Thursday, April 11, 2013

Opening Comments day after USDA report

Markets are called better this a.m. behind a choppy two sided overnight session that ended firmer with spreads firming as well.

Corn lead the strength up 8 cents on the May contract, the July was up 5 ½, and new crop December corn was up a penny, beans ended the overnight session up 2, KC wheat was a nickel better, MPLS 3 better, and CBOT wheat was up 4.  Outside markets are supportive with a weak US Dollar with the cash index off a little over 300 points at 82.21, equity futures are pointing to a slightly firmer opening, while both gold and crude are fairly close to home with gold unchanged and crude down 30 cents a barrel.

Most of the strength in the overnight session seemed to be two fold.  Follow up strength from yesterdays corn number that was very friendly for the US balance sheet and weather concerns in the wheat areas.

A quick recap of yesterday’s USDA report was friendly better than expected US carryout numbers for corn and beans with wheat in line with expectations.  In the first 15-20 seconds of trading corn was up over 20 cents, but as traders looked deeper into the report they seen the negative increase in world carryout numbers which happened for all three corn, soybean, and wheat.  The world numbers pressured us and didn’t allow for near the strength one would have thought with just the US corn carryout.

Bottom line is the report yesterday was a mixed bag; good for US carryout; bad for the world numbers.  One concern I have with the world numbers is the fact that the majority of the carryout increase wasn’t from increased production; but rather decreased demand; mainly from China; yet over the past couple weeks China has been looking new crop corn and wheat.

The other big thing we need to keep in mind is even though the numbers for US corn carryout were better than expected they are still a increase month over month.  The trend is now of a bigger corn and wheat carryout.  Now that doesn’t mean things still can’t bounce; but it does say that we have curbed some demand in at least some sectors.

As we go forward we should become a weather market and a market that focuses on demand.  Weather talk should start focusing on the cool weather and late planting; but that might still be a few weeks away and if we are seeing late planting that might also mean moisture which takes away from the drought card.

For demand this a.m. we did have export sales and soybeans were below expectations but still more than the needed level, old crop corn sales were disappointing below both the needed level as well as estimates, wheat sales disappointing below needed level, soybean meal sales were very strong, and soybean oil sales were as expected.

As guys get busy don’t forget to have a plan in place; as selling rallies in new crop is probably just the right risk management move. 


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

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