Wednesday, January 22, 2014

Grain Market Comments 1-22-14

Grain markets are called mixed this morning after a mixed overnight session.  When the overnight session ended corn was up 2 cents, KC wheat was up 2-3 cents, MPLS wheat was up 3, CBOT wheat was unchanged, and soybeans ended down 1-4 cents.  At 8:15 outside markets have the DOW futures pointing towards a softer start of about 20 points, crude is up 80 cents, the US dollar is about unchanged, and gold is about unchanged.

First off I want to thank all of you that attend our grain marketing meeting on Monday.  We had around 120 at the meeting; so thank you to all that intended.  I also want to thank our speakers Darin Newsom from DTN and Tim Emslie from CHS Hedging.  For those of you that missed it make sure to attend next year; for those of you that were able to make it any feedback would be appreciated.

Yesterday we saw beans get hammered; on moisture in South America, wetter cooler forecasts and some rumblings of beans getting switched from the US to Brazil.  The funds long plenty didn’t help.

Export shipments yesterday where strong on beans; but not over market expectations.  Corn and wheat where near what they need to be on a per week basis.

We won’t have ethanol numbers today with the holiday.  Those will be out tomorrow.  We will have our MWC Marketing Round Table at 2:30 in Onida today.

Wheat basis remains very volatile; I like having offers out for high pro; but it sucks when the offers are so dependent on the rail road. 

In the big picture one of the things I got out of our meeting on Monday was the fact that long term things look better then maybe they have been the past few decades for the ag sector.  Over the next few years and this coming year in particular prices are really dependent on corn yield.  If we happen to hit a 160-180 bu national corn yield we have so much downside risk that it is scary.  2.00 cash corn???? 2.50???  If we grow 14-15 billion bushels next year and don’t find extra demand yes that low of a price is a possibility.  On the other side if we only grow 140 bu crop on less acres we potentially see a carryout next year that is under a billion bushels again.  We could easily have to find a way to curb demand.  5.00 corn?? 6.00 corn?  7.00???? 8.00????

Bottom line is the past few years corn yield has ranged from 164.7 to 123.4; If demand bounces back as much as they are thinking; all time record demand this year of 13.150; a step back words in yields will be very high prices in a hurry; but big yields in the US open so much downside risk that many could easily go broke.

So as guys are doing marketing plans we need to realize that we could easily see 3.00 type corn or 6.00 type corn.  160 or 140 is nearly a 2 billion bushel swing with the type of acres we now plant.

Below is more market info.  This is from CHS Hedging’s Morning Highlights.

Morning Highlights

By Ami L Heesch

  • Expectations are that there will be more stimulus cuts on improving global economy, which is said to be led by the US. The next Fed meeting is scheduled for next week.
  • The gold market and the US$ are weaker this morning.
  • Energy markets are trading mostly higher this morning.
  • Decent rains are forecast for Argentina again late next week. 
  • The corn market traded higher overnight in thin volume.                
  • Weather conditions are improving in SA this week and focus will be on how well crops progress.
  • The H//K spread narrowed in to a 6 ¾ cent carry overnight.  This compares to 7 ¼ yesterday.
Outlook: 1-2 better, technical bounce, market continues to be range bound     
  • The soybean market traded both sides overnight after yesterday’s beating.  Products are mixed this morning with soymeal trading higher and soyoil on the defensive.
  • Palm oil closed 13 lower at 2574 ringgit on profit taking after 4 days of higher prices.
  • Chinese bean prices were lower overnight. 
  • SA weather conditions remain favorable on decent rain showers this week.
Outlook: Weaker trade this morning after trading slightly higher overnight
  • The wheat market traded higher overnight on what was thought to be commercial buying. This week’s winter storm is not expected to create much damage to the winter wheat.
  • Algeria bought 50,000 tonnes of optional origin wheat from $285-$288 per tonne C&F for April shipment. France was thought to be one of the suppliers.
  • Chinese wheat buyers are said to be looking for as much as 200,000 tonnes of optional origin wheat for April.

Outlook: 1-3 better on improving demand and cold weather across US Plains area

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