Tuesday, May 13, 2014

Grain Market Comments 5-13-2014

Grain markets are called mixed to better this a.m. on a little turn around Tuesday from yesterdays weak action; at 7:30 corn is up 2-3 cents, KC wheat is up a penny, MPLS wheat is up a penny, CBOT wheat is down 2, old crop beans are up 9-10, and new crop beans are 4 cents a bushel higher.  Outside markets have crude up 70 cents a barrel, the US dollar firmer with the cash index at 80.093, DOW mini futures are up about 20 points, and gold is down a couple bucks at 1294.20.

Yesterdays weakness seemed to be follow up from Fridays USDA report and the fact that the market was expecting big progress in corn yesterday afternoon.  They got that as we jumped ahead of the 5 year average; we still have plenty of corn acres let to plant so weather is still important but overall headlines are slowly turning from Rain prevents planting to rain makes grain.  Just keep that in mind; what once caused the market to go up could cause pressure on our markets in the weeks ahead.

We are probably a little early for that but do keep in mind that we are slowly going to be turning around what info means to market price action; we too much rain until crops planted is friendly; but once crops are planted it because very bearish in a hurry.    The headline that the funds see of corn 59% planted; above the 5 year average isn’t a headline that should lead to tons of buying at this time. 

Spring wheat planting came in at 34%; which is well below average; but actually ahead of the 2011 pace, close to the 2009, and 2013 pace.  The 5 year average there is really skewed by the 91% in 2012.  The 5 day forecast also looks like plenty of progress could be made in ND

Soybean planting came in at 20%; which is in line with the 5 year average. 

Winter wheat crop conditions did drop 1 % in the G/E and that crop continues to struggle. 

Below is a link to CHS Hedging recap of crop progress

Basis overall still feels weaker as in my shoes it feels like we have more supply then demand; plus we have a rail situation that adds some volatility to the cash prices.  Especially locally where we will change railroads in less than a month.  In my shoes I then have to ask myself how will the new rail line be?  What type of car volume can I plan on or not plan on?  Does there become a point where we have everything bought that we can physically handle given the rail info that we know today?  Logically the closer we or competitors on this line get to that covered point the more pressure one should expect on local basis.  Add to that what appears to be a big winter wheat crop on the way and the fact that both producers and elevators need to be prepared and it is easy to see what local cash prices and basis could see some pressure as we move forward.  Don’t get me wrong my talks with our new rail line leave me very encouraged on performance; but in the back of my mind I also realize there can be a thin line between what actually happens and what they intent to happen.

I think one thing we really need to watch out for is what the funds will do.  Do we have some risk that the headline leads to them deciding to get short corn again?  Notice their position today versus how short they happened to be last fall harvest. 

Here is a link with some more info on the fund position; it is from Tregg Cronin with Halo Commodities.  He talks about the “smart money versus dumb money”; this also has his morning comments. 

Lastly for more market info this is from CHS Hedging Morning Highlights.

Morning Highlights

By Steve Wagner

  • EU foreign ministers increased sanctions on Russia by freezing assets of oil and gas producers from Russia, citing the Kremlin’s continued encroachment into the Ukraine. In response Gazprom gave Kiev 24 hours to pay their delinquent gas bill or risk being shut off. In Donetsk, Igor Girkin, known as Strelok or “the Shooter” ordered Ukrainian troops to submit to his command or leave the region within 48 hours. After that time the rebels will begin a “anti-terrorist operation.”
  • US dollar index is up .188 points this morning to 80.086.
  • June crude oil is up $.61 per barrel to $101.20 per barrel.
  • Gold is down $4.30 per ounce trading at $1,291.50 per ounce.
  • Dow Jones equity futures are up 33.00 points trading at 16,688.00. The Hang Seng rose .4% 22,347.20; the Shanghai composite dropped .3% at 2,045.97. The Nikkei was up 1.9 % trading at 14,421.60, after a weaker yen boosted Japanese exporters.
  • Corn opened higher Monday night as traders took profits Monday. Solid exports are also supporting the market.
  • Planting progress stands at 59% vs the 5 year average of 58%, however the upper Midwest, Mn., ND, WI. and MI. are all 20% behind or more.
  • There were no corn deliveries overnight with the next date March 7th.
  • Nonghyup Feed bought 60 tmt of corn paying $1.7796 over Chicago Dec. futures.
  • Taiwan purchased 60 tmt of corn from Mitsui for shipment July 25 through August 14th to ship from Brazil.

Outlook: 2 to 4 cents higher on solid exports and turn around Tuesday.

  • July soybeans opened higher overnight as demand for soybean meal once more pulled the market higher, exports remain above USDA projections.
  • There were no soybean deliveries today with the next date April 23rd, soybean meal had 2 deliveries with the next available date April 29th, in soybean oil there were 117 deliveries with the next available date May 6th.
  • Planting progress exceeded expectations at 20%, the 5 year average is 21%.
  • No prices on palm oil due to a Malaysian holiday, trade resumes Wednesday.
  • Soybeans on the Dalian exchange were 27 ½ Yuan trading at 4,420 Yuan.
  • Soybean exports to China should pick up according to Liu Xianwu, general manager of China’s Cereal and Oils business, citing better demand for poultry and aquaculture.
 Outlook: old crop 5 to 10 cents higher led by better demand for soybean meal - new crop 5 to 8 cents higher.  

  • Chicago July wheat opened with higher overnight profit taking. However, it moved lower as trade progressed on improved planting and weaker Matif wheat.
  • There were 111 Chicago wheat deliveries for today with the next available date May 8th. There were no KC wheat deliveries with the next date May 9th.
  • Planting progress was reported at 34%, up from 26% but still behind the 5 year average of 53%. Minnesota and North Dakota are lagging the most at 8%and 11% respectively.
  • Winter wheat conditions deteriorated to 42% poor and very poor vs last week’s 38% and last year’s 39%. Good to excellent dropped to 30% vs last year’s 31%.

Outlook: steady to 2 cents higher on planting concerns and deteriorating crop conditions.

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

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