Monday, May 20, 2013

Closing Market Comments - Fastest corn planting pace ever! Old news? 5-20-2013


Markets closed mixed today in choppy trade.

Old crop corn which started firmer in last night’s session ended the day down 3 cents, new crop corn was up a penny, KC wheat was up 8 cents, MPLS wheat was up 8 cents, CBOT wheat was up 2 cents, old crop soybeans were up 16 cents, new crop soybeans were down 3 cents, gold was up 29 bucks an ounce, crude up 65 cents a barrel, and the US dollar showed some weakness with the June futures off 470 at 83.915.

This afternoon we got a little more answers on the Planting Delays/Yield loss versus “rain makes grain” debate via the crop progress/condition update. 

Corn planting came in at 71% planted; up 43% from a week ago; based on planting intentions that is some 41.8 million acres; versus the old record of 34.1 million acres of corn planted in one week.  On the positive note and talk of yield loss note; that means we still have about 28 million acres of corn to plant; after the optimal date.  Which most have as 5-10 to 5-20.  Based on some of the recent moisture and forecasted moisture you can make an argument that some of the last acres won’t get in and if they do get in they will be in very late.  So some of the bulls will still argue that we have a bullish card potential in yield loss and acre loss.  The other card that many will throw out that should have some merit is the fact that with basically ½ of the crop planted in a week pollination might be fairly tight and thus potentially leaves weather more critical during pollination period.

Kevin Van Trump had a good explanation of this in his morning wire today.  Corn traders will be very interested to see this afternoons USDA "planting progress" numbers. There is no doubt farmers have been burning the midnight oil this past week. In fact several analyst believe Iowa planted over 50% of their crop and as a whole corn planting here in the US will be 60-70% complete vs. just 28% last week. This brings up a very interesting point: With close to 50% of the US crop ALL going in the ground (late) during the same 7-10 day planting window (May 10-20th), I am of the opinion, the price of poker for "pollination" just escalated dramatically. Meaning the mid-to-late-July time period will now be mission-critical for the US corn crop. Any type of extreme heat or dryness could put an abnormally LARGE portion of our crop at risk. Lets also not forget, as our good friend Chip Flory over at Pro Farmer points out, "the corn plant reaches physiological maturity about 56 days after pollination. That means the crop could still be trying to add yield when days are getting too short to gather all the energy needed." Right now I have to believe the market is currently trading a 153-158 type yield number. With over 95 million corn acres almost certain to go in the ground this type of yield does very little to excite the longer-term bulls. However, if we were to see the extend Jun-Jul-Aug forecast show more heat and less moisture, a sub-150 yield could start to become more of a reality and the bulls might once again start to run. Lets also keep in mind I am starting to hear a few more producers talking about switching to shorter varieties (some 82-day varieties even being discussed), the question is how dramatically will the shorter varieties affect overall yields?  With these cards still in the deck, I currently feel that most producers should sit tight with between 40-60% priced or hedged. “

Don’t look at the above comments he makes as super bullish; to me it just means he is comfortable not looking to sell more. But keep in mind that he has done a good job being pro-active and making sales. 

Overall if a guy has 0 sold and you see today’s crop progress report you shouldn’t get bulled up.  You should probably be looking for a spot to lay off some risk and make some sales.  Now our trade area is very tough; because we don’t have that super high APH like areas to the east of us do; we seem to be able to get either one of two things.  A great crop or little to no crop.   So I can more than understand how guys in our area are a little more on the fence for making new crop sales………especially as dry as it had been. 

Plus we are in an area that marketing seems to be a year behind.  Meaning many guys sell what they have in the bins or what they carried over from the previous year.  To the east of us they seem to sell a year out a little more often; with much more confidence.   But if you now have got some moisture and feel more comfortable about our new crop potential don’t be afraid to take some risk off the table should we get another bounce; especially for those bushels that you will have to move. 

