Tuesday, April 15, 2014

Grain Market Comments 4-15-14

Grain markets are called mixed this a.m. after a mixed overnight session; that saw corn down 3 ¼ on old crop, new crop DEC corn was off 1 ¾, KC wheat was down 2 ½, MPLS wheat was down ¾ of a penny, CBOT wheat was down ½ of a cent, old crop beans up 8 ¼, and new crop beans down ¾ of a cent.  At 7:50 outside markets have the US dollar up slightly with the cash index at 78.838, the DOW Mini futures pointing towards a positive start of about 20 points, crude down around a buck at 103.04 on the May crude oil contract, and gold down 35 bucks an ounce on the May Gold Contract at 1291.90.

Three big things driving the market lately, weather being the biggest.  But demand and the Russia Ukraine situation also grabbing some headlines.

As for weather; mother nature remains very challenging in efforts of producing crops.  The western winter wheat areas remain very dry and now they have also seen some cold weather hit.  Low twenties in some areas as far south as parts of Texas have been reported.  Big debate as to what damage if any has and will happen because of the stage of the crop; many report it is 2-3 weeks behind.  But this did help the wheat market bounce yesterday.

Here is CHS Hedging Crop Progress report link. 

The Russia – Ukraine situation appears to have escalated a little bit and anytime that happens our markets can add some premium in a hurry.  Same thing here will it lead to any actual increase in business for the US?  Still unknown.

Lastly is the debate for demand and supply.  We had a friendly USDA report last week; but headlines lately are questioning if the demand that is now penciled in can actually happen.  Another big unknown.

Bottom line is our markets have added some fear premium because of the unknowns.   Could this unknowns all end up positive and push our prices much higher.  Without a doubt; but they also could also end up just being fear’s that don’t turn out. 

The rail situation remains a big struggle.   My elevators continue to be very far behind; it is so challenging that last week our general manager testified before the STB in Washington DC.  Who knows how this will shake out; some indications are that these struggles could continue for some time to come?  But that is really an unknown; too many factors to know as everyone is working on improvements and maybe a little help in the form of warmer weather can go a long way to helping the railroads catch up?

The one thing that the rail movement does do is effect basis; as trading grain is not easy to do when you don’t know for sure when you can ship it.  When producers ask when can I get a grain in it is hard for us to give an honest answer because we just don’t know how the rail will shake out.  Same thing when we try to sell a grain; it is hard to determine when we can honestly tell a buyer he will receive his product.  This makes things challenging and volatile. 

My only recommendation as to marketing is to have offers out; so if we get fortunate enough to get some cars that maybe we can hit some spot sales and pass on some good values. 

Longer term I have to wonder if the rail situation will add to our carryout?  I know of some ethanol plants that haven’t been able to run at full speed because they couldn’t get empty ethanol tankers back fast enough.  What about export business?  Was there some that we missed because we didn’t get the product out fast enough or when the demand was there?  I know of a couple birdseed plants that have had to pause production because they couldn’t get the product in.  Will any of this lead to a bigger carryout in any of the different grains????

Below is some more market info from CHS Hedging’s morning highlights.

Morning Highlights

By Christopher Steinhoff

  • Ukraine begins a military backed “anti – terrorist” operation in its eastern region where pro-Russian militants have seized buildings.
  • As of 7:00am CDT: Gold is down $22.00, crude oil is down 80 cents, US$ index is 0.087 firmer. Hang Seng was down 1.6% and Nikkei is up .6%.
  • USDA reported corn planting at 3% complete vs 6% on average but ahead of last year’s 2%. LA, MS, GA and AR are the leading states, followed by TX, NC and KS. ILL and NE are 1% planted.
  • Weather is to remain cold for a few days before a return to more seasonable temperatures.
  • Russia declares Ukraine on the brink of civil war. Political uncertainty and economic sanctions could lead to a disruption in exports from Ukraine and/or Russia.
  • CK/CN carry trades in 6 x 6 ¼ overnight range. 
Outlook: trading 2 to 4 lower
  • CONAB’s recent upward revision of Brazil production to 86mmt was a result of a lower yield but an increase in safrinha soybean acres.
  • Recent heavy rains/flooding in Argentina may lead to a production decrease of 1 to 3mmt. USDA is currently at 54mmt while other guesses range as low as 52mmt.
  • Spreads: K/N is firm near a 13 ½ inverse, with an overnight range of 14 ¾ to 13. The N/X is 6 ½ firmer.
  • News about China defaults/imports is quiet.
  • Malaysian palm oil is up 29 ringgits.
Outlook: mixed trade with old crop firm and new crop weaker
  • Ukraine/Russia situation causes uncertainty for Black Sea export capabilities.
  • As of 6:00am CDT, temps across KS and OK were mainly in the high 20s to low 30s. KS reported 31% of the crop jointed vs 47% average.
  • USDA pegged winter wheat conditions at 34% g/e vs 35% last week. They rate the p/vp at 32% vs 29% last week. Winter wheat headed was at 5% and spring wheat seeding was estimated at 6% complete.
  • Japan seeks 136tmt in its weekly tender. 
Outlook: trading steady to weaker

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

CHS Midwest Cooperatives Logo

This communication may contain privileged and/or confidential information and is intended only for the use of the individual or entity to which it is addressed.  If the reader of this message is not the intended recipient, you are hereby notified that any unauthorized dissemination, distribution, and/or use of this communication is strictly prohibited.   This communication makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.  Nothing herein shall be construed as a recommendation to buy or sell any commodity contract.  There is a risk of loss when trading commodity futures or options.

No comments:

Post a Comment