Monday, May 19, 2014

Closing Grain Market Comments 5-19-2014

Grain markets closed mixed today with some rather volatile price swings.

When everything was done corn was down 6, KC wheat was up 1, MPLS wheat was down ½ of a cent, CBOT wheat was up ¼ of a cent, old crop beans up 20, new crop beans up 17, the US dollar near unchanged, crude up 50 cents, gold near unchanged, and the DOW closed up 21 points.

Nice strength in the soybean market; many called it technical bounce or a bounce off of support………..but maybe our tight balance sheet just showed up today???  New crop beans probably have more of a weather premium built in then does Dec corn; as we are still not half planted on beans while corn is about ¾ planted.

This afternoon we did have crop conditions/crop progress.  Winter wheat conditions dropped 1 % in the G/E; with South Dakota dropping 5%.

Corn planting came in at 73% which was behind the estimate and slightly behind the 5 year average.  Now is it low enough to get the bulls re-excited??? Probably not by itself; but it does mean that we have a fair amount of corn left to plant.  Ball park in the 24-25 million acre area.

Spring wheat planting came in at 49% which was in line with estimates but well below the 68% on the 5 year average.

Soybeans came in at 33% planted; which was slightly below most of the estimates I have seen and is slightly below the 38% on average over the last 5 years.

Below is a link to CHS Hedging Recap of the Crop Progress/Conditions

The biggest thing that these updates do is help determine what weather means.  If the crop isn’t in the ground and you have moisture in the forecast that would typically be good or supportive to prices.  While once the crops are in the ground, rain makes grain.  Right now I think the market has transitioned to rain makes grain for corn; while moisture is neutral to supportive prices for spring wheat and soybeans.

Overall the weather forecast does have most of the US wet and warm in the 6-10 day forecasts as well as the 8-14 day forecast.  If the crop is planted; then it would be ideal.  The forecast also has much of the HRW growing areas to get a decent amount of moisture in the 5-7 day models. 

The thing with weather that we have to keep in mind is that 10 different people can get 10 different forecasts; and 10 different people can have 10 different views on what the forecasts mean.  It is really subject to how one views it and the forecasts change so often and so fast; that a lot of time it isn’t the actual forecast that means much; it’s what has or hasn’t changed in the forecast that matter as well as what actually happens versus the expectation.

I have had a lot of producers ask me if they missed the boat on pricing some of these grains.  The reality is that yes we probably missed a good opportunity to take some risk off the table; but there are far too many unknown factors to determine how things will shake out on prices several months from now.

As for the grains in specific it feels to me that wheat is a longer term sleeper; that needs a little demand or needs to see the combines roll down south.  I liked today’s price action; but it is still unknown what direction the next move in wheat will be.  It does have potential if you look at the US balance sheets(for some of the classes) but the world balance sheets look to have plenty.  So does wheat really need to go higher if we don’t find more export demand????  It certainly can; but won’t we need at least some catalyst to get the fund wanting to get long again??

As for corn for me it feels like we should see another weather scare at some time and seasonal rally; but when I look at the forecasts and how we are sitting I question it.  The other thing that I question is will demand stay as strong as it has the past year or so?  Probably even more then that is can the demand growth keep up?  I wonder if some of the buyers in the world where so empty after the tight supplies of 2011 and 2012 that they have refilled and hence that is why our export demand has been so solid this year.  Are we close to having the empty pipelines caused by the 2011/2012 crops re-filled????

Corn demand is strong, but the position that the funds have makes me nervous.  I think we might need to give them a positive headline if we want to keep them as long as they are and we risk that that headline doesn’t come and they slowly get shorter and shorter.  Not good if the American Producer is as undersold as some think.  Would take more than a lot of demand to offset selling pressure by both the funds and the producers.  But the positive for nearly all of these crops as they are a long way from the in the bin; heck overall when you look at corn, beans, spring wheat, and other grains like sunflowers I am not sure that we are much more than 50% planted.  So some sort of weather scare is possible; I just don’t see it how I look at the present forecasts.  Good thing those forecasts changed rather regularly.

Basis for grains in general has a steady tone to it.  Producer selling has slowed down by in my shoes I am not getting ran over with demand from end users either.  Plus locally we continue to struggle with the rail situation and are nearing a big unknown time with the new RCPE rail road taking over our rail line in the next few weeks.  I believe that longer term it will benefit the producers in our area; but I can’t honestly know how the transition will effect operations in the short run; I know intentions are very good.

Sunflower market in general remains very tight; but buyers also show little to no interest right now.  Business really needs to pick up for the birdseed guys.

Please give us a call if there is anything we can do for you.


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