Closing Grain Market Comments 1-2-2014

First off I would like to invite you to our FREE Grain marketing seminar. January 20, 2014 -10 a.m. CST at the Ramkota in Pierre. Darrin Newsom, DTN Senior Analyst and Tim Emslie, Research Manager from CHS Hedging will be speaking on the grain markets. A Free Lunch will be served.

Today markets started the new year off in the red.

When the markets closed we had corn down 1 ½ cents a bushel, KC wheat down 9 cents, MPLS wheat down a dime, CBOT wheat down 8 cents, soybeans down 18, the DOW off 135 points, crude down nearly 3 bucks, gold up 22 bucks an ounce, and the US Dollar firmer by 500 some points at 80.563 on the US Dollar Cash Index.

Some rain in Argentina help put some pressure on the soybean market.  While wheat didn’t manage any follow up from the strength to close out the year.  Instead wheat in the first trading day of the year has already took out all of last year’s lows.  Corn tried to firm up but it looked like the selling pressure from wheat and beans was too much. 

Charts looking rather ugly; wheat new lows, corn double bottom; but also a new contract low close.   Catch a falling knife for the grain charts right now.  It does sound like we should have index fund reallocation that should include buying of quiet a bit of corn.

Here is a yearly price change report for some of the commodities.

	31-Dec-12	29-Nov-13	31-Dec-13	Monthly	Year-to-date
				% Change	% Change
nat gas	3.351	3.954	4.23	7.0%	26.2%
cocoa	2236	2791	2709	-2.9%	21.2%
oj	117.35	139.7	136.45	-2.3%	16.3%
cotton	75.14	78.14	84.64	8.3%	12.6%
crude oil	91.82	92.72	98.42	6.1%	7.2%
euro	132.08	135.87	137.88	1.5%	4.4%
rice	14.860	15.960	15.510	-2.8%	4.4%
soymeal	420.6	456.6	437.7	-4.1%	4.1%
cattle	129.9	133.47	134.62	0.9%	3.6%
palladium	703.35	718	718.3	0.0%	2.1%
heating oil	3.0451	3.0478	3.0772	1.0%	1.1%
dollar	0.79885	0.80657	0.80189	-0.6%	0.4%
hogs	85.72	85.67	85.42	-0.3%	-0.3%
rbob	2.812	2.6841	2.7858	3.8%	-0.9%
lumber	373.9	364.8	360.1	-1.3%	-3.7%
copper	3.6525	3.2305	3.3965	5.1%	-7.0%
soybeans	1418 3/4	1336 1/2	1312 1/2	-1.8%	-7.5%
platinum	1538.7	1368.8	1371.1	0.2%	-10.9%
sugar	1951	1715	1641	-4.3%	-15.9%
soyoil	49.16	40.22	38.82	-3.5%	-21.0%
wheat	778	655	605 1/4	-7.6%	-22.2%
kc wheat	831	713 1/4	640 1/2	-10.2%	-22.9%
coffee	143.8	110.25	110.7	0.4%	-23.0%
mn wheat	865 1/2	686 3/4	635 1/4	-7.5%	-26.6%
gold	1675.8	1250.6	1202.3	-3.9%	-28.3%
silver	30.227	19.965	19.37	-3.0%	-35.9%
corn	698 1/4	415 1/4	422	1.6%	-39.6%
31/December/12 - 31/December/13 % Change in China:
Soybeans:	Down 6.5%.
Soymeal:	Up 1.6%.
Soyoil:	Down 21%.
Corn:	Down 3.8%.
Cotton:	Up 1.5%.

You will notice corn is at the bottom as far as year over year change.  Down nearly 40% in the US versus only down 3.8% in China?  What we really need is for the “money” to look at the investments like corn and wheat; and think enough is enough.  Tell themselves “Let’s take some money out of the winners like the stock market and let’ put some money into the underperforming investments like corn and wheat.”  But we need some spark or catalyst to get this started.  Right now we simply don’t have a bullish story out there for the grains.

The thing to keep in mind about markets is their ability to really over do moves.  That means a couple things; first off we probably have more downside risk even at these price levels then we would like to admit.  Secondly when the tide does turn we could really bounce much more then what one things might be possible.  It is just the nature of the game we play today.  Over doing price moves doesn’t mean that one can’t practice good risk management.  Just because eventually we will get a bounce doesn’t tell us when. 

It is kind of like spring wheat and protein.  The past several years many have held high protein wheat despite rather good prices.   Now we are finally starting to see interest in high protein but enough to offset the decrease in overall net price?  No not really.

Speaking of spring wheat we do have buyers looking; basis has been all over the board.  Moving 50 cents to more than a dollar in just a few days.  The firmness is coming from the rail performance.  The board going up is helping basis firm for wheat too; but it is more of a logistic issue.  Some spot wheat can trade 50 cents to maybe a buck or more then posted bids; while some of the deferred to arrive bids remain thin.  Buyers have passed at basis levels 50 cents less then what they have paid for spot stuff.  The other problem for an elevator like ours is knowing when the cars will show.  Right now I have to ask myself can I sell more January or even February wheat?  If I sell it at a 50 cents discount or more to the spot market and then the railroad performance continues to struggle what could happen if I am late on shipment?  From what I have heard some are late on shipment and having to pay 50 cents to a buck or more.  So it makes merchandising very difficult.  The only thing I can recommend is for producers to have basis offers out on wheat. 

In an ideal world one locks in a basis of say option the board to maybe a buck over the board or better?  And then the because of the strong basis eventually maybe the board can rally?  If one asks me how can they get 7.00, 7.50, 8.00, or 8.50 for their 14 to 15 pro spring wheat I would say the path would be via getting basis locked in at a good level and then hope for a bounce on the board.  If the board does rally look for plenty of wheat to be sold.  If the railroads catch up at the same time look for basis to possible nosedive.  And as mentioned above the only real way to play this market is to have offers out; because it is so volatile and has so many factors that will determine a price on a given day.  Mainly shipment when and quality. 

I haven’t seen a rail situation like this since I have been merchandising!  Many think it will continue for several months.  So I do urge those that need to move grain before wheat harvest to have a plan.  As it sits now it looks like we have a harvest before a wheat harvest.  Just based on the likely struggles we have over the next several months. 

On the rail road line; this afternoon I did see an announcement that part of our rail line; part of the old DME line has been sold.  The headline reads CP to sell west end of its DME line to Genesse & Wyoming.

No idea how that will effect things like rail rates and freight spreads; but the new owners seem very committed to both safety and service.  So we do look forward to working with them.

Please give us a call if there is anything we can do for you.