Monday, November 25, 2013
Closing Grain Market Comments 11-25-13
Grain markets closed mixed to firmer today in choppy holiday mode trading.
Corn was up 2-3 cents, KC wheat was up 1-2 cents, Mpls wheat was unchanged to up 2, CBOT wheat was up 2-3, January soybeans up 10, November 2014 beans down 6 cents, the DOW up 8 points, crude down 75 cents, and the US dollar slightly firmer with the cash index at 80.849.
Not a big news day today; we did have export shipments out this morning and they were mixed. Wheat in expected range at 12.6 million bushels which is below what we need on a per week basis……….corn slightly better than we need and slightly better than expected at 30.2 million bushels……….soybeans strong at 66.9 million bushels…..but that was below trade estimates; while above what we need on a per week basis. The thing to keep in mind on exports is their seasonal pace. Right now are elevators busy shipping wheat to the export markets? No the main focus has been the fall crops so for wheat to lag right now shouldn’t be a big surprise. For beans to be strong and well above what we need on a per week basis also shouldn’t be a surprise. The biggest thing to look for on exports is the trend and the comparison to the same time periods in previous years.
This afternoon we had a crop progress report which basically showed that harvest is close to being done in most areas. Here is CHS Hedging recap.
Technically we did have a strong close on soybeans today so perhaps that can lead to more follow up buying. But we do need to keep in mind the fact that we already have the funds long plenty of soybeans; so now might also look like a spot for some profit taking. January soybeans had their highest close since late September. While wheat and corn are both within 10-15 cents of contract lows. Really a tale of two stories on the charts. Fundamentally you also have different stories.
You have a bean story that has super strong demand along with a balance sheet projection that is on the tight side of things. While you have a corn balance sheet that has 1 ½ -3 times the carryout that it has had the past couple years. The longer term thing that is a little scary is what happens if we raise a trend line or better corn crop in 2014? Can we afford to let 3-8 million acres of corn swing over to soybeans? I think the answer is yes if we can actually grow a big crop. 82 million acres at 170 bushel is a 13.940 billion bushel crop. Our expected usage for this present marketing year is just under 13 billion bushels and with the ethanol blend wall one can paint a picture where any production next year over 13-13.5 billion bushels could add to our carryout.
Then if we take it one step forward and add 5 million acres of soybeans at 40 bu an acre we are adding 200 million bushels. Can we add that straight to demand? If not we could see a soybean carryout that is near double what it presently is.
I am not trying to say that things in the grains will be dark for a long time or that this is how things with shake out. But rather I am trying to point out the fact that if the dominos line up correctly we might not like things for some time to come.
Domino number one was this year’s corn crop. Some of the domino’s lining up that we need to watch to see how they land are South America crop (right now projected as big), then how fast demand bounces back, and followed up by acres for next year’s grains. How many acres can corn afford to lose if we have a 2 billion bushel carryout heading into the game? What about if we hit big yields?
Hopefully some of the bearish talk like the above and what some advisors are pointing out means we are near a bottom. Things always look the darkest at the bottom. But one thing that almost is for certain is marketing grains going forward isn’t going to be easy. Thick nerves will be needed as should good risk management.
Elsewhere in the markets birdseed business remains slow. I don’t seem to have many end users looking for product right now. But there is a system that could help bring some moisture to the east coast. Hopefully it is cold enough that it is some snow that leads to birdseed demand.
Basis remains very choppy and volatile for the grains. It is all about timing and quality. If you get lucky to hit both at the right time you can see decent bids; otherwise it is liking giving the stuff away and this seems to be for nearly all the grains. As example right now it makes more sense for me to cancel rail car orders in Pierre for corn and truck the corn to my Onida facility and put it on a shuttle. Typically we don’t bid any different prices for the two locations on corn; but right now the spread is just huge between ethanol numbers and export numbers. Also as I have mentioned we have big spreads in quality and timing of grains like winter wheat, spring wheat, milo, and sunflowers. Timing is everything.
We are closed Thursday and Friday but there are grain markets on Friday. If anyone is looking to do any marketing I will be on my cell which is 605-295-3100.
Also with the Holiday look for basis and the board to be rather choppy. We really need some good new news to get the funds interested in owning corn and wheat; lately they just seem to want to sell the grains and buy the stock market. We need something to cause a spark in the grain markets and help money flow into our markets on the long side. Keep in mind that money flow is the trump card; we can have good prices when we have money flowing the right direction no matter what our supply/demand fundamental situation is like. Money flow and the funds are the trump card that we need to have in the deck once in a while.
Mark your calendars!!
Winter grain marketing workshop on January 20th in Pierre at the Ramkota at 10:00 a.m
Speaker - DTN Senior Analyst Darrin Newsom
Speaker - CHS Hedging Research Manager Tim Emslie
Please give us a call if there is anything we can do for you.