Those “have to” bushels are the ones that a guy really needs to be pro-active on.  Having homes or something done in marketing that leaves you comfortable so you don’t get forced into unprofitable or unwanted sales. 

The scary thing for those that have nothing sold for new crop; is the fact that if things shake out negatively it could be sometime before we really get a chance to sell levels at or near today’s new crop bids.  The job of the market will be to find demand should we raise a 13.5-14.5 billion bushel corn crop. That means that we could be waiting for a long time before we see a bounce.  Having said that my hope is that the present carryout projection and crop size is already priced into the market.  I hope that the fact we planted nearly ½ of the crop in a week is already priced into the market.  I also hope that the old crop tightness spills into new crop support.  But as you can see that is a lot of hopes; and hope isn’t exactly the best friend when it comes to marketing or pricing grain.

The one thing that I believe the market does have under estimated is the current situation of most of the “American Farmers”; meaning most don’t have to sell to make payments.  Look at the guys in this area that tend to market a year behind.  Why do they do that? Because they can.

Plenty of producers have plenty of money and plenty of empty bin’s.  So low prices might not happen despite big carryout’s.  Even locally I ask myself what will cause a lot of grain to move?  The first thing I think of is insurance checks; giving guys cash flow.  Check mark one for not having to move grain.  Next is bin room; check mark two for not having to move grain with the lack of winter wheat crop in our area. 

The couple things that I see moving some grain are the comfort level increase via the recent moisture.  I think that will help some move and maybe a little moving before spring wheat harvest.  Maybe some spring wheat moving because many guys put spring wheat into the failed winter wheat and many guys still have most of last year’s (if not the last couple) spring wheat crop.  

The next thing I would see to push grain to move is emptying some bins for fall crop.  So perhaps the excess moves at harvest.  But will much more?  And if a guy ends up getting an ugly price off the combine will that cause him to hold off for even more later?

Bottom line is despite all of the bearish talk on supply and demand realize that one key component to supply has changed the last few years.  That is the success and financial situation of the American Farmer.  Many guys can afford not to move much grain; they simply don’t have to like they used to.

Back to the crop progress report.  Winter wheat condition was dropped 1 % point in the G/E category. I did notice that South Dakota was up 3% points……….that made me scratch my head.  Wondering if they no longer count all of the stuff that was zeroed out in the past week or so? Or maybe they seen the couple of summer fallow fields that did look like they had a small improvement?

Spring wheat planting came in at 67% planted which means it also has caught up to the 76% on average.  Keep in mind those averages are all skewed a little bit from last year’s super fast pace.  North Dakota is at 50% spring wheat planted and 61% corn planted; that is the area that looks like it could be losing some acres.  But based on conversations with contacts I am not so sure that we are losing any spring wheat acres yet.  By the sounds of it we could actually be gaining a few from the corn acres.  I think guys might have preferred to PP it; but much of the ground had got some fertilizer on it thus PP isn’t the best option. 

Soybean planting came in at 24% planted versus 42% on average. In line with estimates.

That is one thing we should take from these numbers this afternoon.  In line with estimates; not new news.  So don’t have to trade them; we could but we don’t have to and if we do we shouldn’t trade them for too long of a period.

Other news out today; include export shipments.  We seen decent wheat and corn numbers.  Both above what we need on a per week basis to meet current USDA estimates.  Beans were light only about ½ of what is needed on a per week basis.

Continue to see comments of bigger Russia wheat crop.  I still think that is early but it needs to be on our radar.  We need to see some sort of bullish news and preferably the demand kind for wheat to really rally.  It takes more than the old news of bad United States crop; otherwise we wouldn’t be under pressure.


Below are a couple of links from CHS Hedging; Crop progress info and CFTC Commitment of Traders.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress052013.pdf

https://www.chshedging.com/UserFiles/Documents/2013/Research/CFTC%20Commitments%20of%20Traders/CFTC051713.pdf

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

Thanks

Jeremey Frost
Grain Merchandiser
Midwest Cooperatives

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