.
While the corn usage for ethanol and exports is known; the wild card and
reasons for the swings in recent years has been the feed usage or other
usage. Bottom line is in my opinion the
bean number could be very tight but I don’t think the number will set the
stages for bean prices over the next several months. I think what China does or doesn’t due will
influence beans and I think the tightness in beans will show up in basis.
For corn old crop prices direction could easily follow the
report direction for a couple months; as the report will really be the only big
headline for old crop other than new black swan events. We will have the regular ethanol updates and
export updates; and we will see what margins are doing but we won’t know until
the June report if the market did it’s job finding additional demand or curbing
demand.
For new crop the acres take a back seat because it really
comes down to weather. Now acres can be
important and if we have an extreme above or below estimates it will affect the
markets but the bigger effect will come from what weather does to yield. Bottom line on new crop is it might be very
hard to sustain a major rally if the acres are any place between 95-100 million
acres of corn planted; because anything close to trend line yield produces a
crop between 13.5-15 billion bushels or so.
This year we will use only about 11 billion bushels; so to find 2.5 to 4
billion bushels of demand will be very tough.
That’s not to say that say that higher prices can’t happen; but it won’t
be easy without a repeat of last year’s bad weather.
One thing heard today that I found interesting was that some
72% of producers thought new crop cash corn wouldn’t go back below $5.00. I find it interesting because most advisors
are liking the idea of making sales and it seems to me that we have too much unsold
new crop grain. I think we have a huge
longer term risk in prices should we have a good growing year. Does it mean guys should be making sales here? I am not sure; I think we should on a small
bounce; but more than anything we need to realize the huge possible risk we
have out there. So no I don’t want to be
making tons of sales right here; but I want to realize that every day that goes
by getting us closer to new crop my prices objectives probably should come down
and premium will eventually fade out of the market.
As for other news out there today. We had export sales out; which were horrible
for corn and beans. While the wheat
number was good; but just in line with estimates. Not enough to help wheat turn around the
weakness that it had starting last night.
Basis is still under a little pressure; the recent bounce on
the board just has a little more supply then demand for corn and wheat
both. We are very close to really
widening out nearby corn bid because we can’t find any homes. I think the coverage for later on slots is
smaller than ever. I have basically zero
corn sold for June-September typically I already have a decent deck on. So end users are basically hand to mouth; which
is good and bad; but very volatile. When
they get covered nearby like they are presently bids just start to drop. Buyers or elevators then look for the next slot;
which in this case is also covered. Then
they look at June or July as example; but most producers and elevators don’t
have interest selling June at a discount to the nearby bid; especially with as
tight as corn is suppose to be. So you
just into a stalemate or waiting game.
Elevators and producers get long upfront hoping for basis to appreciate
at sometime; which likely happens if the board goes under pressure or supply
stops. But as long as the supply or
selling continues basis stays under pressure and if it continues to happen for
an extended period of time guys will obtain too much length and be force to sell
it thus push the basis weakness out even further. The other very interesting basis thing
happening is where the final corn product is ending up. I would say only about ¼ to ½ of our corn
over the past several months has went to the same end users that bought it the
past 3-4 years. Part of that is bigger
crops around our traditional end users; but part is the lack of crops in other
areas. This might mean that later on our
area gets tight and basis has to do some work to keep or get the grain coming
in.
Bottom line is look for basis to be very choppy and very volatile.
Please give us a call if there is anything we can do for
you.
Jeremey Frost
Grain Merchandiser
Midwest Cooperatives
800-658-5535
800-658-3670
605-295-3100 (cell)
605-258-2166 (fax)
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