Thursday, June 27, 2013

Opening Comments day ahead of big USDA report

Markets are called mixed to better this a.m. as they hurry up and wait for the USDA quarterly grain stocks and acre update report which will be out Friday June 28th at 11:00 central time.

In the overnight session July corn was up a penny, December corn was down 2 cents, KC wheat was up 5 cents, MPLS wheat was up 3 cents, CBOT wheat was up 4 cents, July beans 8 cents higher, August soybeans 6 cents higher, and November soybeans 3 cents higher.  At 8:10 outside markets have the US dollar about unchanged with the cash index at 82.93,  gold is up 2 bucks an ounce, crude is up 50 cents a barrel, and the stock market looks like it has a big bounce continuing with the DOW futures up about 90 points.

Big thing is tomorrow’s report; which I will go over shortly.  The other couple things have been ethanol numbers yesterday, wheat harvest, weather, export sales this a.m., and the outside markets.

Yesterday we had ethanol production.  It bounced back matching its highest levels since June of 2012; and ethanol stocks had a small decline.  Keep in mind here that seasonally we see some summer shut downs for maintenance.  Plus my sources tell me that guys simply can’t get ethanol sold and make margins for August/September.  So most still lack coverage; which means things could be very volatile for this industry later this summer.

For wheat harvest updates; the biggest common thing I have seen reported has been “better than expected”.  The protein in central Kansas looks to be a little on the low side too; which would go along with better yields.  The nearby KC July contract has been under severe pressure the past 3-4 sessions and the main reason has been wheat harvest.  One thing we need to keep in mind here is we are never going to hear all of the bad stories as to how much wheat was already bailed up or disked under.  The only thing we are going to hear about for harvest updates is what is left; so the tendency should be to report the better stuff.  I did ask a couple wheat buyers if the areas that had these good yields had expected good yield and the answer I got was yes………but the yields seem to be a little better then these areas had expected and most are starting to figure a bigger Kansas crop then what the last USDA report had.

Even locally the little bit of winter wheat that is left seems to have improved over the past month.  Bottom line for wheat is we still have the bearish world story and now some of the mustard is getting took off of the story about how bad the crop is down south.  I did read a comment this a.m. about parts of Australia starting to see a little stress.

Weather seems to be ideal in many areas and I can’t say that it is super bearish or super bullish.  Really depends what got planted; which we should have a better idea on tomorrow.  I would say I see more rain makes grain comments then comparisons to 1993; but I think this card hasn’t been plaid out yet and it is really too hard to say what weather card is bullish or bearish; so many areas looking for different things.  The thing we don’t have is that big headline driving the funds to our markets because of weather.

Export sales this a.m. were good for wheat at 26.9 million bushels.  Old crop corn was also surprisingly good at 13.3 million bushels; which isn’t a big number but we only needed 5.2 million on a per week basis to meet USDA’s latest corn export projection.

Old crop soybeans were only 500,000 bushels; but new crop beans came in at 16.5 million bushels.

The corn number is supportive; as is the wheat number but the bean number isn’t nothing great.

Below are the projections for Friday’s report; this is from the Van Trump Report.

US June Acreage Worksheet

June #
March #
2012 Final
Ave. Trade Guess
Range Estimates
94.200 - 96.900
77.100 - 79.240
All Wheat
55.200 - 56.400
Spring W
11.700 - 12.700
Durum W
1.550 - 1.800
US June Grain Stocks Worksheet

June #
March 1
June 1, 2012
Ave. Trade Guess
Range Estimates
2.725 - 2.952
0.413 - 0.500
0.718 - 0.781

Just a few comments on this report; more this afternoon with some trade strategies then as well.  Many are talking about the fact that it is likely that the USDA has a re-survey for the acre portion.  I tend to agree; how can a report on June 1 really tell us what we did or didn’t get planted?  It can’t be 100% accurate.  This could be good or bad; just depends how the USDA wants to play it and how those that reported played it. 

As for the stocks number the big thing that sticks out to me is how much lower corn and beans stock estimates are versus last year.  200-300 million in each of those.  I read something this a.m. that made reference to the corn stocks projected to be the lowest in 16 years and the bean stocks the 3rd lowest in nearly 40 years.  Man the trade seems to be looking for some bullish numbers.  If they are correct and harvest is as late as it looks to be today we could really see some fireworks on the old crop supplies over the next couple months.  But are they looking for something too bullish?  Any chance the USDA prints something as bullish as the trade is looking for?

Also following up this report will be an updated July Supply and Demand; in my shoes I don’t see any major changes on that even if the USDA comes in well above or well below the trade estimates on Friday.  Keep in mind that back in March we came in some 400 million bushels or so above the trade estimate only to have the April Supply and Demand report show a carryout with an increase of about 150 million (memory off the top of my head).

This afternoon I will list a few trade strategies ahead of the report.  This will cover some option plays; but the bottom line for this report is one wants to be comfortable.  Realize how many times this thing has moved us limit one way or another.

Jeremey Frost
Grain Merchandiser

Midwest Cooperatives

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