The grain markets are called mixed to easier this morning
after a mixed overnight session. When
the overnight session ended we had corn unchanged, KC wheat off a penny, MPLS
wheat off a penny, CBOT wheat off 2 cents, and soybeans down 4 cents. At 8:10 outside markets have the US dollar
near unchanged with the cash index at 80.727, crude near unchanged at 93.57,
gold down 5 bucks an ounce at 1232, and DOW mini futures pointing towards a
positive 60-70 point start for the DOW.
Biggest thing in our markets is the hurry up and wait for
Friday’s USDA report. The January report
has had a history of setting market direction for sometimes months. It has a history of being a market mover and
many times limit moves. The one thing
that I would say is that options; both calls and puts are pretty cheap heading
into a historically big market moving report.
As example for corn you can buy both January calls and puts that are
about 30 cents away from the market for 2-3 cents. If the USDA gives us a report that moves us
limit those are in the money and return 3-5 times of what one spent. If we are limit for a couple days like last
March we could see a 2-3 cents investment turn into 50 cents or more. Personally if I had a lot of corn in the bin I
think I would sleep better if I had some under the money protection for a few
pennies. I am always worried about what
the USDA has to say.
The good news is that it should be hard to see a report that
is super negative with where prices levels are at; as the market is already
short and many have priced in a negative report with bigger production. I emphasis “should be” because with the USDA
anything is possible. How would the
market react if we have a corn carryout north of 2 billion bushels? What if the USDA says corn production is 14.5
billion?
We will be having our marketing meeting this week in Onida
on Wednesday at 2:30; at that time we will go over some possible strategies
heading into the report. But with
implied volatility as low as it is and options as cheap as they are the right
move might simply be to buy some extra insurance to get one comfortable heading
into Friday’s report.
Here are some estimates for Friday’s report
Wheat
Corn Soybeans
Average
trade estimate
0.557 1.861 0.149
Highest
trade estimate
0.586 2.054 0.180
Lowest
trade estimate
0.460 1.654 0.118
USDA
December 0.575
1.792 0.150
Source
Corn Avg. Harv.
Soybean Avg. Harv.
Prod. Yield Acres
Prod. Yield Acres
Average
trade estimate 14.066 161.2
87.174 3.279
43.3 75.749
Highest
trade estimate 14.255 163.3
87.612 3.330
44.0 76.376
Lowest
trade estimate 13.897
159.8 86.927 3.240
42.7 75.500
USDA
November
13.989 160.4 87.232
3.258 43.0 75.688
USDA
2012 final
10.780 123.4 87.375
3.034 39.8 76.164
The other big thing I continue to see and deal with on a
daily basis is railroad freight and how it is effecting basis. We have seen basis all over the board and at
times we are seeing some good numbers trade for high protein spring wheat. Make sure to have offers out.
Here is more morning market information. This is from CHS Hedging Morning Highlights.
Morning Highlights
By Kevin Stockard
Highlights
- The Senate
voted to confirm Janet Yellen as the Fed Chair on Monday, the 15th chair
in the Fed's history. She is the first female Fed Chair and helped develop
the Fed's current communication policy.
- The USDA
January Supply and Demand report comes out at 11:00 AM CT on Friday,
January 10, 2014, as well as Quarterly Stocks and Planted Acreage.
- Outside
markets as of 7:00 AM: crude oil is up 0.56, USD unchanged, and S&P
futures are up 6.00
Corn
- Corn
export inspections came in below expectations at 19.3 million bushels vs.
28.7 million last week.
- The
Commitments of Traders report yesterday afternoon showed funds net short
163.8 contracts of corn vs. 156.9 the week prior
- Argentina
is hot and dry, but rains are still in the forecast for later in the week.
The market does not seem as concerned about South American weather as it
shifts its focus to Friday's USDA reports.
Outlook: March corn couldn't quite take out yesterday's high
overnight, and will likely be choppy and leaning lower as markets wait to see
the effects of index re-balancing.
Oilseeds:
- China's
Dalian soybeans were up 19 in overnight trade, while soymeal was down 4.5
and soyoil was down 78. There were deliveries of 245 bean oil contracts.
- The
Commitments of Traders report yesterday showed funds net long 116.5
contracts of soybeans vs. 135.5 the week prior.
- Brazilian
growing regions saw somewhat disappointing rains of less than 0.25"
and look to receive below average rainfall over the next 10 days.
Outlook: March beans look set to test nearby support again after
taking out yesterday's low overnight.
Wheat
- Argentina's
wheat harvest, which is now about 75% complete, has been better than
expected and there is talk that they will begin exporting as soon as Jan
10. This would cut into potential U.S. HRW business to Brazil.
- India's
PEC is set to offer 160 MT of wheat in a Wednesday tender, the first of
three offers which will total 630 MT.
- Temperatures
remain very cold across the wheat belt. There is sufficient snow cover for
most areas, but parts of eastern Indiana, north central Kentucky, and
southern Ohio lack snow cover and could be in danger of winterkill.
- The
Commitments of Traders report yesterday showed funds net short 103.8
contracts of Chicago wheat vs. 102.4 the week prior, and net short 6.3
contracts of KC wheat vs. 4.9 the week prior.
Outlook: Wheat had a disappointing close yesterday and took out
the low overnight. Strong export demand is being outweighed by huge
competition.
Lastly 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.
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