Thursday, June 13, 2013

Opening Grain Market Comments - USDA Supply and Demand Report Recap 6-13-2013

Markets are called mixed this a.m. behind a mixed overnight session following a USDA report yesterday that was neutral to bearish for the most part.

In the overnight session corn was down a penny, KC wheat was a penny lower, MPLS wheat was down 3 cents a bushel, CBOT wheat was down 2 cents a bushel, July beans down 9 cents, and November soybeans were lower by 6 cents a bushel.  At 8:20 outside markets have crude down 20 cents, gold down 16 bucks, the US dollar about unchanged, and equity futures pointing towards a mixed mainly unchanged type of start for the DOW.

Yesterday it was all about hurry up and wait for the USDA report.  With our marketing meeting yesterday and my boy’s baseball game early last night I didn’t get a recap of the report.

Here is a rundown; this is from the Van Trump report yesterday.

US Ending Stocks 2012/13

June #
May USDA #
Avg Guess
Range of Guesses
0.684 - 0.919
0.080 - 0.140
0.715 - 0.751

US Ending Stocks 2013/14

June #
May USDA #
Avg Guess
Range of Guesses
1.175 - 2.200
0.185 - 0.344
0.501 - 0.713

Global Ending Stocks 2012/13

June #
May USDA #
Avg Guess
Range of Guesses
124.500 - 128.200
60.500 - 63.000
179.800 - 181.395

Global Ending Stocks 2013/14

June #
May USDA #
Avg Guess
Range of Guesses
141.510 - 155.200
68.200 - 76.000
179.800 - 188.500

US Wheat Production

June #
May USDA #
Avg Guess
Range of Guesses
All Wheat
1.872 - 2.109
All Winter
1.401 - 1.523
Hard Red Winter
0.676 - 0.815
Soft Red Winter
0.492 - 0.517
White Winter
0.200 - 0.217

The big headlines on the report include wheat production raised.  The market thought wheat production would be lower but instead it was raised so that was a little bit of a black eye for the wheat market.  The other headline for wheat that I seen was a little positive; the world wheat ending stocks for 2013/14 lowered.  Nothing major but it puts year over year about unchanged and the trend was small Former Soviet Union crops; i.e. Russia/Ukraine.   If we want to be bullish we need to see that trend continue; we need issues someplace else in the wheat world besides locally.

The big negative headline had to be the USDA not doing anything about our corn late planting situation.  Our carryout is still pegged at nearly 2 billion bushels for new crop and a crop size of over 14 billion bushels.  The positive on this is the market’s reaction.   I think we would have had a much more negative reaction if the USDA would have trimmed planted acres say by a million or something.  It came off to the market that the USDA took a wait and see approach on many of the line items in the new crop balance sheet.  And they probably should have; but that to me gave the market some comfort and should allow us to stay range bound until we get new info.

The new info will be the June 28th stocks and acre report; as well as seeing how weather develops.  Can the poor crops bounces?  Will other areas make up the loss?  Lots of unknowns still out in our market that should need to be defined before we see how things actually shake out.  Just keep in mind that sometimes our market really trades like a futures market; where the info we see on a daily basis gets put to the back burner while the market looks for new info that is unknown.  They call it a futures market for a reason.

For us to realistically have a chance to have a major rally the market needs to be convinced that our carryout and production is much less then the present 14 billion bushel crop size and the nearly 2 billion bushel carryout.  Until the market gets confirmation or more believe that the crop and carryout is much less then what is presently forecasted it should be hard to really rally.

As for the world corn and bean numbers; a couple things stand out.  First off bigger numbers then the trade thought.  But less than last month; which is a good trend to have.  I think a lot of the world numbers are like our present corn numbers.  They seem to be more then aggressive in production; but equally as aggressive in demand. 

That might be one risk we have going forward; should we see reductions in production; be it in the US or other spots in the world.  Will it mean smaller carryout numbers?  Or will the demand simply slip? 

I guess we really don’t know how easy it is to lose or find demand.   We might think we do; but we really are not that good at predicting the future.  I do know that basis the average farm price that one component that the USDA is using for increase its demand is lower prices.  Can the demand stay as strong as they say should we be at present price levels or higher?  Only time will tell; it seems like having more product around helps demand; but how much?

At the end of the day yesterday’s report didn’t provide many answers.  For me it just added more questions.  For marketing it tells me the risk is still to the downside; but it really goes back to producers comfort levels.  Producers are much more comfortable than ever before and their overall situation in regards to bin room and wealth probably gets under estimated via the market.

Other news out; yesterday we had ethanol numbers.  Very strong and lower stocks.  Leaves the door open for more ethanol usage in the coming months.  The thing we have to watch out for here is imported ethanol.  A lack of July/Aug/Sept coverage should keep corn basis very volatile; but my ethanol plants are still passes on offers for those slots claiming they can’t get the ethanol sold with the inverse in the board.

This a.m. we had export sales out; good for wheat which is now new crop at 15.7.  But old crop corn and bean sales continue to be horrible.
New crop corn sales were also weak at only 2.7 million bushels and new crop bean sales were ok at 16.4 million bushels.

We are starting the new crop wheat sales ahead of where we were at last year; while beans are about the same level, and corn is behind.  That means that if the USDA report is right from yesterday we should see wheat sales slip as we go forward, while corn and beans should pick up.  With corn picking up dramatically over the next year.

Weather patterns look about unchanged to me.  I also question what type of weather we need to get the funds or “big money” back into a buying mood.  I don’t know that too much rain can do it; at least not until we get some confirmation that we have lost yield, acres to prevent plant, and have more acres that need to get re-planted.  I just question whether too much rain is a headline that the funds can get a hold of and run our markets up.  I think longer term there are plenty of issues that could arise but the question is when and will they actually arise and if they do will they mean much?

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