Tuesday, May 14, 2013

Closing Grain Market Comments 5-14-2013

Markets closed mixed today in choppy trade despite the rather friendly crop progress report that we had yesterday.

Old crop corn was off 3 cents, new crop corn was off a penny a bushel, KC wheat was up ½ cent a bushel, MPLS wheat was down a penny a bushel, CBOT wheat was up a penny a bushel, old crop soybeans closed down 4 ½ cents, new crop soybeans were up a 4 cents, the US dollar is up 310 points at 83.586 on the cash index, the stock market made more new all time highs on the DOW today  up 124 points, crude was off almost a buck a barrel, and gold was off about 10 bucks an ounce.

Rather choppy market action today.  The May contracts went off the board without much for fireworks; but spreads did end up at record levels or at least go off the board at the highest levels in history.  Hopefully that means we have set a target for the July futures to achieve; but it might take more than basis strength and a lack of producer selling.  It might take the funds or “big money” getting interested in the grains if we want to see the July contracts get up to the levels that the May corn and May soybean contracts went off the board at.

The past couple of days we have had plenty of news; with the crop report out last Friday the 10th of May and then yesterday we had an updated crop progress report that showed us with the lowest corn planting pace on record.  I didn’t think the report on Friday was negative; but it wasn’t enough to get the funds buying either.  It showed big world production idea’s and big United States production ideas for the 2013/2014 crops; but everything was very close to the pre-report trade estimates.  The present balance sheets remain historically tight and the late planting progress won’t help new crop aid in the old crop tightness like it did last year.

I also thought the crop progress coming in at only 28% corn planted; slow spring wheat planting, slow soybean planting, and a poor winter wheat crop would have been supportive to our price action; but that wasn’t the case.  We didn’t mustard much of anything today; despite the fact that some deferred forecasts are also wet for much of the corn belt.  Part of the reason is we a planting window going on now.  But the bigger thing is the funds don’t seem to want to buy our markets because off too much rain.  Will that change at some point?  Perhaps?  But when the funds see the USDA print a 2 billion bushel carryout with production of over 14 billion bushels it is going to be hard to get them on the bull bandwagon.  Especially if they look deeper into the balance sheet and see that to come up with a 2 billion bushel carryout; we need to increase demand by nearly 2 billion bushels over this year’s demand.  On a percentage basis that has been done; but never on as a raw number.

As I have mentioned many times recently the most probable logic to increase demand is via lower prices; the USDA average farm price as example.

Bottom line is the outlook that the funds see for present fundamentals needs to change; at the end of the day it doesn’t matter much what you or I think our fundamentals are or could be.  It might eventually; but on a day to day basis it’s what do the funds or “big money” think.  So realize that they might not add the premium that many in the industry feel should be warranted.  And if the USDA’s latest forecast is close to accurate; being pro-active will be the move for this year.  Notice a lot of “if’s” ; but keep in mind that doesn’t mean we shouldn’t be pro-active.

Tomorrow will bring some demand news with the weekly ethanol numbers and the NOPA soybean crush numbers. 

Otherwise we really don’t have much new news out there.  We can talk about the weather and the new crop demand projections but those are becoming old.  The bottom line is weather should drive our markets; but I don’t see it driving us up until things become a total train wreck and even then it might be hard for wet weather to drive grain prices up.  Everyone know it takes rain to make grain; so too much rain isn’t the best candidate for a grain price rally. 

Our best candidate for future price rally might be the old crop tightness and then after that weather issues elsewhere in the world.  But keep in mind the time table of when weather issues to happen probably isn’t ASAP……….our weather rally last year didn’t start until the Middle of June.  The 2010 weather rally via Russia’s issues didn’t start until July. 

The other slim possibility is just a reason for the funds to get interested; keep in mind that the 2008 corn rally happened with a big carryout; it started via the wheat market and overall good things going on in the world economies along with talk of hedging commodities against inflation.  So that might also be something to lend some support at some time; a black swan that says buy grains or commodities for X reason.

The other thing that can happen is just the technical trade; at some point things become over done and then with the funds involved we seem to have an ability to overdue things in the opposite direction.  A technically driven or emotion driven market that decides to accelerate to the upside at some point is also a possibility; it just probably doesn’t happen until we least expect it.

Elsewhere things rather quiet.  Corn basis feels firm; but I can’t sell much August corn to the ethanol plants as they just don’t like the huge inverse that they have on the ethanol side of things; not to mention the corn inverse from July to September futures.  Winter wheat basis is steady to firmer; while spring wheat basis feels a little weaker up front; but a little more interest in the deferred slots.

Birdseed orders have been strong; but buyers are not paying up either.

I do have buyers looking for milo if anyone has offers on that; things there are very tight.

One thing we need to watch is the US dollar which is at the highest level this year; another negative check mark for grain price outlook.

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