Friday, July 19, 2013

Opening Grain Market Comments - China still buying???

Markets are called mixed this a.m. behind a mixed overnight session.

In the overnight session corn was down 4-6 cents, KC wheat was off ½ of a cent, MPLS wheat was unchanged, CBOT wheat was up 1 ½ cents, August soybeans were up 11, and November soybeans were up a penny.  At 8:10 outside markets have the US dollar slightly softer at 82.739 on the cash index, crude is up a buck now over 109 on the August contract, the Sept crude contract is at 108.67, gold was up 6 bucks an ounce, and it looks like a weaker start for the stock market with the DOW futures off about 30 points.

Another day same story.  Weather and the funds.  The forecasts that I seen this a.m. see a little more moisture in a little bigger part SD & NE; while MN and IA look a little drier in the 1-5 day forecast.  While the 6-10 look at little cooler.

Here is CHS weather link.  It does a good job of showing present forecast along with old forecast.

For weather it is all over the board; I do think the stages are set for some volatile markets come Sunday night depending on what the forecasts end up showing.

I do think we have to ask the question what type of weather and weather forecasts will it take to get the funds back involved in a way that helps our prices.  What does it take to get the funds to cover shorts and what does it take to get the funds to want to get long.

One positive or reason the funds might look to get long is the price relationship between say corn and crude.   Could that attract some sort of buying for our grains????

The other thing I noticed this a.m. was more talk of China and the grain they are buying.  More rumors of them buying both wheat and some corn.  Sounds like they might have bought Australian wheat, French Wheat, and some US wheat.  Bottom line is that China still seems to be a wild card and potentially bullish card.  It seems like China wants to support these type of price levels; does that mean we are near a bottom on the board????

Egypt has also been back in the game buying wheat again; it had been several months.  It doesn’t look like the US got any of the business; but at least they are back in looking to buy.  The business yesterday looked like it all went to various black sea countries.

Old crop corn basis remains extremely volatile; but also very inverted.  As example some of the bids are much stronger for nearby corn then for August or September.  For us as an elevator it makes it tough because of the fact that we have a wheat harvest starting.  We can only ship out so many cars and you can only get so many trucks underneath product.  So the fact that we can’t get corn in and out today or yesterday and if we ship product couldn’t ship it until late August or maybe even early September makes bidding for old crop corn very tough. 

But I would say having offers out is probably the right thing to do.  Things are hot for old crop corn and with every day that goes by we get closer to new crop.  One day a cliff will happen for basis; but we really won’t have big yellow warning signs.  Those signs are already out there just from how volatile basis is; plus how some end users are bidding big inverses; while others have small carries or flat markets.  Other e-plants say they are about covered.  Corn is going into areas that it maybe typically doesn’t.  It feels to me like we have one last panic push by the market.  If we see successful pollination over the next couple of weeks I think many producers will start to let go and once this corn market basis is over it could be over in just a few hours.   It literally should be that volatile; where one afternoon someone trades just a huge number; but in the morning the only bid left might be new crop values.

Bottom line is use caution holding old crop corn basis too long and realize it is very much like playing a high stakes poker game.  When it’s over it won’t be fun; in the meantime the path of least resistance will be up.

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


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