Monday, March 11, 2013
Closing Grain Market Comments 3-11-2013
Markets closed firmer across the board for the grain markets with some follow up strength from Friday’s USDA report.
Corn closed up 8 cents, beans closed up 8-9, KC wheat was up 2, MPLS wheat was up 2, CBOT wheat was up 3, equities continue to run with the DOW making new all time highs once again today up 50 points, and the US dollar was softer.
More talk of lots of wheat needing to move. Both in the Northern US as well as India; but also still hearing world wheat values are slightly below the min price that the India government has in presently in place. In the US it feels like we have tons of wheat to move; but it also feels like producers might simply wait it out. If they do decide to wait it out realize what happened last year to spring wheat basis; when harvest basically started a month or two before it actually did. If we have a wheat crop this year there is just a huge amount of old crop wheat that might decide to try and move before harvest actually hits. I don’t view this as having a huge effect on the board; but it could cause plenty of basis weakness.
Wheat spreads in KC and MPLS firmed slightly while corn spreads showed a little weakness. A lack of producer selling and slow rail movement helped out the wheat spreads. While the May-July corn spread showing a little weakness appears to be coming from a little basis weakness and the fact that some end users ethanol plants in particular have rather decent coverage.
Export shipments were out this a.m. They showed beans at the lowest level in 24 weeks; around 17 million bushels; which is still about 2 times the amount we need; but only 1/3 to ½ of what they have been for months. Perhaps the huge demand train is starting to slow down?????
Wheat numbers came in at about 27-28 million bushels; above what we need to hit estimate and an improvement from last week.
Corn export inspections came in at 14.4 million bushels; which is off slightly from last week and also slightly below the pace we need on a per week basis to hit the latest USDA number of 825 million bushels.
I did see a couple rumors out there that some cold weather might lead to frost damage. One mentioned it hurting Brazil corn and another mentioned a late cold surge in Argentina may threaten late crops. Perhaps this helped out our markets a little bit. Also on the weather front lately has been a lot of pictures of wheat and most of them are not very good. Plus the last system missed Western Kansas.
I would note that overall the weather card has changed a little bit; I seen a note today talking about Canadian flooding and that isn’t the only place. Anyone here anything about a lack of water in the Missisippi lately? No that has changed; don’t get me wrong many areas such as ours are still dry. But many have seen some improvements. That doesn’t mean we won’t get another weather scare or a different type of weather scare at some point; but the game we are playing is one that is always changing. So we probably need to keep that in mind in regards to marketing.
Many advisors are out there saying one needs to already have a large portion of new crop on the books. Keep in mind that all the sales anyone made early the past couple years looked bad; but the reason sales were made was because of the crop potential. We have tons of potential to produce a big crop on big acres. This year more than the others we also probably have more risk if we do produce that crop. Why? Because of what we have done with demand. We have done a good job of curbing some demand for corn.
Only time will tell if demand can bounce as fast as we curbed it the past couple of years. But the risk and the reason advisors like the idea of having stuff sold is because if demand doesn’t perform a miracle and we do grow a big crop we simply will have carryout numbers that we haven’t had to deal with in a long time.
Bottom line is one needs to realize that good weather opens up probably more downside risk then we think is out there. Bad weather probably does the same to upside potential. So if we are treating grain marketing as a business that is out there trying to manage risk then a marketing plan needs to have that pro-active approach.
Be ready to pull the trigger on some baby step sales if we can get a bounce as we go into spring planting. Heck maybe be ready to pull the trigger on some sales even if we don’t; so you don’t end up having to try and do all the marketing at once at a time that might not have the best prices in the world.
The other thing that one probably really needs to be watching is old crop basis. Do not give away the inverse that is out there. Old crop winter wheat basis is strong as is old crop corn basis. If one sits on old crop corn; now until new crop you have about a 2.00 inverse in the cash bids. That is a storage cost of nearly 30 cents a month. The more time that goes by the higher per month that storage cost could be. I don’t know that we have seen the top of corn basis; but I do think one should be ready to lock in basis sometime in the near future. Probably when guys get busy in the field and movement really slows down.
Wheat basis still says sell me; but keep in mind that the carry in the board will offset some of the basis strength seen. I guess to me wheat basis says lock in or lock in sometime in the next 30-60 days; but only if I plan on pricing the board by July-August.
The birdseed market is on the slow side; but some sunflowers have been flowing down to the crush market. Perhaps that will help prices when the birdseed buyers come back in? Also talking to a buyer today he indicated that he felt like sales might pick up; just from the little bit of softer prices.
Don’t forget we are still offering free delayed price on wheat and corn. But also keep in mind that part of the reason we are offering free delayed price is because basis is strong.