Monday, March 25, 2013
Closing Comments 3-25-2013 - USDA Report Preview
Mixed day for the grain markets today.
Corn closed up 7 with much of that strength coming from fund buying near the close, soybeans closed down 3, KC wheat was down 3, MPLS wheat was down 1, CBOT wheat was down 3, equities closed weaker with the DOW off 64 points, crude was up about a buck, and the US dollar was sharply higher.
An ok day for the grains; but one that also left me feeling a little cautious. First off the strong close by corn seemed to come from the funds and idea’s that this week’s report will be bullish. The only bearish forecasts I have seen for the report are those worried about the fact that everyone seems to be bullish on it and I land in that camp. That we have had a nice rally since the last USDA report; but we also seem to have too many looking for bullish numbers which opens the door will they be bullish enough. What if they are not bullish but actually bearish. No one is talking about it; but this report doesn’t have a history of always limit up; there have been numerous times when it has been limit down. I do feel that the report happening when the markets are open will take a little of the extreme out of the report; but also add to the volatility.
What I mean by the extreme out of the report is the fact that we won’t have everyone waiting for the open to and getting more bulled up or bearish. I guess I have a theory that the longer the info is out without pricing itself into the market the more extreme the movement when the market opens. I.E. in the past the markets had always been closed when the USDA released it’s stocks or S & D reports. The past few the market has been open and the market seems to trade both sides in rather choppy volatile trading action when the report is released. Before if we had a bullish report; we wouldn’t see the market trade both sides; it would simply trade higher off of the open or lower off of the open if we had a bearish report. Before by the time we had the report out everyone had already jumped on the buy or sell bandwagon; now with the markets open the price discovery happens for a little longer period of time in my opinion.
Back to my point; it just feels to me that we have some risk on old crop corn in particular that everyone is looking for a bullish report. It might take something super bullish to have follow through buying. Also a little concerning is the local fact that I can’t find much if any homes for nearby corn. End users completely plugged and having no interest for a few months is not bullish; but that might just be a local thing as some areas still need corn hence we still have a decent inverse on the board.
The other thing that made me a little nervous today was the price action on the outside markets. A very strong US dollar doesn’t help us get additional exports and an overall risk off type of attitude won’t promote money flowing into investments such as commodities. I didn’t like the DOW price action today; perhaps it was just another small correction in what has been a big bull market since 2009; but trades like today were we put in new all time highs and trade lower than the previous day’s lows are yellow flags to me and technically made give some a decent risk reward spot to go short. Plus we have all seen the arguments on the actually strength of our economy; so I won’t go down that road; but some of the things going on in Europe and with Cyprus should make us nervous. That isn’t all bad either because it means that at least some are playing the market from the short side which means we have a little balance. When everyone gets supper bullish or supper bearish and we don’t have that balance that is when typical blow off tops or bottoms tend to be made.
Else were today basis felt a little weaker for corn. As mentioned above a lack of homes; or at least homes at values that are being posted. There is always a price that will trigger buyers; but right now that price is much lower than most of the posted bids. The positive for corn is that most end users especially in our area have little to zero coverage for June-July-August-September corn and I know of a couple plants that use 4-5 million bushels a month. That’s a lot of corn that they need to buy at some point?
Wheat basis felt a little weaker today as well; seen a small increase in producer selling with some moisture hitting parts of the southern growing regions. (Heard of a foot in parts of Kansas for snow in the last event.) We also still really lack hard red winter exports; we haven’t had any of the wheat in our area go to the export market. While years of some bull markets we seen wheat in our area go that direction. Right now those markets are still 30 cents or so away from our domestic market for winter wheat. Spring wheat is close; but part of that is due to the fact that spring wheat in our area can trade a small discount to the ND spring wheat due to quality and spreads going west.
The sunflower market is slow; bids and offers seem to be getting a little wider. But orders have been decent and the crush is competitive with the birdseed.
Seen a rumor that some more Argentina corn has been booked into SE US Feeder markets. That would be a both bullish and bearish thing. Shows us how expensive our corn is versus some other places in the world; but also friendly because we don’t have enough corn to meet our demand.
We did get some cars into most of our locations over the weekend and we are offering free delayed price on most of the grains. With the cars most of our locations have room for almost any grain………….call if you have questions.