Thursday, May 9, 2013

Closing Grain Market Comments - Day ahead of USDA Report

Our markets had a good bounce today ahead of the USDA report out tomorrow. 

Corn was up 16 on old crop, new crop corn was up a dime, KC wheat lead the strength today up 19 cents, MPLS wheat was up 9 cents, CBOT wheat was up 18 cents, old crop beans closed 18 cents a bushel higher, November soybeans were up a nickel, the DOW was off 22 points, crude off about 40 cents a barrel, gold of 16 bucks an ounce, and the US dollar had a very strong day with the June up about 800 points at 82.75.

Very good day for grains; perhaps some short covering ahead of the report that is out in the a.m.  Also seen some talk about try weather in the PNW area.  Also seen talk of possible freeze in wheat this weekend. 

Other news supporting wheat was a confirmed strip rust case for some wheat in Nebraska.   Also hearing that some Black Sea areas are seeing production slip from earlier estimates and that Australia is very dry needing moisture as they seed winter wheat.

Tomorrow the USDA will have a wheat production number out; one has to question how accurate it will be just looking out our back yard plus the fact that much of the frost damage down south might not show up until the combines roll. 

Old crop could see some potential strong fireworks with the strong basis we have had and firm spreads.  But the new crop outlook and expectations are not that good.  The major risk we have tomorrow should be (I say should be because it is the USDA and they have a mind and logic of their own)new crop corn and bean balance sheet and the world situation.  How important will the United States production be?  Well it will depend on what our competitors have.  Some advisors out there believe the world is and will be swimming in grain.  The risk is that they are right or that the USDA says they are right.  Plus we all know exactly what the USDA did the past couple of years on corn yields to start off the first couple months.  Will they do that again tomorrow?

We did have export sales out this a.m. and I would call that a non-event; nothing too bearish or bullish.

I am not going to go over any more info on the USDA report that will be out tomorrow bottom line for the report is we have some risk.  It all comes down to what logic the USDA comes up with and if it is something that the trade believe or that “big money” believes.  Report days tend to be trend changing days; not sure if it will follow that up tomorrow or not; plus many of the charts are in no man’s land.  Not really at support or resistance.

Basis continues to feel firm for the grains all around with the exception being spring wheat; which has been sloppy on the spot floor as of late.  Some blame it on the weather which has hurt the sales that usually go with grilling out and baseball games etc.  But there is also a tremendous amount of old crop spring wheat and it feels like we are adding some spring wheat acres locally because of the failed winter wheat.

The one thing that isn’t happening is ethanol plants are not paying up for huge amounts of coverage for August/September.  The local ones are bidding it at a major discount to par nearby values.  They simply can’t sell ethanol out there and make it work.  When I try to sell corn for those slots they ask my opinion of the July/September futures spread; many just got it handed to them last year in that slot.  Bottom line is many plants in South Dakota have very little coverage on; which means they will either have to pay up; or if they have to pay up too much they might shut the doors.  It is hard seeing them going with the shut the door option as strong as demand and profit margins have been as late but that was the comment I got from one ethanol buyer today.

The birdseed market has been quiet; good orders but overall demand still seems to be soft or at least buyers are playing a wait and see game.  They need to buy plenty of product but realize that there is a huge amount of sunflowers in the bin. Plus they realize we are possibly increasing the acres a little.  The one thing many are forgetting is the lack of subsoil moisture that our areas that are huge sunflower growing areas.  Some of the guys I talk to think planting sunflowers with as dry as it is are a mistake because we don’t have the subsoil.  I am not an agronomist so no real comment on that.  I know flowers worked really good last year despite it being very dry; but this year they won’t have that subsoil moisture to pull from unless things change.

The latest 6-10 day forecast do have above normal moisture for much of the corn belt; if we are still lagging behind planting those forecasts will keep adding support to our market.  But once things get in the ground moisture isn’t going to take us higher.

Technically the December corn contract did manage a key reversal today; closing above yesterday’s highs while taking out yesterday’s lows.  Positive sign; let’s just hope tomorrow’s report does make today’s trade look like a bull trap.  Lets hope we can follow it up with some strength.

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