Friday, May 23, 2014

Grain Market Comments 5-23-14

Grain markets are called slightly firmer this morning after a slightly firmer overnight session that saw corn up 2 cents, KC wheat up 3, MPLS wheat up 4, CBOT wheat up 4, old crop beans up 5, and new crop beans up 2.  At 8:05 outside markets have crude up 40 cents, the DOW mini is about unchanged, gold is near unchanged, and the US dollar is up a little with the cash index at 80.357.

Most feel that the strength overnight is a little profit taking ahead of the long weekend; as well as some risk premium ahead of the long weekend.  Markets won’t open again until Monday night after today’s session closes.  Personally with the volatile markets we have had; especially for beans it would surprise me at all to see beans see some profit taking that puts pressure on that market by the end of the day.  We also have option expiration today as the June options expire. 

I mentioned yesterday in the midday update phone call that nothing should really surprise us for a  move in beans.  Tight fundamental situations typically resolve rather violently; end users that need beans will have to do whatever it takes to get coverage; but once that coverage happens or they sense it can happen then bids can vanish.  No one wants to be stuck with old crop beans at 2.50 a bushel premium to new crop beans.  They will take everything they need; but if they can get to new crop and buy a couple bucks a bushel cheaper believe me that’s what they will try to do.  Add to this the fact that beans still have a positive old crop headline story that continues to lead to fund buying interest and you have a rather volatile marketplace.

We are about a month away from when the funds really won’t have much ownership left in the July contract; so we should be nervous on when the tide turns.  Bottom line is we need to be aware that we could see pressure on the markets (beans in particular), even if our fundamental situation hasn’t resolved.  We could see a headline of more South American beans hitting the US and even if it isn’t change our fundamental situation it could be a catalyst that leads to fund selling and from what I hear they simply have too much July ownership.

Don’t get me wrong old crop beans still have plenty of potential but the price action and headlines are scary.  We could be up a couple bucks more or give all of this rally and then some away.  Just be prepared for a wild ride.

So far we haven’t seen corn, wheat, or even sunflowers really follow the strength that beans have had.  The sunflower situation remains tight; but we just don’t have a lot of demand right now.  It feels like we have way too many sunflowers in South Dakota which serves more of the birdseed market and not nearly enough in North Dakota.

Here is some more market info.  The first is morning comments from Tregg Cronin with Halo Commodities

The below is from CHS Hedging Morning Highlights

Morning Highlights

By Joe Hofmeyer

  • As of 7:00 AM CT: US dollar index is up .19%at 80.379, European Stoxx is up .12%, Nikkei closed up .87%, Hang Seng closed up .05%, crude oil is up 24 cents at $103.98 per barrel, and gold is down $1.50 at $1293.40 per ounce.
  • Dry weather in the Northwestern Midwest through Saturday will allow planting progress to continue at its rapid pace. The 6-10 day forecast shows improved chances of moisture in the Southern Midwest that will benefit newly emerged corn and soybeans. Rains will continue in the Southern Plains through May 27 relieving the drought stricken areas.
  • The northern tier of the Corn Belt is pushing hard to get crops planted ahead of crop insurance deadlines and rains that are expected to move in within the next 5 days.
  • Germany’s business confidence reading fell from 111.2 in April to 110.4 in May amid signs that growth in the country’s economy will slow this quarter. Germany is key to the euro area economic recovery efforts.
  • Vladimir Putin said Ukraine is in full-scale civil war after government troops suffered their worst losses in battles with separatists.
  • Rains benefitted Nebraska and Kansas yesterday, while the states of Minnesota, North Dakota, and Wisconsin stayed dry allowing planting progress to continue in the areas that are furthest behind.
  • Even though good progress is being made, with corn planting behind in the North and additional rains in the forecast, it is likely that corn will lose some acres to either preventative plant or soybeans.
  • Old crop corn export sales were revealed at 20 million bushels yesterday by the USDA. We only need 11.8 million bushels weekly to hit current USDA projections.
  • Basis levels are steady to slightly better as producers are not moving grain with their focus on planting.
  • China will auction 3.5 mmt of corn from its temporary reserves on May 29, according to the National Grain & Oil Trade Center.
  • The CZ4/CH5 spread seems to be content to sit at slightly better than a 9 cent carry for the time being.
Outlook: Corn continues to reluctantly follow soybeans higher, but traders see no reason for the added risk premium at this time. Sideways trade is expected ahead of the long weekend. 1-2 higher to start.  
  • July soybeans put in a new contract high yesterday of $15.36 ¾, but settled the day at only $15.18 ¾. The front end of the soybean curve is once again showing strength overnight.
  • July soy-meal closed above $500 per ton for the first time yesterday, and has continued to move higher in overnight trade.
  • There is some chatter that processors are contemplating switching bids from the July to the August board.
  • Old crop soybean exports out of the U.S. were once again net positive yesterday at 6.04 million bushels. We simply cannot afford to continue to export soybeans with our current domestic balance sheet.
  • Talk of South American soybeans being imported into the U.S. continues, but quantifying the amount is proving difficult.
  • China will auction 300 tmt of soybeans from its temporary reserve on May 27, according to the National Grain & Oil Trade Center.
Outlook: Extremely tight domestic old crop supplies continue to result in explosive trade, as the market tries to figure out how, and if, imports will be able to connect the old and new crops. 5-8 higher.
  • Rains will continue through May 27th in the Southern Plains with general coverage of 2 inches according to Commodity Weather Group LLC.
  • Precipitation looks to hold off in the Northern spring wheat growing geographies until late in the weekend, which will allow planting to continue to advance in both the U.S. and Canada.
  • Old crop wheat (crop year ending May 31st) exports yesterday were revealed at 5.2 million bushel. This is behind the needed weekly pace to hit USDA projections.
  • Kazakhstan agreed to sell 100 tmt of wheat to China for the 2014/15 crop year. Kazakhstan exported 10 tmt of wheat to China last year.
  • South Australian sub-soil moisture is adequate to excellent in most areas with producers gearing up to plant.
Outlook: Weather forecasts throughout the world continue to be closely watched by traders, but currently there are not enough problems to get anyone excited with a world balance sheet that is very comfortable. 2-4 higher.

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


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