Monday, April 29, 2013

Closing Comments - Corn up the limit - best day in 10 months

Markets closed firmer across the board today on weather and short covering.

Corn lead the strength up the limit of 40 cents on the nearby contract, while new crop December corn was up 35 ½, KC wheat was up 25, MPLS wheat was up 15, CBOT wheat was up 24, July soybeans were up 28, Nov soybeans were up 19, the DOW was up 106 points, gold was up 22 bucks an ounce, crude was up a 1.50 a barrel, and the US dollar is about unchanged with the cash index at 82.12.

Weather got the markets moving; then some technical buying and short covering gave corn it’s best up day in months.  Weather has cool and wet in the deferred forecasts and parts of the corn belt forecasted to get 1-3 inches this week; some of which could be snow in Iowa.  This leads to idea’s that the yield and acres could shrink.  Typically we see a yield reduction when corn gets planted too late and that is what the market focused on today.

Adding some fuel to the fire this afternoon was the crop progress; that showed corn at only 5% planted versus the 31% on average and last year’s 49% planted. 

Here is a good recap of the crop conditions from CHS Hedging

Some strength in the corn market also came from the fact that the funds had moved to their shortest position since April of 2010.  So perhaps many had already sold our market down because of the known fundamentals and now we add talk that perhaps those fundamentals are changing.  Perhaps we are losing both acres and yield via the slow planting.

Here is link to Friday’s CFTC recap from CHS Hedging.

So today we had the picture change; but today’s picture changing is a weather market change.  One thing that helped our markets out is the fact that when everyone left on Friday the forecasts had some warm and dry in them; just a few days later come Sunday night they had changed.  Weather markets can change in a hurry so by no means is there a guarantee that we will follow up today’s strength.  It could happen but the market could easily be selling off later in the week saying “rain makes grain”. 

Plus fundamentally how high do we need to go?  Think about the fact that we have to increase demand year over year unless we grow a crop something like 11 billion.  If we grow 12 billion we need to find about a billion bushels demand increase over what we are projected to use.  If we dropped our corn acres down to 90 million and yield of 150; and harvested 90.6% we would still grow a crop of about 12.3 billion bushels.  That would be a decrease in the yield of 5-15 bushels versus most of the estimates out there.  Some of the guys I talk to have thought for a while that we are trading 155-160 on yield; the USDA in their outlook for had a 163-164 yield.  As for the acres the March planting intentions were 97 million acres; have we already lost 7 million acres?  In our area we have probably actually gained some acres via the failed wheat; not enough to make a difference but a small increase none the less. 

Bottom line is if this is a rally that is simply driven by fear; fear that we won’t get the corn in it is probably a rally that at some point should be sold.  I wouldn’t bet against the American Farmer; and if we can continue a rally and guys don’t take some risk off the table via getting protection or making some sales that is what you will be doing.  Betting against yourself.

That being said if the funds decide to jump on board things could get crazy over the next several days, weeks, and months ahead.  If that happens it should make marketing difficult; as when our markets go up it feels like they just don’t want to stop.  Bottom line is using some risk management or having a game plan is recommended; because when this thing falls it could get very ugly.

The other thing that we really need to keep in mind in regards to marketing is the fact that the average producer is very undersold for new crop corn.  The market likes to do what it can to hurt the most.

I don’t want to come off as all bearish; as I am not.  I think the charts perhaps have turned and we could see a bounce as we go forward; but I do think that guys need to realize that this might be a second or last chance.  We don’t have the demand to really have a huge run up (sustained) on new crop prices; at least not today.

Moving on; other news today included export shipments.  Corn came in line with estimates but well below what we need on a per week basis, wheat shipments were very strong and well above estimates and the needed per week to meet current USDA supply and demand balance sheet projections, and beans came in very close to estimates as well as what we need on a per week basis.   Bottom line no real market mover here.

Winter wheat conditions did drop 2% in the G/E category, and spring wheat planted jumped to 12% which is still well below the 37% on average.  Neither this nor the lack of corn planting is probably new news; the wheat crop tour will be new news as we see those updates over the next couple of days and the latest forecasts will also be important.  If the rain fall for the corn belt doesn’t materialize and the latest forecasts start calling for warm and dry we could easily give back some of today’s rally.

For the wheat crop tour you can follow some of the info on twitter using hash tag #wheattour13.

Here is link for the map of the tour that some will be following.  By the looks of it tour is probably starting in good area’s but as it moves on it appears to be moving in to more stressed areas.  I find it hard to believe that this tour will be bearish; but we do have to ask our self how bullish can it be and how much of it is already built into the market.

Also looks like parts of KS could get down below 30 on Wednesday night after being close to 90 today.  That could make things interesting with the possible freeze happening during the tour.

Tomorrow is first notice day for May futures.  No limits and with the lock limit move for July and September corn limits will be expanded starting tonight to 60 cents a bushel.

Please give us a call if there is anything we can do for you.


Grain Merchandiser
Midwest Cooperatives
605-295-3100 (cell)
605-258-2166 (fax)

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1 comment:

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