Thursday, November 14, 2013
Grain Market Comments 11-14-2013
Grain markets are called mixed this morning after a mixed overnight session.
In the overnight session we had corn unchanged, KC wheat up 6, MPLS wheat up 4, CBOT wheat up 7, and soybeans down 5. At 8:10 outside markets have the US dollar near unchanged, crude down 70 cents, gold up 15 bucks an ounce, and the DOW futures near unchanged.
Markets have been very quiet as of late; other then last week’s USDA report. Most of the news this week is a day late with the Veterans day holiday. This morning we will get ethanol data but we won’t see export sales until Friday.
Talk continues to be floating around that the EPA may lower the ethanol mandate; but keep in mind that right now ethanol margins are strong and our low stocks with high production point to the fact that economically ethanol works right now and that is just as important as a mandate; maybe even more.
NOPA crush will be out on Friday.
From CHS Hedging . “Japan has bought 60,346 tons of U.S. wheat. This is the first regular tender in four weeks that Japan has bought milling wheat. They also bought 45,594 tons of Canadian wheat and 23,505 tons of Australian wheat.”
One of the biggest things I am seeing develop for many of the grains is basis and logistic issues causing big basis swings. First off rail freight costs have been extremely volatile as of late. As harvest finishes up the demand for rail cars and trucks softens and thus the costs becomes less. But bigger then that seems to be quality issues and local issues that have spill over effects. This is happening for more than one grain.
One example is corn over the last month plenty of corn from Central South Dakota has went over to Iowa ethanol plants on rail and some of the typical ethanol plants that pull corn out of are area are absent and show little interest. Corn going to the corn capital during harvest? A couple reasons first off some areas have pockets where they just didn’t get all the acres in so there draw area will expand. Plus you have the issue with moisture; as many ethanol plants only take 17 or less moisture corn. So corn has to get dried down.
Another example is winter wheat and quality. South Dakota didn’t have much of winter wheat crop this year and some of the areas that did have winter wheat don’t have milling quality. So many mills have replaced winter wheat in the grind if they can. The biggest thing that we see is the difference in bids between quality that is milling quality and stuff that has to go to the export market or go to a big house to get blended.
Last example is the sunflower market. You have birdseed business that is slower then slow and buyers that don’t have interest. While you have confection buyers or buyers that buy sunflowers for human consumption super hungry for big seeds. The spread between the two bids is just huge and it all comes down to logistics. Sunflowers going to the birdseed that have to move today are cheap. But sunflowers going to the birdseed for say later in the year are reasonably priced. Why because buyers that can arbitrage know that the spread between crush sunflowers – dehull sunflowers – birdseed sunflowers has to be reasonable. So how this shakes out later is anyone’s guess but one of a couple things needs to happen. Birdseed sunflowers need to come up (which probably is how things shake out just not until things get put away) or the other markets(dehull – crush)come down in value.
Bottom line if one is looking to move sunflowers and you can put in the bin nearby you can see some decent offers getting hit.
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