Tuesday, July 9, 2013

Opening Comments - USDA Report projections 7-9-2013

Markets are called better this a.m. behind a firmer overnight session.

When the overnight session ended corn was up 10-12 cents, KC wheat was up 13, MPLS wheat was up 11, CBOT wheat was higher by 14, and soybeans were higher by 21-23 cents.  The outside markets at 8:10 have crude down 50 cents a barrel, gold up 12 bucks an ounce, the US dollar up 120 tickets at 84.337 on the cash index, and the stock market futures up about 50 points on the DOW mini futures.

A dead cat bounce or oversold market bounce that is continuing?  Or maybe some position squaring ahead of the USDA report that is out on Thursday?  As for headlines not much has changed from Friday to today; perhaps the crop conditions didn’t improve quiet as much as many expected and maybe with all the unknowns plenty of the shorts have got a little ahead of themselves as you can find many agronomists and producers that are much more cautious on production estimates then the trade seems to be.

Here is CHS Hedging recap for the CFTC Report.  Notice the funds short a sizeable amount of corn; which opens the door to the question are we just seeing short covering?

One positive our markets have going is the fact that many are very bearish; are they bearish enough to call a bottom?  Hindsight usually works best here.

Technically December corn is basically back to what was old support and now new resistance.  To me it looks the charts are setting up perfectly for Thursday’s report to be a catalyst that either turns us back down at this resistance point or push’s us threw and maybe gives us a chance to rally back towards the top end of the range we had previously had.  5.70 or so on the December contract.   Seems like a stretch if we actually are going to have a 14 billion bushel corn crop; but only time will tell.

As for the report on Thursday here are the carryout estimates

Marketing year                  2012-13             2013-14         
                                 Corn   Soybeans       Wheat    Corn  Soybeans
Average trade estimate          0.725     0.121       0.632   1.896     0.263
Highest trade estimate          0.800     0.135       0.690   2.338     0.329
Lowest trade estimate           0.537     0.104       0.566   1.618     0.164
USDA June estimate              0.769     0.125       0.659   1.949     0.265

You can see not much for old crop changes; but slightly tighter then last month based on the smaller stocks number at the end of June.  As for new crop also not much for changes; but much wider ranges.  The bottom line here is the market is still looking the 2013/2014 carryout’s to more than double from the present year.

As for other news out there we don’t have much; we have had some decent demand for wheat coming from China and that keeps the smoking gun open for the wheat market.  But is it enough for us to really rally if corn is just experiencing a small little bounce before moving lower?  Probably not.  We also have a slow SRW harvest; but there again that’s probably not enough for us to have a super bull market.

Weather continues to be a big mixed bag.  I did read something this a.m. that indicated over 50% of the corn should pollinate in the last week of July or so.  As we get closer to that time period the weather forecasts will become very important and weather probably trumps what the USDA has to say on Thursday or takes over the lead shortly after.

As for grain marketing; I think we need to realize a couple things.  If and it’s a big if we raise 14 billion bushels we don’t have a clue what fair price is.  We could be there or near a “fair price” or we might be a couple bucks too high.  I don’t want to say the sky is falling but we have to realize that if the crop is as big as it has been talked about we have no real good idea what is fair value.  On the flip side with where crude is at and the fact that we are at levels that are fairly cheap compared to the past couple years; I don’t think getting super aggressive now is the right move either; the right move is to be comfortable and that’s different for everyone.

I don’t want to sound wish-washy; but if I or others knew if this thing was near a bottom we would all stick our money where our mouth is and buy…buy….buy…..and if we knew it was near top…….we would sell……..sell…sell……  the only good recommendation is to point out the risks and rewards; which are even hard to define; so at the end of the day it goes back to what type of marketing position makes you comfortable with your beliefs in the market place and then what type of grain marketing plain leaves you comfortable should your beliefs end up being wrong.

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

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