Opening Comments 5-29-2013

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

When the overnight session ended old corn was down a penny, new crop corn was up 2 ½ cents a bushel, KC wheat was unchanged, MPLS wheat was up a couple pennies, CBOT wheat was off 2 cents, and both old/new crop soybeans were about unchanged.  Outside markets look like we have a weaker start in line for the DOW with futures pointing towards a lower start of about 60 points, the US dollar is down about 400 points with the June futures back below 84 trading at 83.780, gold is up 5 bucks an ounce, and crude oil is down 70 cents a barrel.

A couple pieces of news out this a.m.  First off I seen an announcement come over that China cancelled 147,000 tons of old crop soybeans.  We already have crushers rolling bid and “saying” they are covered for a couple months and lately the export game for old crop soybeans hasn’t been strong.  This is just a little more un-needed headline weakness.  I don’t know that fundamentally anything has changed for old crop soybeans as things are tighter then tight; but when you have basis nearly a buck softer at some crush plants and you see headlines of old crop exports cancelled you don’t have a super bullish market either.

The other bid news out was late yesterday’s crop progress and condition report.  Winter wheat condition was unchanged, soybeans came in a 44% planted, spring wheat was 79% planted, corn was 86% planted, and corn emergence was 54%.  Overall positive to prices; the fact that we didn’t get lots done in the last week isn’t new news.  I think the weather forecasts remain important.

The other thing about the planting progress is you have two sides to the story.  The big story that many see are the headlines; such as corn 86% planted versus an average of about 90 %.  Corn emergence at 54 % versus 67 % on average.  Spring wheat at 79% versus 86% on average.   On the surface these numbers say we have done a good job catching up.

But the million dollar questions should be; how much corn will need to be re-planted?  With the final 13-14 million acres of corn get planted?  How much potential corn yield has been lost or is that all still up in the air depending on mother nature?   Will the balance of the spring wheat get planted?  ETC ETC…….. plenty of bullish things happening with our delays and unknown agronomic/growing effects of our weather.

So will the traders and more importantly the funds look at the headlines and say everything’s fine so sell……sell…….sell?  Or will they look a little deeper and decide maybe it’s time to buy….buy….buy?  I don’t know that answer; I do think some charts are looking a little better so I lean towards the side that we potentially add a little more premium.  But I also think that longer term the job of our market is to find demand at least until we know we have cut supply dramatically.

Not much for other news out there this a.m. the reaction to the China cancellation will be important.  Later this week we will have ethanol numbers and export numbers.  But also month end which could lead to some position squaring.

Smithfield foods is close to a deal to sell to Shuanghui Group from China.

Forecasts look very wet for the Western corn belt.  Iowa in particular……..overall I say the forecasts are positive to prices; but my opinion isn’t that important.  At some point if we do get the grains planted we need to remember that moisture won’t be the thing that likely runs us up. 

I did see that SovEcon pegged the Russian wheat crop at 50 MMT versus the USDA at 55 MMT and for exportable supply they are at 13-15 MMT versus the USDA estimating 18 MMT.  For wheat to rally we are going to want to see more headlines like this; we need to cut some supply in other places in the world so we can spark some demand interest for US wheat.  A lack of demand for US wheat is really keep wheat from having a good fundamental reason to rally.

Don’t forget we will have our weekly marketing meeting in Onida at 3:00 today.

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