Thursday, June 13, 2013

Closing Grain Market Comments 6-13-2013....did Wheat put in a bottom?

The grain markets closed mixed today in choppy trade.  MPLS wheat helped pull the other wheat markets back into positive territory and we did have corn bounce into the close well off of its lows.

When the grain markets closed we had July corn down 7 cents, September corn down 4 ½, December corn was down 2, KC wheat was up 2 – 3 cents, MPLS wheat was up 5-6 cents, CBOT wheat was up 2-3 cents, July beans down 31 cents, and November soybeans down 14 cents closing just above the 13.00 level.  At 2:45 outside markets have a very weak US dollar down 300 some points at 80.640 on the US Cash Index, gold down 10 bucks an ounce, crude up 70 cents, and the stock markets have a big bounce going on right now with the DOW up 180 points.

The positive today has to be the little mini reversals for the wheat markets in CBOT and KC.  The KC July wheat contract hit its lowest level in about a year before turning around and closing positive.   Some would classify as a key reversal in that it made a new low for the move and closed higher; other technical books would just consider it a reversal because we didn’t close above the previous sessions highs.  Either way it is a positive; it might not last but is really the first positive we have seen on the wheat charts for some. 

MPLS wheat continued to hold support around the 8.00 level on the July board; another positive.  I do question if we see some pressure against that support should we get all the spring wheat in; but the chart looks to be holding up so far.

CBOT wheat flirted with its lows from late in May but also managed a little reversal type action on the charts.  It also looks like we have a little bullish divergence in momentum on the CBOT July Wheat chart.    Meaning when we made our low back in late May STOCH got down to the low teens and now even though we are near that same level STOCH is in the upper twenties. 

I don’t want to read too much into the wheat price action today; but I thought it was overall positive.  We have the funds short plenty of wheat and we have everyone talking about the big world supply and yesterday we had production come in higher than expected on the USDA report.  But despite all of this the CBOT wheat market is a few pennies higher then it was when right before the USDA report came out at 11 a.m.  yesterday the 12th.

So my hope is that we have finally made a low and got some of this negative information priced in.  The only thing I would say is that hope and greed are not very good emotions to have when it comes to marketing. 

As for news today I did see that SovEcon raised their Russian wheat crop to 52 MMT from the 50 MMT they had.  But is still below the USDA number of 54 MMT that the USDA had yesterday.

We did have export sales out this a.m.; nothing super bullish here.  Good for wheat but not off the charts at 15.7 million bushels.  Our commitments for the year are at 272 million bushels versus only 203 last year.  Perhaps why the USDA increased our export forecast yesterday?

The corn and bean export sales were very light.  Not where we need to be to meet current USDA projections for the old corp.  The new crop corn was horrible while the new crop bean sales where so-so.

The support in MPLS wheat today came from forecasts and thoughts of acre loss.  I did see this comment in another market summary today.  “===Central and eastern Kansas wheat fields expected to possibly see 80+bpa wheat cut as evidently the 5 frost events in April and May did less than expected/reported damage”

Maybe that is what the USDA seen when they raised our wheat production yesterday?  The thing that we have to keep in mind in regards to a frost is the fact that sometimes the damage doesn’t show up until the combines roll.  (80 bushel straw with 20 bushel wheat????)  I guess we will find out over the next several weeks.

I did see a comment that Goldman lowered their price forecast for the grains for the next twelve months.  Citing favorable weather conditions and growing supplies.  I don’t care to argue the point; most producers I know would argue it; especially those in Iowa or ND where they can’t get the crop in the ground.

The point I want to take from it is the headline that the funds or “big money” see.  That headline is bigger supplies as noted in yesterdays USDA report.  If we truly want a bull market and higher prices we need to give the funds or “big money” a reason to enter.  That reason can be inflation or some other black swan event not directly tied to our fundamental supply and demand or it could be our carryout levels/production levels.  Right now the USDA reported forecasts for balance sheets are not a headline that say……..BUY…….BUY………..BUY……….if anything they are headlines that say……. SELL………SELL……….SELL.

Bottom line is we need something to change; maybe a policy change that helps increase ethanol usage or ethanol blend?  Maybe inflation talk?  Maybe confirmation of a huge loss of acres and yields?  I don’t know what it needs to be but we need some story that is buyable material for the funds.  It doesn’t have to be accurate and make sense to everyone; we just simply need a story that tells the guys with the money to buy.

Elsewhere we have been trading some sunflower offers the past couple of days.  Mainly for deferred slots like Jan-March of 2014.  If you have some interest now might not be the worst time to have some offers out there. Buyers are concerned about the loss of acres in North Dakota.

I have seen some signs that old crop millet might be finally done going up as I have had several brokers start to indicate offers back to me.  That type of volatile price action tends to come at the end of a move.  I guess in this case it will really depend on when and how harvest shakes out.  Will it be early?  How empty will bins be waiting for it?

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


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