Thursday, July 18, 2013

Closing Grain Market Comments

Markets closed mixed today in rather choppy price action.

September corn was up 3 cents, December corn was down a penny, KC wheat was off a penny, MPLS wheat was down 5, CBOT wheat was down 5, November soybeans were down 18, the US dollar was near unchanged with the cash index at 82.76, crude was up 1.50 at 108 a barrel, and the DOW closed at a new all time high up 78 points.

Weather and the funds, maybe a little old crop corn and soybean fundamental story was and has been what the markets have been about.  Today the talk for weather was a little normal or cool weather for parts of the corn belt in the deferred forecasts.  Nearly 100 here today has some local guys I talk to a little concerned as we could really use a drink.

Overall I think weather is getting view by the trade as negative to prices; hence we have been under pressure over the past few weeks.  The weather market for corn is getting closer to being over; weather will start being more of a focus for the soybean market as we move forward.

When I say weather for the corn market being over; I should probably say it differently.  The forecasts out today go out towards the end of the month; which is when most of the corn will be pollinating if not sooner.  Now if the present forecasts change and we add some heat and moisture that is forecasted doesn’t hit we easily could rally from weather.  Just as it sits right now with present forecasts and good conditions in the eastern corn belt the odds of a bullish weather card seem to be falling by the wayside as each day goes by.  More and more are starting to feel like the bean market will be taking the lead.  Looking at the charts and the wedges/triangles on some of the bean charts I tend to agree.

Don’t get me wrong I still think weather is important for corn; but I think the market is in the process of taking some of the risk of 11-12 billion bushel production out of the price.  So over the next couple weeks look for beans to start to take a little bigger lead.  The other thing to keep in mind for corn and the bean market is the demand side.  A month from now most will have a solid number for corn and bean production.  It might not be final but the number should at least have something behind it.  Presently the numbers are just thrown out of thin air via the USDA.

Once the market feels like it at least has a clue of production we will shift over to a demand market; or should shift over to a demand market.  If production does come in as high as the USDA presently has or higher look for some pressure to come on the market until the market proves it has demand like the USDA has forecasted. 

I am not going to argue if demand is stated to light or too heavy; but I do feel very strongly that the funds and players in our market will put the burden of proof on the side of “show me the demand”.   They should simply based on history. 

First off however we need to find out what our supply is.  I know most producers don’t want to think that it might go up.  But if have many of you asked yourself the question “is this corn crop only 33 bushels more than last year?”   I guess from where I sit I would think it is bigger; but maybe that is a case of backyardagains???

News out today was light but we did have export shipments out this a.m. and they were solid for wheat and corn; while poor for beans.  But overall not new news; as the big numbers are from the reported sales last week to China.

Egypt did buy some wheat today; 300 tmt; but none of it was US wheat; not a surprise but also not a headline that is good for US wheat demand.

Old crop situation for corn and beans is still super tight; but also very volatile.  Some places have big inverses while others have some carries in their bids.  I would caution that when we see harvest down south that we will slow or shut down one of the outlets that some of the corn is going to.  Right now that market is making the other markets really pay for corn.  Bottom line for old crop corn basis is sky looks like the limit for now; but one day and maybe one day soon before we know it things will fall to new crop values.  Huge reward still out there; but also a huge risk.

Watch Sunday nights forecasts and see if they give our markets a leg up or continue the pressure.  Also we really need that headline for the funds to want to cover shorts or simply get long.

Please give us a call if there is anything we can do for you.


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