Tuesday, July 30, 2013

Closing Comments 7-30-13

Markets closed mixed today in rather choppy trade.

Corn was up 4 to 6 cents, KC wheat was up 6, MPLS wheat was up 3 cents, CBOT wheat was up 4, August soybeans closed down 18 cents, November soybeans were down 17 cents, the DOW was off 1 and the US dollar up a couple hundred points.

Look like some fund squaring up as it looked like they sold some soybeans that they are long and bought back some corn and wheat that they are short.  Will the funds continue to get short wheat and corn?  Will they decide to move from long soybeans to short soybeans?  If they do decide to get short soybeans what type of price could we see for that market?  Will that add even more pressure to corn/wheat?

One of the big headline that has been out the last day or two is bigger South American corn and soybean crops.  Some think that the present corn crop is understated in South America and projections for soybeans for this coming year are off the charts.  Right or wrong the headline that we are starting to see is big crops and not only big crops in the US but big crops in the world.

Wheat to me looks like it is still in the bottom building phase.  It acts like it wants to rally; but we need a reason and the market just hasn’t had that reason. 

I did see a little chatter of some grain export business today.  First off did see some beans sold to unknown; most likely China.  I also heard from a couple of good sources that China is looking for some new crop corn boats.  Also heard talk of China and Egypt looking to buy some wheat.  The wheat story in China might be one bullish card that hasn’t been truly played out.  Our export pace for wheat is very strong given the present projections.

Talk of freeze and snow in parts of South America is also being considered bullish wheat.  Plus it was announced today that Japan will now take US white wheat again.

Corn basis feels better or at least like it has stabilized.  I had several buyers looking for offers and I don’t think they like the offers that I had from our growers.  Yes buyers have bid things much cheaper; but if you are a grower does that mean you have to sell it cheaper?  At least right now?  Most guys are looking at the cheaper board and basis and say while that helps demand.  Then looking at the cool weather and saying well that takes new crop and pushes it further back.  That then doesn’t cheapen up the offers for old crop; if anything it makes the offers higher.  Right or wrong.  Bottom line is old crop corn and soybeans remain volatile.  The bid ask spread should continue to widen out; if buyers need something they might have to pay up; if they don’t well then it might not a be a pretty price.

I have seen some winter wheat trains get rejected for being too high on protein.  Not sure how that all shakes out; but it is going to make marketing challenging.  Most still think that the North Dakota won’t have much protein and that should let areas like ours get paid for protein.  But how much carryout old crop spring wheat is high in protein?

Weather as far as headlines go is really showing no changes.  Not many issues other than slow development.  Potentially huge issues with an early frost; but I don’t think many are concerned yet.  Perhaps they should be; but the market isn’t trading like it has much concerns about anything.

The last thing I want to mention is that almost all buyers for all the different commodities have ran for the hills the past week.  Buyers of corn, milo, millet, sunflowers, soybeans in particular have really softened up bids.  Now if any of those buyers come back and want to buy big tonnage and from me in particular I don’t think I can buy a huge amount of bushels/pounds extremely cheap.  Yes some would be available a little cheaper than it was a week ago; but not much.  I asked a couple farmers today for some corn offers and most of those offers were levels fairly similar to where bids were at before the market melted down.

I know I don’t have interest getting caught short old crop with as tight as the stocks situation is.   Bottom line is look for more and continued volatile markets for the little bit of old crop that is out there.

As for marketing in general I think we need to realize that we are walking into unknown territory in regards to potentially big corn crop and what the funds might want to do.  We don’t have anything written in sand more or less stone that says the funds can’t continue to add to their shorts.  At the same time we could at anytime see a catalyst help turn the charts and then help push our markets back up.  The only thing that can really be recommended is to get oneself comfortable; which shouldn’t be easy.  I would say that options for the grains are on the cheap side with implied volatility low; so they can be used to help re-own or protect grain relatively cheap should a big move happen.

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


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