Friday, May 9, 2014

Closing Grain Market Comments USDA Report Day 5-9-14

Grain markets closed mixed after the release of the USDA report.

When everything was said and done old crop corn was down 9, new crop corn was down 13, KC wheat was off 14, MPLS wheat was off 10, CBOT wheat was off 13, old crop beans up 17, new crop beans up 2, the DOW was up 32, the US dollar stronger at 79.869 on the cash index; while both gold and crude ended near unchanged.

All about the USDA report……….below is a recap; this is from the Van Trump report.


US New-Crop Corn Production

Today's 2014/15
USDA 2014/15
Avg. Guess
USDA 2013/14
Planted Acres
91.7 million
91.7 (March)
     91.7

95.4
Harvested Acres
84.3 million
84.6 (Feb Outlook)
     84.4

87.7
Yield
165.3 bpa
165.3 (Feb Outlook)
    161.4

158.8
US New-Crop Soybean Production

Today's 2014/15
USDA 2014/15
Avg. Guess
USDA 2013/14
Planted Acres
81.5 million
81.5 (March)
     81.5

76.5
Harvested Acres
80.5 million
78.5 (Feb Outlook)
      80.1

75.9
Yield
45.2 bpa
45.2 (Feb Outlook)
     45.2

43.3
US 2013/14 Ending Stocks

USDA 5/9
USDA Apr.
Avg. Guess
Range of Guesses
USDA 2013
Corn
1.146
1.331
1.314
1.231 - 1.435
0.821
Soybeans
0.130
0.135
0.134
0.125 - 0.174
0.141
Wheat
0.583
0.583
0.590
0.570 - 0.630
0.718
US 2014/15 Ending Stocks

USDA 5/9
USDA Feb
Avg. Guess
Range of Guesses
Corn
1.726
2.1
1.672
1.295 - 2.354
Soybeans
0.330
.285
0.307
0.200 - 0.464
Wheat
0.540
.587
0.553
0.425 - 0.652
US Wheat Production

USDA 5/9
USDA June
Avg. Guess
Range of Guesses
USDA 2013
All Winter
1.403
1.509
1.468
1.312 - 1.591
1.534
Hard Red Winter
0.746
0.781
0.782
0.610 - 0.870
0.744
Soft Red Winter
0.447
0.509
0.467
0.409 - 0.570
0.565
White Winter
0.209
0.219
0.220
0.188 - 0.268
0.225
All Wheat
1.963
2.080
2.050
1.891 - 2.182
2.130
World 2013/14 Ending Stocks

USDA 5/9
USDA Apr.
Avg. Guess
Range of Guesses
Corn
168.42
158.00
157.31
149.45 - 161.20
Soybeans
66.98
69.42
69.77
67.30 - 73.00
Wheat
186.53
186.68
185.95
181.91 - 189.00
World 2014/15 Ending Stocks

USDA 5/9
USDA Apr.
Avg. Guess
Range of Guesses
Corn
181.73
NA
159.41
149.90 - 175.00
Soybeans
82.23
NA
80.34
67.00 - 95.00
Wheat
187.42
NA
184.53
178.00 - 200.00
South American Production 2014

USDA 5/9
USDA April
Avg. Guess
Range of Guesses
Argentina
Corn
24.00
24.00
23.86
22.30 - 23.86
Argentina Soybeans
54.00
54.00
54.40
53.50- 57.00
Brazil
Corn

75.00
72.00
72.10
70.50 - 74.00
Brazil Soybeans
87.50
87.50
87.23
86.50 - 87.50
Overall report was bullish old crop corn and beans; bearish new crop corn and beans.  World numbers bearish across the board.  US wheat numbers friendly on production; but carryout numbers in line with estimates.

After we get a report we open the “what’s next” question.  For old crop corn some ask are we overestimating the increase in corn exports and old crop corn demand?  Basis and cash markets sure feel like we have more than a 1.1 billion bushel corn carryout. 
Are we curbing soybean demand for old crop?

Many ask how can the USDA start at 165 on corn yield and 45 on soybean yield?  I guess the answer is because they can; realistically we could be well below that; but there is also a chance that if mother nature is nice that we come in higher than that when everything is said and done.  One big positive I took from today’s report is just how much demand has increase; it wasn’t too long ago that many talked about an old crop corn carryout near 2 billion bushels ( I should mentioned that it still feels that way to me; but that is probably due to local production along with the railroad issues causing the back log).  Maybe demand for grains is simply strong enough to offset big supplies?

Bulls now can argue that corn demand could be better in the coming year; plus they have plenty of room to take the 165 yield lower.  The USDA has 2014/15 corn usage off by 213 million bushels  versus this present year’s projection.  Now if that is flat and say yields drop to 155; (which might be a better starting spot) You drop 2015 corn carryout to under a billion bushels again in a hurry; close to 700 million.  Bottom line is the headline for new crop corn today is very bearish; but the reality is we could easily end up with a  bull market; just depends on mother nature and demand.   I do thing we have some risk that the June stocks report finds more old crop corn and in the meantime the funds might turn sellers because of the charts and the headline of a big percentage increase versus this year.  Reality is our balance sheet situation for new crop corn and beans is no more known today then it was a month ago.

First thing that needs to be done is determine production and thus supply; realistically we should have a good clear idea for a couple months on that.  If we don’t have issues in weather I could see the funds turning sellers because of the headlines; if the funds do turn sellers that might give us lower prices and thus increase demand.  Making the markets even that more volatile should we not hit the 165 corn yield or the 45 bu soybean yield.

Bean situation for new crop is very similar; can we really think our carryout is 2-3 times what it has been the past several years?  Well today it is at least in the headlines; but the reality is we have no clue what bean yield could be; nor do we know much many soybeans China might use should we actually have them for sale. 
One thing that is scary is the world numbers; but there again how can we have a real forecast that has much accuracy this early in the game?

As for wheat I have to wonder what it takes to continue the rally; with winter wheat production coming in below estimates have we priced the crop issues in HRW country into the market?  Where it sits today is that wheat needs some more planting delays in ND to get the wheat bulls back interested.  Longer term the wheat balance sheet is fairly tight.  If wheat demand can stay flat year over  year we do get the wheat balance sheet very tight in a hurry.  As a matter of a fact if you just keep usage flat our wheat carryout drops to a tighter number then it was in 2007/08.  Keep in mind it is very unrealistic for us to feed the same amount of wheat we did last year unless the price of corn versus wheat really changes.  Now exports on the other hand; should issues develop overseas perhaps we can see exports closer to the present year numbers instead of being decrease by 230 million bushels like the USDA has forecasted?

If the USDA has given us a good definition of wheat production; then the job of the market is to see if it needs to find demand or curb demand; and I am not sure which one it needs to do at these prices levels.  I do know that the wheat headline of an increase in world wheat carryout versus last year has to be a blow the bulls considering the fact that US production was below the estimates.

Overall markets did take it on the chin today; but the old crop corn carryout (should it be accurate) should give some hope to higher prices and at the very least it should have increased the bet or importance of the weather going forward.  Personally I still want to practice good risk management; realizing that we have had a decent rally that should probably be rewarded for some of the grains, and realize the risk of the fund position, risk of weather being ideal, and the risk of the focus turning towards the world balance sheets which in print are ample.
Elsewhere in the market basis continues to feel weak as most buyers simply don’t have tons of interest.  Birdseed market also feels soft as business just hasn’t picked up.  Most buyers are no longer threatening the huge discounts for late shipments like they did a few months ago as some no longer need product or their program has ended. 

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

Thanks

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