Friday, May 17, 2013

Grain Price and Market Comments 5-17-2013

Markets are called mixed to weaker this a.m. behind a mixed overnight session.

When the overnight session paused old crop corn was down ¾ of a penny a bushel, new crop corn was down ½ of a cent, old crop soybeans were up 5 ½ cents a bushel, new crop soybeans up 2 cents a bushel, KC wheat down 3, MPLS wheat was off a penny, and CBOT wheat was off a nickel.

At 8:15 outside markets are surging with the US dollar up 620 points at 84.206 on the cash index, equity futures point to a positive start of about 40 points on the DOW, crude is up a buck, and gold is down another 11 bucks.

The US dollar took out last year’s highs and is now at its highest spot since late June/Early July of 2010.  As mentioned a few times the last couple of days our grains made our lows June 29th 2010; the day before the June 2010 USDA stocks and acre update.  At that time July corn on the board got down to 3.25.  The US dollar isn’t at its highs it made it June of 2010; but it is trading at about the same level it was a week or so after the grains made their lows.  Not a good reason for the funds to get super interested coming back into commodities.  Spec money seems to prefer the commodity play as a hedge against inflation and inflation typically happens more with a weaker US dollar.  A stronger US dollar also doesn’t help our export potential; it makes us more expensive as we try to sell grain.

It does look like parts of the EU have some decent rains forecasted and that is pressuring the wheat market a little bit.  I have also seen comments about the recent moisture and expected moisture in the United States in the next few days; those comments indicate that because of the slow developing winter wheat crop the moisture could be beneficial. 

INFORMA is expected to release its acre estimate updates this a.m.  The market might be watching to see if they think we have added prevent plant acres or lost acres in general do to the moisture.  I am not sure if they will have a production number.  The thing about the slow planting and production numbers is the fact that we can afford to lose some based on our present balance sheet.  It might take losing some to get the funds interested.  Think of it this way; they look at the USDA numbers and see 14 billion bushel production and 2 billion bushel carryout; none of them say well that’s bullish I should buy.  It probably takes losing the top end of the current ideas before we have a real good chance of getting the funds too interested. 

Sounds like South America is giving some support to the bean market.  Argentine producers don’t seem to be interested selling and are reluctant sellers; the crushers down there have only been able to buy 10.7 MMT versus 12.5 MMT a year ago; despite a larger crop.  Also hearing talk of an on again off again strike in some Brazilian ports.  We did sell a few old crop soybeans to unknown today; as well as new crop soybeans to both unknown and China.

Weather should be the driving factor; but we probably won’t know until Monday if it is a rain makes grain or if moisture is taking away some of the top end yields via late planting and if it is losing acres.  Plenty of debate around on that topic.  Some guys are “mudding it in” and that also might cause some issues later.  The other thing to remember about the late planting is the fact that some of its effects won’t be known for several months. 

Below is comment on weather from the LaSalle Group  “Weather appears to be bearish for the most part.   Probably had record week of corn planting.   Farmers going 24 hours per day.   Heavy rains are starting to fall in the NW of the corn belt and will continue to move eastward into next week.   Most of the heaviest amounts should be confined to the Dakota's and Minnesota.   Temps will warm following the rains and dry out in most of the belt.   Would think corn progress is somewhere between 60 - 65% and beans 20 - 25%.”

Old crop soybeans and corn remain extremely tight; with good margins for the ethanol plants and that should help ease some of the weakness seen in new crop should things pan out the way some are thinking.  But it will only take us so far; plus the funds seem to own some old crop futures; they might not want to hold on if they think that new crop is bearish.

The other thing I have noticed a lot the past couple of weeks is the fact that many advisors are bearish and making sales for 2013 crop and some for 2014.  I don’t think producers are following them and that is one component missing from making a possible bottom.  We have many in the industry bearish, we have spec’s bearish, but we don’t have too many bearish producers.  Markets like to turn when everyone starts betting on the same thing; we don’t have that yet. 

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

Jeremey Frost
Grain Merchandiser
Midwest Cooperatives


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