Markets closed mixed to mainly weaker today.
July corn was down 8 ½ cents a bushel, September corn was
down 13 cents a bushel, December corn was off 10 cents a bushel, KC wheat was
down 17-21, MPLS wheat was down 6, CBOT wheat was down 17-19, July soybeans up
19, November soybeans unchanged, the US dollar up a little with the cash index
at 82.45, the DOW was off 140 points, crude was up 1.20 a barrel, and gold was
down 11 bucks an ounce.
Overall an ugly day; there were times when MPLS wheat and
soybeans showed some promises. But overall
spreads where very volatile. KC spreads
seen the nearby KC July wheat contract lose a dime to the 2014 July wheat
contract. From what I heard was a little
harvest pressure and some houses in KC getting lower protein. Something that they might sit on and try to
drive spreads wider.
Old crop new crop corn spreads also had a very choppy volatile
day. Some of the bids for old crop corn
have rolled to the September contract; while others remain against the
July. Bottom line is that spread has
been choppy and likely stays choppy.
Producer movement for grains has really slowed so you would think that
the spreads firm up. But that wasn’t the
case for all of the grains today; as mentioned above in reference to KC wheat.
Wheat basis also felt a little heavy; plenty moving lately on
basis contracts and my contacts indicated that the Gulf HRW basis traded 7-25
cents less than it did last week.
Perhaps another reason that KC wheat spreads moved wider. The domestic markets don’t seem much weaker
but I have locally seen a lot of basis contracts done and some mills have
stepped back. Plus it really only seems
like 1 or two mills have supported basis at these type of levels. Most others are waiting for new crop; not
they will get much out of this area.
This a.m. we had export shipments out. Good for soybeans and poor for wheat and
corn.
This afternoon we had a crop progress update. Not much for surprises the big thing is that
the crop condition trend has improve for corn, spring wheat, and soybeans. Both corn and soybeans improved 1 % in the
G/E while spring wheat improved 2%.
If that trend continues we really have to be concerned about
the seasonal pressure that we have seen over the last 20-30 years. I have a couple seasonal charts in my office
for November soybeans and December corn and they look like we go off of a cliff
right around the start of July. (These
seasonal charts are older ones and that trend hasn’t been the case the last
couple of years)
As each of the last couple of years we have made our highs
around the August crop report; but last year at this time our crops had started
to feel the stress of the drought. As it
stands out the numbers have improved the past couple of weeks. The corn crop is now back to its 5 year
average; with an uptrend.
Here is CHS Hedging recap
Right now the market seems to be focused on a couple
things. Wheat harvest updates (today
seen as bearish via surprisingly good yields noted in central KS), the outside
markets (bearish the past few days with economic concerns…..particularly in
China), weather (overall has to be a little bearish….at least on the headlines
as rain makes grain), and position squaring ahead of the report on Friday
(unknown). Bottom line is the headlines
today mainly said sell.
Now as we get further into the wheat harvest could we see
more disappointments start to hit the headlines? Yes of course; but just by nature producers
are conservative when it comes to estimating the yields; now perhaps the market
isn’t. Could we see the outside markets
stabilize and maybe see our markets focus on the Chinese demand which has been
very strong for wheat as of late; with many talking about a smoking gun in
regards to China and wheat. Yes we
could.
We could also debate weather; as I know plenty of
agronomists that are more than concerned in some areas.
Could Friday’s report show way less acres then
expected? Could our quarterly stocks be
less than expected? After all basis and
the spreads have said for some time that old crop corn and beans are tighter
then tight. Sure could happen that way.
The other way these things could play out is similar to
today’s price action and headline. Our
crop could get bigger, the KC wheat harvest might not be as bad as we once
thought, we might have under estimated the old crop stocks, and we could
continue to see weak outside markets or an overall economic meltdown.
Bottom line is I don’t think many if any are going to be
smart enough to take all of the hundreds and maybe thousands of variables and
determine exactly how these markets will shake out. If they did why would they tell anyone? Not to say that someone won’t get it right as
someone will. But for risk management
purposes and grain marketing purposes our job it to treat the above as unknowns
and make good business decisions that fit our individual goals in a way that at
the end of the day we can say we are comfortable with the decisions that we
make.
Please give us a call if there is anything we can do for
you.
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