Thursday, December 5, 2013
Grain markets closed weaker today in choppy trade.
Corn was down 3 cents, KC wheat was 9 lower, MPLS wheat was 8 lower, CBOT wheat was a dime lower, Jan soybeans were down 2, the US Dollar off 400 ticks or so with the March futures at 80.440, crude is at 97.50, gold was off 22 bucks, and the DOW closed down 68 points.
Follow up selling for wheat today from the announcements the past few days that include bigger crops in Australia and Canada. Plus no nearby issues for the wheat crop in the U.S. It might not pencil out very good for producers trying to make a profit but the market doesn’t seem to care about that.
We did have export sales out this a.m. and considering it was a holiday week last week they were not super bad but overall they were on the disappointing side and didn’t help the bulls out at all today.
We did have corn and beans manage to get back to unchanged a couple times during the session but when the markets closed they both ended in the red.
Technically you can find both some positives and negatives when looking at the charts. You have some of the wheat charts back down towards some major support that hopefully holds. But if it doesn’t it could really open up further technical downside. You have soybean charts that have moved a little range bound the past few days and corn charts that had a very positive close early in the week. But today’s price action for corn opens up the question as to was today a small breather/correction before moving higher or have the last few days been a breather before resuming the selling pressure????
Only time will tell for sure and it probably depends on what type of info the USDA puts out next week in their report.
Speaking of the report, CHS Hedging did release their pre-report ideas for next week’s USDA report. Tim Emslie who is CHS Hedging Research Manager wrote up the comments for the pre-report ideas; he along with DTN Senior Analyst Darrin Newsom are our two speakers for the marketing meeting we are sponsoring this winter. It is in Pierre at the Ramkota at 10 a.m. on January 20th.
Here is the link to the info. https://www.chshedging.com/UserFiles/Documents/2013/Pre%20USDA%20Report%20Comments/120513.pdf
You will see that they are on the bandwagon of smaller carryout numbers do to strong demand. But how much of that demand is because of the season (harvest)? Also one needs to question what a couple things are doing to demand. First off what is the producer holding pattern doing to demand? Yes there is demand for products at present price levels; but if the American Farmer doesn’t sell do the buyers find a replacement of some sort?
How about the horrible freight/slow moving trains? As example I feel if mother nature would have cooperated a little more and if trains would have showed up a little faster that our elevators could have handled much more at harvest. But things didn’t come together………….will the demand still be there later when the product wants to move is the question?
I have seen a few more orders pick up for the birdseed industry; but overall things are still slow. We really need a little more demand.
Wheat basis, corn basis, and cash values in general seem to be all over the board. I do like the idea of having some offers out there because of how volatile freight and basis is. It helps us know what type of numbers we should be offering when we get someone looking to buy and that is worth a lot for end users. To get coverage without having to call 100’s.
Please give us a call if there is anything we can do for you.
Grain markets are called weaker this morning behind a weaker overnight session.
When the overnight session ended corn was down 5 cents, KC wheat was down 6 cents, MPLS wheat was down 3, CBOT wheat was off 8, and soybeans are off 7 cents. At 8:00 outside markets have the US Dollar about unchanged, crude up 25 cents a barrel, gold down 23 bucks an ounce, and the equity futures pointing towards a lower start of about 30 points on the DOW.
Rather low volume in the night session last night as most of the grains struggled. Wheat is seeing some follow up weakness from yesterday’s Stat’s Canada report that had a much bigger than expected Canadian wheat crop. The buying on corn the past couple of days has looked to mainly be short covering. We put in new contract lows on Monday and then reversed to close higher and that lead to a little short covering; which it should. Think of it this way; on your grain that you are marketing do you take a little off the table when we make new highs that we have had for several years? Many do and the guys that are short should take a little profit when they make new lows.
Technically can they take enough profit to help turn the charts? Today’s weakness so far isn’t the best; but we are not that far away from where many of the recent shorts positions where took on; so yes if we can mustard a little more of a rally we could easily see more short covering and if that happens with some fundamental news we could see charts turn bullish. But as of right now until we can mustard just a little more of a rally and turn those charts rewarding the rallies seems to be the play.
Longer term I think the question many producers need to ask them self is what happens if the markets don’t turn around. What is one’s game play should our markets continue to drift lower? Eventually things turn and we get higher markets but from what point and how long does it take? Does it take us months? Years?
I think having a game plan on a worst case scenario for marketing ones grain is good business. If the answer is instead of selling I will just build bins; how are you going to pay for the bins? How many years worth of grain are you willing to sit on? Will the bank go with a plan like that?
As for more news this morning we did have export sales out and they were a little disappointing; but keep in mind last week was a Holiday week.
Wheat came in below expectations and below what we need on a per week basis at 8.4 million bushels. Corn was off versus where it had been at; but in line with most of the estimates and still double what we need on a per week basis. It came in at 23.4 million bushels. Soybeans came in at 29.6 million bushels; in line with most estimates and nearly 10 times what we need on a per week basis; but also a big decline from the recent weeks. Soybean oil was only about ¼ of what it needs to be on a per week basis.
Other headlines I am seeing; from CHS Hedging
- The International Grains Council(IGC) reports an estimate of 2013 China corn production at 217.5mmt with imports of 4.5-5.0mmt. USDA is at 211mmt and imports at 7mmt.
- China’s quarantine authority says it has rejected 5 “lots” of US corn. More rejections are possible.
- Bangladesh intends to import 850,000 tonnes this year vs 350,000 last year.
- South Korea and Australia reach agreement to eliminate 300% import tariffs on key ag products, wheat included.
- Deliveries of 649 contracts in Chicago, 13 KC.
- Some Brazil farmers expected to switch up to 3 million acres of second crop corn to soybeans.
- Rumors of cancellations and new business, will we see confirmation of either in daily announcements?
We are now offering free delayed price on winter wheat until July of 2014.
The one very challenging thing lately has been basis. For all of the grains it is really about quality and timing. As example the past few days I have had some spring wheat on the spot floor. The opening bid on it and where it has traded at has been 40-60 cents different. We have freight costs for shuttles moving all over the board. Yesterday it looked like some freight cost as much as 80 cents a bushel on top of the normal tariff charges. Bottom line having offers in place makes sense; but offers can be way too cheap or way too expensive in a hurry with all of the factors driving basis.
The one thing we have to watch out for on all the markets in general is the double up effect that poor rail performance can have. What I mean by that is an end user will buy say a spring wheat train on the spot floor. Because what he has bought isn’t coming in; so he owns spring wheat from elevator A who isn’t getting cars; while elevator B gets cars and sells the wheat. Then before you know it elevator A gets their cars and the mill has two times the wheat coming at them versus what they really need or want. The slow freight and unknown of when elevators are getting cars as well as when the cars will get to destination adds greatly to price volatility.
Please give us a call if there is anything we can do for you.
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