Thursday, May 16, 2013

Export Sales - Morning Grain Market Comments

Markets are called mixed to better this a.m. behind a  mainly firmer overnight session.

Old crop corn was off a penny a bushel, new crop corn was up a penny a bushel, KC wheat was up 4 ½, MPLS wheat was up 3, CBOT wheat was up 3, new crop soybeans were up by 6 cents a bushel, and old crop soybeans were up 4 cents a bushel.  Outside markets have the US Dollar taking a breather with the cash index off 165 points at 83.671, equity futures are pointing towards a slightly lower start, crude is up 35 cents a barrel, and gold is off 17 bucks an ounce. 

The first thing that stood out to me this a.m. the fact that yesterday when we went over our charts during our weekly MWC Marketing Hour Roundtable discussion that the US dollar was up against its highs from about a year ago.  Technically if it can mustard past those highs the next resistance point was the June/July 2010 highs and that it a little scary.  Corn price back in June 2010 had got down to about 3.25 a bushel on the futures board.  Hopefully today will be the start of some weakness for the US dollar and hopefully that will give the funds a reason to look at owning the grains again. 

But for risk management we have to realize that we more than just the risk of what we grow or don’t grow.  We have the risk of money flow via what’s happening to the US dollar, as well as risk that a strong US dollar makes our grain more expensive.  Plus the latest USDA forecast big negative wasn’t just about what we have going on in the United States, the big negative was the world grain production increases year over year.  So if we want to have some business coming our way a softer US dollar wouldn’t hurt us.

News out this a.m. include our export sales number.    We seen fairly slow old crop sales across the board. 

Wheat came in at only 3.3 million bushels; which leaves us needing 11.7 the rest of the marketing year to meet current USDA projections.  That would be a number we haven’t seen for old crop in 4-5 weeks.  New crop wheat sales were strong at 15.3 million bushels.  That puts new crop wheat for 2013/14 at 151.2 million bushels; versus 94.6 this time a year ago.  Keep in mind that the USDA is calling for that number to decrease this year over last year; but we are at over 150% of what we where a year ago.  Bottom line is USDA forecasted us not to get the new crop wheat business but so far that isn’t the case.  Perhaps the other countries need to grow some of the big crops that the USDA forecasted first?

Old crop corn sales were 8.7 million bushels; slightly above what we need on a per week basis to hit the USDA’s latest forecasted number.  New crop was only 1.5 million bushels.  This is the opposite of the wheat situation with new crop commitments at 144 million bushels; versus last year being at 195.  Friday’s USDA report has a big jump year over year for exports for corn; but we are several months away from new crop corn so this isn’t a major surprise.

Old crop soybean sales were poor at only 600,000 bushels, while we need about 3.6 million each week to hit current USDA forecast.  New crop bean sales were ok at 12.8 million bushels; but just like corn we are behind a year ago despite the fact that the USDA is expecting a year over year increase.  Soybean oil did see net cancelations; while bean meal exports remained very strong.

Overall export inspections this a.m. was a non-event; nothing too bearish or too bullish.  The only exception might be bean meal.  But it was another event that didn’t tell the funds to buy grains and that is what we are lacking.  Headlines or reasons for the spec’s to get bullish or want to go out and buy grains.  Look at the balance sheet projections on Friday; we can argue them all we want but at the end of the day the funds don’t care to own corn on the board with a  14 billion bushel crop that leaves us with a 2 billion bushel carryout.

As we go forward weather will be important; but to get some of the funds or spec money interested we probably need to be trading a carryout closer to 1 -1.5 billion bushels; with production much lighter than the present forecast.  And even then if the world numbers stay strong or the US dollar decides to continue to rally it could be tough to gain much strength.

Weather will continue to be a factor to drive our markets; but I no longer know if the rain is bearish or bullish.  Some areas have moved fast and such as ours will welcome the moisture. Other areas that haven’t got much done are losing yield potential or acres in general.  But overall it doesn’t feel like we will rally off of too much moisture.  Too many ideas that producers get things done in small planting windows.  I guess longer term the slow planting could still be supportive should we end up well below trend such as some studies have suggested or if we lose a material amount of acres to prevent plant.  But we probably need to shave ½ to a billion bushels off the present production estimates to get the funds very interested. 

Everything else is generically quiet; not much interest from end users.  Birdseed business seems to be very good; but actually buying demand is hit and miss.  The milo market is strong and I have guys looking for milo offers.

Wheat basis is hit and miss; we haven’t had enough good weather to see the baseball season bun baking business pick up nor do we have enough exports to keep the mills too honest.  But we also don’t have much for producer interest in selling.  I do think that we could have a huge amount of spring wheat to move in both North and South Dakota before new crop and that might act like a harvest before the harvest so I am a little bearish spring wheat basis.  Winter wheat basis remains strong but still lacks the exports to make another leg up.

Corn basis is solid and firm; but the inverse on the board makes basis feel top heavy about every other day.  Local ethanol plants have no interest owning corn for slots they can’t sell ethanol for; yet as mentioned many times recently ethanol margins are very good and promote expansion of production not reduction.

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