Monday, August 5, 2013

Closing Grain Market Comments 8-5-13

Markets closed ugly today with corn DOWN 3-7 cents, KC wheat was off 11 cents, MPLS wheat was down 8, CBOT wheat was down 15, new crop soybeans were down 2, the US dollar was unchanged, the DOW was off 46 points, and crude was down 40 cents.

Grain markets really seem like they simply want to work their way lower or at least that’s what the funds are drying to do is grind our markets lower.   It feels like we may have had a little panic producer selling today and more and more are getting bearish; so maybe we can eventually find a bottom.  I guess it always feels darkest at the bottom.  But just the fact that the only real positive we can talk about for the grain markets is the fact that everyone is getting too bearish isn’t a good sign.  The funds have showed us many times over the years that they can really extend price moves.

Don’t get me wrong  you can find a couple other positives; but nothing that is headline leading or good enough to help our markets bounce.  We still have the freeze card and slow development of the crop card in the deck.  But the major card that lead our rallies the past two years simply hasn’t shown up.  As we have had plenty of moisture (in most areas) and we haven’t had too much heat.  Sure we could find more demand but many of the pro’s are going to start arguing that if we don’t find demand in a hurry we could continue under pressure and fundamentally it is hard to argue against them.

Crop conditions this afternoon showed the headline why we have been under pressure.   As corn and soybean conditions were both improved; it really appears we have had ECON 101 do its job as the high prices have helped spark production both in the US and around the world and demand is simply soft or at the very least not strong enough to pull us higher at this time.  Maybe end users should be jumping on the prices we presently have?  But most are not and that’s one thing that adds to our markets over doing the moves.  End users don’t give the market support on the price breaks like perhaps they should and producers tend not to sell as much as maybe they should on the rallies.  That along with the funds is why our markets really tend to overdo price moves.

As mentioned this afternoon we had a crop progress report.  Here is the CHS Hedging comments on it.

You will notice that both corn and soybean conditions jumped 1% in the G/E category; with both presently at 64% good to excellent.  The other thing you will notice is we seldom see conditions jump in August.  Typically as the crop progresses and matures conditions drop.  But that wasn’t the case this last week.

Top Third’s comments from Mark Gold today mentioned it was the first time he had ever seen the conditions improve in August.  Bottom line is mother nature has been much more friendly to our crops the past few months then it was the past few years during this time period.

Here are Top Third’s comments referencing the conditions improving.

The other piece of news this a.m. was export shipments.  Which were good for wheat and corn and poor for soybeans.  Wheat came in at 25.5 million bushels, corn was 15.1 million bushels, and soybeans were 1.4 million bushels.

The other info I seen out was INFORMA’s crop estimates.  Not sure how important the actual numbers are; but I think the trend is something to watch. 

Corn yield they pegged at 158.6 bushels per acre; with total production of 14.140 billion bushels.  Basically looking for an increase in production with bigger yields.

For soybeans they pegged it at 42.7 bushels per acre with a total production of 3.266 billion bushels. 

As we get closer to figuring out the crop size demand will start to be important.  As it sits now many question if the presently forecasted demand can actually be hit.  Plus many such as Mark Gold above think the crops are actually bigger then some of the forecasted numbers.  Many think we will be swimming in grains and that’s just another reason we seem to be struggling.  Headlines of 2 billion bushel carryout or 14. Billion bushels of production isn’t exactly a headline to get funds to buy.

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