Tuesday, February 25, 2014

Opening Grain Market Comments 2-25-14

Grain markets are called mixed this morning after a choppy overnight session that saw corn unchanged to up ½ cent a bushel, KC wheat unchanged (basis May), MPLS wheat up ¼ of a cent, CBOT wheat unchanged, and soybean down ½ to 2 ½ cents a bushel.  At 8:00 outside markets have DOW futures pointing towards a softer start of about 10 points, crude is down 1.05 a barrel with the April contract at $101.69, the US dollar index is off 115 points with the cash index at 80.079, and gold is down a buck an ounce at 1337.00.

Fairly quiet on the news front today.  The past few days the big headlines have been the USDA outlook conference last week; that left a major negative headline for the funds to trade; even though it probably wasn’t realistic. 

Here is just one of the stories that the conference lead to getting printed.  http://www.agrimoney.com/news/us-corn-stocks-to-soar-43percent-to-10-year-high---usda--6782.html  As you can see the headline of US  corn stocks to soar 43 % to a 10-year high isn’t something to get money flow buying corn.  The reality is that what type of carryout we will have for 2014/15 is up to many factors including acres, yield, and demand.  On the yield side of things if you take the past 4-5 years you will notice a huge swing in yields.   Bottom line is yields that the USDA used last week probably do leave us with a big carryout; but it is probably a little early in the game to assume that we can hit that type of yield.  The reality should be that yields of 160-170 or higher take our carryout very big and thus lower prices, but in my opinion it is a coin flip if we are above or below 160; and if we happen to come in closer to a 150 yield or less the carryout gets tight in a hurry while the prices could bounce in a hurry as well.

The other thing that has been talked about the last few days has been the lack of bean cancellations.  Every week we need to cancel some bean exports not to go over what the USDA has us pegged at; yet every week we have continued to sell beans.  Yesterday we had shipments in line with estimates for all three of the grains.

Yesterday we also had March soybean contract close at its highest level since September of 2012.  Very strong technical market; with a strong looking chart.  We are overdone and we are seeing sell signals from advisors but right now the chart looks like a run away train.

We also seen wheat and corn maybe develop some trading ranges yesterday with the strong up tick from the lows.  If we can hold the lows charts look real positive; and would look even more positive if we take out last week’s highs.

Railroads continue to struggle and that is making basis and cash price bids rather choppy.  I do like having offers out on basis for wheat and flat price items like sunflowers; but whether offers get booked or not probably depends largely on the rail road and it is kind of a catch 22.  Because if we get a lot of cars then offers probably trade high; but if we get cars and everyone gets cars then the mills might be double bought and so may end users like birdseed plants. 

Basically nearly every mill and birdseed plant has had to order 2-3 times (maybe more) then what they actually need.  Same thing with us and rail cars; because the railroad is so far behind it has lead to ordering more cars then perhaps are actually needed.  Because us as an elevator or an end user such as a mill can’t afford cars not to show up.  The mills and birdseed plants can’t afford to have to shut down because they don’t have product to process.  While us as an elevator don’t want to make every producer in the world mad if we don’t have any cars.  Things will eventually turn around but right now all the hype and bad performance leads to more pressure put on the rail lines.

I have had many asked why rail performance is so bad.  First off the demand for oil in ND seems to have switched some focus from grain to oil and that has created more rail demand for grain on other lines.  Next you have had a cold and snow filled winter.  Then you also have the fact that we have a 14 billion bushel corn crop; versus 10-12 the past couple years; 2 billion bushels more is about 500,000 more rail cars.  So maybe South America isn’t the only one that has outgrown their infrastructure????

I just seen this pop up on screen for morning export announcements. 

Export Sale, Cancellation     02/25 08:11

   USDA: Sale of Soybeans to China, Cancellation of SRW Wheat to Egypt  

   Private exporters reported to the U.S. Department of Agriculture export
sales of soybeans for delivery to China during the 2013-14 marketing year and a
cancellation of a soft red winter wheat sale to Egypt during the 2013-14
marketing year.

   WASHINGTON (Dow Jones) -- Private exporters reported to the U.S. Department
of Agriculture the following sales activity:

   - Export sales of 568,000 metric tons of soybeans for delivery to China
during the 2013-14 marketing year.

   - Cancellation of 110,000 metric tons of soft red winter wheat sale to Egypt
during the 2013-14 marketing year.

   The marketing year for soybeans began Sept. 1.

   The marketing year for wheat began June 1.

   The USDA issues both daily and weekly export sales to the public. Exporters
are required to report to the USDA any export sales activity of 100,000 metric
tons or more of one commodity made in one day or quantities totaling 200,000
tons or more in any reporting period to one destination, by 3:00 p.m. Eastern
time on the next business day. Export sales of less than these quantities must
be reported to the USDA on a weekly basis.

Here is more market info; from CHS Hedging; their morning highlights

Morning Highlights

By Ryan Stone

  • As of 7:00 am CT, the Dollar Index is down .075 at 80.150, crude oil is down $1.32 at $101.50, gold is down $5.00 at $1,333.30, and European stocks are lower.
  • Even with equity futures trading lower this morning, outside market strength is impressive with the S&P reaching an all-time high yesterday.
  • Reminder: First notice day for March grain and oilseed futures is Friday, February 28th.

  • The nearby corn contract continues to hold support at $4.50.
  • Yesterday, another U.S. exporter announced that it will not handle MIR-162 corn. The list of exporters willing to handle this type of GMO is shrinking by the day.
  • As corn export sales continue their impressive pace, river logistics seem to be deteriorating. A return of the “polar vortex” has renewed concerns of ice restricting barge traffic, and an oil spill on the lower Mississippi has export terminals concerned that corn origination for export may slow down significantly.  
Outlook: Mostly unchanged on supportive technicals and limited new fundamental news.

  • Logistics in South America continue to garner attention after the recent rainfall. Reports of combines and trucks getting stuck in the mud are becoming increasingly common.
  • Mato Grosso, Brazil’s most intense soybean growing region, is being described as 50% harvested.
  • The U.S. continues to export large quantities of soybeans with yesterday’s export inspections reporting another 46.7 million bushels shipped.
  • Domestic soybean processors continue to roll their spot basis from SH to SK, many of which have dropped their basis in the process.
Outlook: 3 to 5 cents weaker as traders take profits after the recent rally.

  • The return of cold weather has once again sparked concerns of winter kill.
  • The Ukrainian parliament voted in favor of sending former president Viktor Yanukovich and other high ranking government officials to trial in the International Criminal Court. This continued news of a resolution to the recent Ukrainian crisis has calmed the concerns of wheat traders.
  • A group of millers from Taiwan has agreed to purchase 83 tmt of U.S. wheat.
Outlook: Mostly unchanged with continued export demand supporting the market. 

Grain Merchandiser
Midwest Cooperatives
605-295-3100 (cell)
605-258-2166 (fax)

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