Wednesday, April 30, 2014

Grain Market Comments 4-30-14

Grain markets are called easier today on a little pull back from the recent strength.  When the overnight session ended we had corn off 4 cents, KC wheat off 1, MPLS wheat off 2, CBOT wheat off 2, old crop beans off 5, and new crop beans off 3.  At 8:05 outside markets have the DOW mini futures pointing towards a start near unchanged, the US dollar is off about 260 ticks with the Cash US Dollar Index at 79.548, crude is off about 1.20, and gold is off about a buck.

Yesterdays strength came from the KC wheat tour, which showed an average yield of 34.7, versus 43.8 last year, and 53.4 the year before.  They estimated the crop 6-8 weeks from harvest.  So that opens up the question is the tour using max potential just because of the methodology they are having to use to calculate? 

The other question this tour will end up bringing up is how big is the crop and at what price level has the deteriorated wheat crop been priced into the market?  A smaller wheat crop isn’t going to create any extra demand and that’s really what wheat has missed for some time.  Demand; the US getting large exports.  Don’t get me wrong wheat does have a lot of potential but we have to have some caution as to when the news that we are trading today becomes old news, priced into the market.

Technically some of the wheat charts have had some upside breakouts; but then again wheat has always been famous for head fakes.

Here are a couple links with some more info on the tour

To follow the tour on twitter use #wheattour14

The other thing that continues to effect the market has been mother nature and planting progress.  Which continues to be a struggle for corn and beans in most areas.  Many are talking about prevent plant and that is probably a little early; but it has to be on the radar and it is a concern; but we also have to remember that the last USDA acre estimate was on the low side (according to many) and many thought we could increase overall acres. 

In my opinion the cool weather is more of an issue then perhaps some of the moisture.  The one thing we really will have to watch will continue to be North Dakota and what they end up with for spring wheat acres and sunflower acres.  I have heard of a lot of concern from that area and that could lead to the crush plants getting a little more aggressive on sunflower prices.

Speaking of sunflowers I do have some buyers showing interest in some old crop hi oleic’s.  If you have any please give me a call.

The birdseed market continues to be soft and business has just slowed down.  It doesn’t help that the railroad situation was so bad for so long that buyers screamed for cars.  Then it felt like we gave them 2 months supply in about a week period.  Did we miss some business along the way?  Did the rail situation cause missed demand for any of the grains?  I guess only time will tell but in my opinion we have to realize that there should be some risk in our upcoming stocks reports just because grain that wanted to move wasn’t able to and its not like we can magically get back that piece of business that might have been missed.

Also we are now offering a new crop ACT OF GOD program on millet; please give us a call for more info on that.

As for “generic” grain marketing I don’t have any problem rewarding a rally; but it really is going to depend on everyone’s unique situation.  There are way too many unknowns right now; which has added some premium to our markets; but bottom line is we need to all know the potential both upside and downside in these markets.  In my opinion if cards lay right there is a huge amount of both potential and risk in nearly all of these grains.  So find a way to get yourself comfortable for the ride.

Here is some more market information from CHS Hedging Morning Highlights

Morning Highlights

By Phyllis Nystrom

  • As of 7:04 am CT: US dollar index down .153 at 79.655, overseas markets mixed/lower, crude oil down $1.28 at $100.00, ULSD down 2 cents, gasoline down 1 ¾ cents, and natural gas down 2 ¼ cents.
  • Chances of showers stay in the forecast for the Midwest through Friday with temps staying below normal.The southwestern Plains continue dry.
  • Markets have backed off overnight as weather effects may be built into prices for the time being.Nothing new from Ukraine.
  • The Federal Reserve is expected to lower their bond purchasing program by another $10 billion per month as their meeting concludes today.No interest rate changes are anticipated.
  • Effective May 1st, the new daily trading limit in corn will be 35 cents, $1.00 in beans, 45 cents for CBOT wheat, 50 cents for KC wheat, 3 cents in bean oil and $30 in bean meal.Limits will be recalculated in six months.
  • Corn is off to a weaker start after yesterday’s planting delayed induced rally to a three week high.First support in the July contract is $5.08, resistance $5.24 ¼.
  • Bulls need to be fed daily and corn is due for a breather, it has closed higher in five of the last six sessions.
  • There were no corn deliveries against the May contract.
  • The CK/CN is 5 ¼ - 5 ¾ carry, continuing to be rangebound from 5 – 6 ¼ cents.
Outlook: Corn is ripe for a correction lower on profit-taking and as near term weather may be factored into current price levels.

  • Beans began the evening session on the plus side, but faded after midnight and have traded within yesterday’s range.The uptrend remains intact but prices are approaching overbought conditions and could be due for a correction lower.
  • There were no bean deliveries against the May.The estimate was zero to 250 contracts.
  • Meal deliveries were zero versus estimates for zero to 20 contracts.
  • Oil deliveries were 2,596 versus estimates for 350-2,500 contracts.Last date April 23.
  • The SK/SN inverse is widening, trading out to 8 ¼ -11 cents overnight.
Outlook: The uptrend continues until the market has more confidence nearby supply issues are being met; however, without fresh bullish news we could see a setback.

  • The results from the first day of the annual HRW wheat tour projected an average yield in northern Kansas at 34.7 BPA versus last year’s tour estimate of 43.8 BPA for the same area.The 5-year average for this area is also 43.8 BPA.This is the worst yield since 2001.271 field samples were taken from an area from Colby to Manhattan, KS.The tour moves into the south and west today and is expected to see worse yields.
  • The director of the Colorado Assn. of Wheat Growers put their wheat yield at 32.0 BPA and the director in Nebraska pegged their yield from 40 to 45 BPA (avg. is 41.1 BPA).
  • Deliveries:144 CBOT contracts, last date April 8. Estimates for SRW delivery were zero-400 contracts.There were no HRW deliveries, estimates were for zero to 100 contracts.  Minneapolis deliveries were 453 contracts, last date April 22.
Outlook: Wheat is correcting lower in spite of poor yield results from the wheat tour.

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

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