Monday, April 15, 2013

Closing Comments 4-15-2013 - Gold smashed - Risk off day! Ugly Ugly Markets


Markets closed down hard today in risk off trade.

Corn was off 12 on the May contract, New crop December corn was off 18 cents, May soybeans closed down 18 cents, November soybeans were off 25 cents, KC wheat was down 21, MPLS wheat was off a dime, CBOT wheat was off 21 cents, crush sunflowers were down 30 cents a cwt, the equity market got hit hard with the DOW off 265 points, crude is down 4.00 bucks a barrel, and gold is off 149.00 an ounce. 

Just a complete train wreck of a day; lead by fund selling and risk off.  Gold lead the pressure and some of the reason being given include.  Weak chart action last week that lead to more technical selling today, China’s GDP which came out Sunday night below estimates, rumors that Cyprus will be selling gold to pay for their bills, talk that a couple big banks (Citi and Goldman) told clients to sell and that the commodity run is over, and some talking that perhaps gold just isn’t as good of a hedge as many had thought.  Bottom line is the pressure from gold spilled over into some of the other markets and our supply and demand fundamentals took a back seat at least for a day.

Adding to some pressure at the end to the stock markets might have been the reported bombings at the Boston Marathon.

The next couple days could get interesting as we could see plenty of margin calls for those that were long gold and that probably means selling something else that they own or simply cutting risk exposure. 

The grain news today was mixed.  First off we got another confirmation that China bought US SRW; but this was really old news. 

Next we seen export shipments and they were just horrible for beans.  The worst since harvest time easily and below what we need on a per week basis for the first time in a long time.  So we added a negative fundamental on top of the outgoing money flow.

Speaking of money flow; we need to realize that money flow is, has, and will always be the biggest fundamental when it comes to grain price movement.  Sure actual product we have or don’t have means something; but more days then not the biggest fundamental is simply money flow. 

Back to the grain news; shipments for wheat and corn were in line with estimates with wheat a hair above what we need on a per week basis based on current USDA projections and corn was just a hair under what is needed.

This afternoon we had planting progress and crop conditions.  Corn planting was pegged at 2% versus 7 % on average and 16% last year.  Friendly; but not new news.  Were we are over the next month however could be a headline and a reason for the funds to get back in; but keep in mind that if planting delays happen because of moisture longer term that isn’t negative.  Now if the delays are from cold weather that is different.  One other positive should be the swing states like North Dakota appear to be losing corn acres; were they are going is up in the air; as from what I read most producers might be skipping some spring wheat too as it just doesn’t pencil that good.  Keep in mind that how big of a corn crop ND or SD grows won’t really make much difference in the big picture.

This afternoon we also had winter wheat conditions that were left unchanged.  With the recent moisture that might be considered a little supportive but we also had some areas that could have had some frost damage; so unchanged is probably neutral.  It does sound like there are some more cold weather suppose to hits some wheat areas tonight.  So perhaps we can see the freeze card laid out on the table once more?  Plus many are still trying to determine what damage happened in the past couple of weeks.

Spring wheat planted came in at 6% versus 35% last year and 13% on average.

Here is more break down on this afternoon’s report; from CHS Hedging


The other piece of news I seen today was the soybean crush numbers.  Which were overall rather bullish as we need to cut usage versus last year by 20% if we are going to only hit the present USDA numbers.  The biggest year over year cut during this upcoming time period has been 12%; bottom line is soybeans need to curb more demand than ever. Perhaps the slow export shipments are the start?  Maybe China can wait until South America gets things figured out with their logistics?

As for the next couple of days we need to see what money flow will do.  Will the outside markets stabilize or is this just the start of a major melt down?  Overall grain fundamentals feel supportive; but not enough to take us higher without some support from money flow and the funds.  Plus if weather does break it won’t take long for stuff to get planted and it also appears that our high prices have encouraged more production around the world.  So then we will have to watch demand and that probably doesn’t get too strong if we have poor outside markets.

Basis felt mixed today; bids on the spot floor for winter wheat and spring wheat were thin. Most of the spring wheat bids have rolled to the July futures and the recent snow storm in ND didn’t help speed up movement.  Corn basis felt thin also.

Birdseed market seems to have decent orders; but buyers are also being patient.

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