Thursday, April 11, 2013
Closing Comments 4-11-2013 - small bounce for grains....weaker China demand
Markets closed positive today in choppy somewhat volatile price action.
Corn was up 2 cents on the nearby, July corn was up a penny, December corn was up a penny, May soybeans were up 9 cents a bushel, July soybeans were up a penny, new crop soybeans were down 11 cents a bushel, KC wheat was up 9, MPLS wheat was up 5, CBOT wheat was up a penny, the dollar is off with the June futures at 82.345, equity markets bounced with the DOW up 63 points, gold was near unchanged, and crude is off a hair over a dollar a barrel.
I thought the close on corn was very disappointing; we had been up 5-10 cents most of the day; but the last 5 minutes or so corn really sold off; both the flat price and the spreads that had been stronger gave up a decent portion of the gains near the close. Spreads were also weaker yesterday during the last few minutes of trading.
I did notice that more bids have rolled to the July for both corn and beans and that should keep things interesting for the spread. It also means that if the spread gets wild basis could get very wild too. Most the of the bids I am seeing from most of our buyers are now against the July and they don’t seem to be super aggressive. That is probably coming from the fact that most have decent coverage; actually I really don’t know of a single rail home for April and very few for May; while many of the truck ethanol plants have coverage into some of the summer months.
Ethanol margins seem to be good; a did get a comment from one buyer that margins were as good as they have been for about a year and a half. The USDA did increase ethanol usage on yesterday’s report; which seem to be a little quick triggered based on the fact that we really haven’t had super strong production. But perhaps they know something that others don’t????
Producer selling is very quiet; but it doesn’t feel like many end users really care. One of our brokers today mentioned that perhaps the end users that really need the corn will simply go to the board and try to firm spread up. It doesn’t seem like the guys I talk to really have a concern going into a 20 cent or so inverse. Perhaps guys should? I know that commercials will try to be even or short into an inverse; so maybe locking in basis even though it has softened up isn’t the worst thing to be looking at? I guess it will really come down to what happens when guys get threw some of the major coverage they presently have? Will they come to the table and look to buy corn before producers get out of the field and once again look at moving corn?
Weather remains a mixed bag. Very cold temps could have damaged more wheat in the past few days and this on a crop that has one of the worst condition ratings on history. But some of the areas such as ours did get some needed moisture out of the system. The positive for prices is that planting progress has slipped; guys in our area are now a couple weeks out if not more; while other areas that haven’t had anything planted are even further out. We could easily lose some of the swing acres that corn was looking to gain. The less acres the more important weather and yield become.
I don’t think the trade has put much premium into the market for this yet; but it could over the next couple of weeks. The “magic” date to watch is usually what we have planted by May 15th.
Export sales were out this a.m. and they didn’t show much good for demand as wheat and corn were both below the needed levels; and beans even though above what we need on a per week basis were below trade estimates. Bean meal we solid.
The other thing we need to really keep in mind is that yesterday the USDA said world demand was softer as we seen increase in world corn, wheat, and soybean carryout numbers. Most of which came from decreases in demand and mainly Chinese demand. Now perhaps it isn’t actual demand decrease but come from another game that the Chinese tend to play with our markets. But one needs to realize that if demand is slipping we don’t need near the production and the bird flu situation hasn’t helped out demand for beans. As mentioned before I do question the drop in corn demand and wheat demand as China has been in news for both of those grains in the past couple of days.
Never the less we do need to realize that yesterdays report opened the door for demand slipping. One report perhaps isn’t a huge concern; but if it develops as into trend we could have some huge risk. Especially if we get the acres and yields that some early forecasts are calling for. Less demand and more supply isn’t a recipe for higher prices. Bottom line is watch the demand trends and realize that softer demand along with decent crops opens huge downside risk so if we do get rallies the right business decision is probably going to be to take some risk off the table.
If you want help with a marketing plan or want us to place some target price or target price indicators give us a call and we will help watch things.
One positive for the markets today was that we finally got confirmation that China actually bought 360 tmt of US SRW for June forward. It had been in the markets for some time; but wasn’t reported until this morning.
Seen one comment that Egypt might be overstating their wheat crop; which might open the door for more imports but they still have a bad financial situation.
Basis felt softer for wheat on the spot floor today; most to arrive bids are also a little lower than they were. It seems like we need to do plenty of flour pricing yet for May; but the millers are not being supper aggressive. Perhaps some are looking for old crop wheat to move before new crop gets here. I know locally the moisture we got the past couple of days should help guys feel more comfortable so that might lead to some of the same haven grains bins getting moved.
Talking to the rail road they think they will be caught up next week on orders. That probably adds a little more supply to the market and potentially a little more basis weakness.
Please give us a call if there is anything we can do for you.