grain market comments

Grain markets are called mixed this morning.

At 7:40 we have CBOT wheat near unchanged, corn near unchanged, MPLS wheat up 3-6, KC wheat up a penny, and soybeans up about 8 cents.  DOW futures are firmer, crude is up about 70 cents, and the US dollar is slightly firmer.

The driver yesterday seemed to be fund selling and technical selling.  But isn’t that nearly always the “reason” on down days?  The answer is yes a lot of times it is and what that tells me is that the funds, charts, and money flow having a huge effect on our prices.  Like it or not; it is just the way it is.  They help create the liquidity that we need; it sucks on days when we see pressure on the prices for what they do.  But that’s not my point.

My point is that we know the funds will help over extend price moves, we can become more knowledgeable on things such as charts and where the funds are sitting so we can better determine potential risks as well as rewards.  It makes it challenging because of how prices move.  Take wheat as example, did we really need to move up as much as we did the past few months?  Did we need to correct as much as we have the last couple weeks?  One could argue either way, if not both ways.

Weather  continues to be a mixed bag, still very dry in the south; but very good moisture called for.  Will it be too late?  Is it a headline that leads to fund selling or another leg down?  Overall forecasts appear to be wet and warm which would be ideal for grain that is in the ground.  Still plenty of talk about planting issues in the Northern states; but bears will say their production doesn’t matter and bulls talk about all of the unplanted acres.

With the funds as long as they are if we do get everything planted what will it take to keep them long?  To keep them from selling length?

Fundamentally demand is very strong for beans and corn.  While we are so far away from being competitive in the wheat export world; at least for HRW that it is scary.  The problem with the strong demand for corn and beans is that it isn’t what the market is focused on.  The market is trying to determine supply and is a weather market.  The longer we keep strong demand the better; but the thing that is most likely to move our markets today is weather and will be for the next several months as we determine how big our crops are.

Here is more market info from Tregg Cronin at Halo Commodities

http://halocommodities.com/5212014-morning-comments/

And the below market info is from CHS Hedging Morning Highlights

Morning Highlights

By Joe Hofmeyer

Highlights

• As of 7:00 AM CT: US dollar index is unchanged at 80.0059, European Stoxx is up .23%, Nikkei closed down .24%, Hang Seng closed up .01%, crude oil up 85 cents at $103.18 per barrel, and gold is down $4.50 at $1290.10 per ounce.
• Weather forecasts are still showing improvement in both the Southern Plains and the northern tier of the Midwest. Moisture replenishing rains are expected in the Southern Plains while the Upper Midwest is expected to be warmer and drier aiding planting efforts.
• Russian billionaires are assembling at the St. Petersburg Economic Forum this week as they weigh the market fallout from Russian/Ukrainian tensions. Investments have continued to flow out of Russia throughout this situation.

Corn

• July corn futures have moved lower the last 5 trading sessions, as advancing planting progress and adequate moisture weigh heavily.
• Warmer temperatures this week are a major benefit to early crop development for areas that are planted.
• Producer selling has been light with the focus continuing to be on planting the crop. Basis levels have been steady.
• Industry participants are looking for another strong ethanol production number (920K barrels/day) this morning, as margin are very profitable and seasonal ethanol demand is strong.
• After a cool and wet spring that has delayed planting, a Democratic Senator from North Dakota is calling on the U.S. Department of Agriculture to delay the May 25th crop insurance corn planting deadline that is in place for most North Dakota counties.

Outlook: July corn was not able to hold support at $4.75, adding more downside potential. Weather will continue to dictate price action, but the trade is feeling more comfortable with each passing day as more seed is put in ground. Mixed to start.
Oilseeds

• The SN/SX inversion currently sits at $2.37 ¾. The contract high for this spread is $2.77 which was established in mid-April.
• Eastern crush margins have fallen to 60-65 cents and western margins are down to 40-45 cents. Crush margins are getting close to not being able to cover variable costs.
• Brazilian farmer selling is strong while Argentinean farmer selling is light with slow harvest progress.
• Two additional Brazilian bean cargos are anticipated to land in U.S. ports later this week. With the addition of these 2 a total of 7 will now have come into the U.S. since April.
• China bought 111 tmt of optional origin soybeans for the 2014/15 crop year yesterday.
• China’s second soybean auction saw 82% of offered beans sold.

Outlook: Old crop volatility continues with July futures attempting to trade above $15.00 yesterday before falling off sharply. Uncertainty remains if we have enough old crop supplies/import to connect the old and new crops. Weather looks near ideal for planting in the week ahead. 5-8 higher.  
Wheat

• Spring wheat planting pace should continue to accelerate as we move further into the week.
• Forecasters are calling for the first general rain in a number of weeks for the HRW region for Thursday into the weekend. Although the HRW crop is probably beyond the point of adding yield, these rains should help maintain what is already there.
• There are yield concerns for Black Sea wheat, as temperatures are forecast to be above 90 degrees in the wheat growing regions of southeast Russia and Kazakhstan toward the end of the week. In some of these areas less than 20% of their normal rainfall has been received.

Outlook: Having two problem areas in the world (Southern Plains & Russia) should give traders a reason to put a bid back into the market. Weather models for these 2 areas will be watched closely, and can change quickly. 1 to 2 lower in Chicago and KC, 3-6 higher in Minneapolis.   

Jeremey Frost

Grain Merchandiser