Friday, October 4, 2013
The grain markets are called mixed this a.m. behind a mixed overnight session.
In the overnight session corn closed up a penny, KC wheat was down 2 cents, MPLS wheat was up penny, CBOT wheat was unchanged, and soybeans closed off a nickel. At 8:00 outside markets have crude up 80 cents a barrel, gold down 8 bucks an ounce, the US dollar up a couple hundred ticks at 79.99 on the cash US Dollar Index, and the DOW futures are pointing towards a positive start of about 30 points.
Rather choppy markets in the overnight session and very narrow range for corn the past few sessions. As for stories there seem to be a few different ones out there for mentioning.
First off is the government shutdown and some of its effects on the grain markets. First off it has had a negative effect on the DOW as the DOW has lost over 700 points the past couple weeks. It’s a little early to say if any of that money leaving the stock market will manage to make its ways to the grain markets; but technically if the DOW were to lose another 300-400 points it could really open up more downside pressure in a hurry. If the DOW loses money in a hurry that seems to hurt all investments; and grains would probably be included in that.
Probably more important for the grain markets is the lack of information that the market is getting. Presently we are not seeing export sale announcements or weekly export information. We are not expecting to see harvest progress or crop conditions. Many are wondering if we will see a monthly USDA report; and if we do how delayed will it be. Some of my sources indicate that even if we had a resolution by today that we still would have the USDA report delayed. One other thing I have noticed is no USDA spot floor close for MPLS spring wheat. I know there are hundreds of more things that are getting effected; but the point I am trying to make is that the USDA being closed and government shutdown seems to be adding more unknowns.
Unknowns can do one of two things; they can add premium or they can scare the players away. Who wants to play a game when you don’t know the rules?
The other couple generic stories as of late have been better than expected yields for the row crops. Most seem to be in the camps that the yields are getting better. I guess only time will tell; but if yields are getting better fundamentally we will need to see some increase in demand. That might not be easy to happen in corn if the producer is a unwilling seller at the lower prices. They say that cheap prices promote demand; but that is only true if the end users can actually buy the product cheaper. I guess I am a little worried that the low price of corn won’t attract as much export demand as we might need to help our balance sheet situation simply because producers might not be big willing sellers.
If that is the case it could have some side effects on basis; meaning early in the game you could see basis strength……….but that lack of selling later on could cause us to have missed the business. That could open the door to the producer then trying to sell after we have already missed the business. Spring wheat basis did just this a few years ago; producers held on too tight at harvest and by the time they looked to sell the export card had already sailed. Bottom line is I am not super bullish basis if we have a huge carryout and see producers fail to sell it when the end users look for it. Keep in mind the type of percentage that the is feed in the first quarter of the year.
So if producers are not willing sellers during the present time period when we feed most of the corn and they fail to sell so we end up getting some export business things could get dicey if we actually have the big crop that some (most) believe.
So for marketing I am not opposed to consider min price contracts. Because the cost of a min price contract is going to be cheaper than paying the min storage fee. Plus you don’t have to worry about paying storage and getting less for the grain.
Don’t get me wrong the min price option isn’t best for everyone; but it might be a better option than paying storage at the elevator.
We will have some private reports for estimates out today; with INFORMA out at 10:30. Most are looking for an increase in corn and bean production.
We did get our Onida elevator opened up for some corn; presently we are taking up to 17 moisture; with normal discounts to apply.
Please give us a call if there is anything we can do for you.