Monday, July 29, 2013

Closing Grain Market Comments 7-29-2013

Markets closed weaker today in rather choppy trade action.

When everything was said and done corn closed down 3 cents, KC wheat was down a penny, MPLS wheat was down 2, CBOT wheat was up a penny, August soybeans were up 18 cents, November soybeans were down 9 cents, crush sunflowers continue to be under pressure down 40 cents a cwt, the DOW was down 37 points, crude was about unchanged, and gold was up 7-8 bucks an ounce.

Nothing great to report today; but I did see a couple decent signs.  First off the severe pressure wasn’t that bad; not like we had last week at least.  The wheat price action also continues to be ok; perhaps some would even say good versus what has been happening with corn and soybeans.  I wonder if we are making our HRW seasonal lows?  Harvest is basically done for winter wheat and now is the time when they need to try and get some acres.

Bottom line is I have nothing good to report that says our markets are anyplace close to putting in a bottom.  But some of the charts did leave doji or doji like days and we do have momentum slowing down.  Some momentum indicators actually look like it wouldn’t take much to produce a buy signal.

The other thing I look at for new crop December corn is on July 5th we traded down to 4.91 and today July 29th we are at 4.73; or only 18 cents less.  When I look at what has happened for the big weather headlines over the past 3 weeks or so and say we have only lost 18 cents; I feel fairly good.  Weather has been much close to ideal for many areas over the past 3 weeks; not everywhere; but almost no place has got blasted with hot and dry.  Some areas dry; yes and need a drink rather bad.  But overall in the big picture you have to say that weather and the weather outlook has been close to ideal especially regarding the cool weather during pollination. 

Bottom line is when I look at the big headline and say we only lost 18 cents I got to be rather happy.  Now if I look at what we have lost in some of the other corn contracts (September) or look at what we have lost versus our highs; yes one has to be disappointed.  As for whether we have or have not made a bottom that is still to be determined.  Hindsight usually works best and honestly in our market we have way too many unknown variables that need to be answered first.

One last positive  that we had today was a bullish key reversal in August Soybeans.  It only took losing 1.81 from last week’s highs; but we did have a classic bullish key reversal.  Could that lift a little more life into the other markets?  Without a doubt; but also keep in mind the funds are already long beans…………and many wonder if we need to get that fund length trimmed down.  Plus keep in mind that wheat didn’t exactly get hammer last week when the August soybean contract lost what it did.

The biggest thing that our grains really need is that headline for the funds to cover shorts and consider going long.  Maybe China will be in buying more wheat and corn?  Plus they are already always buying beans.  Maybe the headline will eventually turn towards weather?  Or the funds will get back on a commodity inflation type of run?  Maybe the funds will just look at the charts and compare corn, crude, and the DOW ………..and say yep that corn’s cheap enough???

As for weather and our markets the big headline that the funds are seeing is that things are great.  We have cool weather and some areas getting moisture; which is good for pollination.  But I think we have a major can of worms for our weather too.  As it simply is too cool; the crop is getting further behind each day instead of catching up.  Maybe it will turn around by as it sits today one should be concerned about the too cool of weather and lack of crop development.

Along those same lines one has to ask what the scoop is for old crop basis for corn and soybeans.  Last week ethanol plants seem to drop bids all at the same time.  I could see the basis pressure happening; it has the last couple years; but I really thought it would take a little more time for it to transpire.  Perhaps it was the Wednesday ethanol numbers that acted as a catalyst to our basis pressure in corn?

My thoughts on old crop basis are that I don’t know that the game is over.  I think the end users are simply playing more games.  I am not saying we will get back to the levels we had; but I do question if end users have enough cover to get them to new crop.  More specifically one might want to question if there is enough corn (buyable or not) to get them to new crop.  How can end users drop basis like they have with the tightest stocks we have ever had?  Easy; it was just a snowball effect.  One plant dropped and before you knew it every other plant had followed.  Elevators and traders seen things starting to drop so they instantly became sellers.  But did they actually buy much corn? And if they did buy corn did they buy it from the farmer? Some areas did; but I also talked to some other guys that didn’t buy much. 

Now add it the tight old crop stocks with the present weather and present forecast.  Locally I would be shocked if we had corn within 2 weeks of when we did a year ago.  That shouldn’t be negative for old crop corn.  Bottom line is just because buyers dropped old crop corn and soybeans basis.  It doesn’t mean they can and will be able to buy it cheaper.  I still think the stages are set for some very volatile markets.  The game might be over for old crop; or the game playing might have just started.

On the FYI front I did ask several buyers what they had bought for corn last week; and you would think they all bought tons because of the heavy basis pressure.  I don’t think that was the case; one buyer mentioned that they had bought a little but the majority of what they bought was at another one of their locations.  I did have several buyers call today and ask if I had corn for sale.  (But I thought you were covered and hence that’s why you dropped your corn bid last week????)

Other news today; I am hearing some talk/concern on wheat in Brazil.  Some of it has got hit with a frost and snow.  I don’t have great details on this but I have seen some talk of it. 

This afternoon we had crop progress.  Not much for new news in it.  Here is the CHS Hedging Recap

Spring wheat conditions and corn conditions were both steady in the G/E slot.  While soybeans dropped 1%

This a.m. we had export inspections.  Wheat was solid at 25.4 million bushels.  Soybeans were poor as expected at 1.3 million bushels.  Corn was as expected at 11.1 million bushels.  The corn and wheat numbers were above what we need on a per week basis to hit present USDA projection while soybeans lagged the number needed.

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