Tuesday, May 28, 2013

Closing Grain Market Comments - USDA Crop Progress Update 5-28-13

Markets closed mixed today with the row crops leading the way and wheat lagging behind.

Old crop corn closed up 9 cents, December corn was up 14 ½ cents a bushel, KC wheat was down 2 cents, MPLS wheat was up a penny, CBOT wheat was down 4 cents a bushel, July soybeans were up 33 cents, November soybeans were up 40 cents, the US dollar is up with the June contract at 84.310, gold was off 7 bucks an ounce, crude up about a buck a barrel, and the stock market had a nice bounce with the DOW up 106 points.

Very strong day for the grain markets; new crop soybeans and new crop corn in particular.  July beans also managed a new high close for the year today.  The strength in the new crop row crops comes from weather and a lack of planting progress.  Ideas are that we have lost some corn acres to prevent plant plus we are potentially losing some soybean acres and spring wheat acres to the same thing.   Some soybean acres might also be getting lost from the slow wheat harvest; not allow for as many double crop acres as expected. 

I did see a couple different advisors selling some new crop corn and soybeans today; and one that I listen to mentioned maybe having a recommendation out in the morning on new crop soybeans.  Comments like “reward the rally” being used.  One thing to keep in mind is the fact that if we are losing corn acres some might get to soybeans.    Also seen a comment that mentioned guys maybe taking prevent plant on corn and then going back into the ground with soybeans un-insured.  I don’t know exactly how that process would work but I can see the logic in it.

I seen a couple different comments showing various weather maps asking the question.  “Bearish or bullish?”  It looks like parts of Iowa will continue to get moisture in the days to come.  Basically to me it looks like we have spots that rain would be beneficial and then we have others that it will continue to hurt progress and may damage what is already in the ground.  Bottom line is we have had issues planting basically since the season started; we have been behind and now the market realizes that we MIGHT have a major issue.  I still think it is undetermined and up to mother nature.

One of my wheat buyers today mentioned the fact that some Hard Red Winter Wheat business was going down; but we ranged anywhere from 40 bucks to 70 bucks a ton too expensive.  This really opened my eyes a little bit on the wheat situation.  Don’t get me wrong I still see some friendly things happening and I think our crop gets smaller; but longer term we need demand.  It won’t matter what we don’t have if the other guys (Russia and other wheat producing nations) have more than enough to make up for our lack of supply.  Now that doesn’t’ mean a weather story can’t happen or develop someplace else in the world at some time.  But today we don’t have that story. 

The story we have for wheat is a bad United States wheat crop; which is old news and been talked about since it was planted in the dust last fall.  The other story we have is big rebound in production in almost every wheat producing nation.  That my friends isn’t bullish.  It was nice for us to see some Soft Red Wheat business last week with China; but that is just more feed wheat business.  The area we need demand is milling wheat.  Bottom line don’t fall victim to backyardagains; looking at the lack of wheat in the United States and think we have to go higher.  If that was the case we would have already rallied.  Now if the funds or “big money” decide to start talking about our lack of wheat sure we could rally; but longer term we need to find a way get that missing piece of the puzzle called demand.

As for news today this a.m. we had export shipments out.  They were very good for wheat; while bad or soft for corn and beans.  The corn and bean numbers lately make one wonder if the door isn’t opened to the USDA lowering the export projection.

The other news out today was this afternoons crop progress report. 

Corn planting came in at 86%.  Bottom end of the ranges I had seen; which were 85-90 %.  Fundamentally it says we still have 13-14 million acres of corn left to plant or nearly 2 billion bushels of possible production.  But keep in mind that if we don’t plant any more acres and we yield the 158 that the USDA is presently using while harvesting 92% which is about average.  We still have production of about 12 billion bushels.  This year we are only projected to use about 11.1 billion bushels which means we still need to find demand of nearly a billion bushels year over year.  So tonight’s crop progress numbers are bullish but longer term do they say we need to run up like we did this last year?  In my opinion not yet. 

If this news can give help us keep the rally going personally I think I would consider “rewarding the rally” a little bit.   Perhaps use a rally to catch up on some sales for those that are uncomfortable for what you do or don’t have sold.   For some that might mean some sales for others maybe just using some options to protect your bottom side risk would be a good play?

The one good thing the weather has done is give the funds a reason to look at the grains.  Right or wrong at least we have a possible positive headline to get the funds interested and if they do decide to get interested we could easily over do a move to the upside.  Longer term present prices levels could easily look very good.

Soybean planting came in at 44%; which is below the average and slightly below the estimates that I had seen which were around 50% planted.  I don’t know that we have a major issue here yet and I look for more acres to slide into beans from corn.    But just like corn we have some wet weather forecasts and if the funds decide to get on board who knows where this thing could go; longer term and fundamentally I think risk is to the downside as I think the job of the market is to find demand. 

Spring wheat planting came in at 79% planted below the average of 86%.  But here also weather looks like it could cause some acres to get switched to prevent plant. 

Winter wheat G/E conditions where left unchanged. 

Other things that stand out in the crop progress report; include the fact that the eastern part of the corn belt is now ahead of average for planting progress.    Corn emergence came in at 54% which isn’t as far behind the 67% average as one would have thought a couple weeks ago. 

Here is CHS Hedging Recap of the USDA crop condition/planting progress report.

The sunflower market felt a little softer today; with bids down a little from the offers that had got filled/traded last week.  Or maybe a better way to say it is the bid/ask spread just widened out a little again; as I don’t know of anyone that is really a willing seller at a cheaper level then they where last week.

Corn and wheat basis both remain very choppy.  Some guys have interest in buying while other like some local ethanol plants are fairly covered.  Expect things to stay choppy; you have to be bullish corn basis in general with the ethanol numbers; but the inverse is too bid for anyone to want to hold any length through the inverse. 

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