The grain markets closed stronger across the board in a day that seen weather effect the markets in a couple ways. Weather helped push the wheat markets sharply stronger and actually delayed the opening of the pit in the CBOT.
Corn closed up 3 cents, beans where up 6-7 cents, KC wheat was up 29 cents, MPLS wheat was up 29, CBOT wheat was up 27, equity markets where mixed with the DOW up 2 points, crude was near unchanged, European wheat was firmer, and the dollar is presently near unchanged.
Great day for all of the grains; as nearly ever wheat, corn, and bean contract made new highs and most of them had new high closes as well. We have this firmness in the grains continuing even before the “acre war” really is suppose to hit. The main reason being given today for the firmness was the cool temps in the southern wheat areas that have a lack of snow coverage. Generically speaking wheat’s rally has been more of a fear rally; fear of supply getting tight and fear of inflation all around; fundamentally there is a protein story which is part of the reason MPLS continues to gain but as far as supply and demand goes we really seem to have plenty of supply and while demand isn’t horrible it isn’t the best either as shown by the rather wide basis we have seen over the past 6-8 months.
Tomorrow we will have export sales out in the a.m. and that could help provide more fundamental direction. Corn exports have been very disappointing lately and it would really help out to see a little more demand there so perhaps we can help create a little more competition as that also has a basis that historically would be on the weak side; not super weak but nothing that one would call a good or great basis.
Overall even though we have a couple of things helping our markets other then fundamentals we still have a grain complex that has much more friendly fundamentals then 8 months ago and some of the fundamentals are rather bullish and the one that has weak fundamentals (wheat) probably has the chance to be a big sleeper if we can see demand stay strong for the higher quality wheat. The huge amount of off quality wheat could pressure or limit some of the other feed grains.
The birdseed market remains very firm; but it has very wide bid and ask spreads. When a buyer wants something bids that one even a week ago would have thought to be not possible have traded; but there are also times when I try to sell and the only response is pass.
Technically charts look great as mentioned above; but we are very oversold and a couple of the resistance points that we cleared today we didn’t exactly do in a super strong manner. Given the oversold conditions and the sharp run up we have seen don’t be surprised to see some sort of correction at any time with no or little reason. As for risk management and marketing don’t forget what the price ideas and thoughts of the market place where in 2008. When we saw corn in the 7.00-8.00 range and crude near $150 a barrel; no one thought we would see corn back down under $5 more less $3 (which it did in under 6 months) or crude back down towards $30. So if I want to remember something in regards to price action I just take a look the market sentiment during and leading up to the summer of 2008 (extreme bullishness) and late spring/early summer of 2010 (extreme bearishness). As if spring wheat and crude can see prices cut by 75-80% in less a year and most of the other grains cut in half there is nothing that says it can or won’t happen again; perhaps it will be another extreme move to the upside like we have already seen; after all sunflowers have nearly tripled in value while corn and wheat have doubled.
Bottom line is don’t forget to use solid risk management/diversification as no one knows that we have in store; with the trend and friendly fundamentals it probably means one makes sales in smaller increments and tries to scale up a little more; but to say that the grains will just continue to going straight up without regard to anything else is just unrealistic and not feasible for an extended period of time.
Also for those of you following http://www.grainmarketingplans.blogspot.com/ marketing plans; the volatile markets will have Neutral Nick making an update rather soon.
Please give us a call if there is anything we can do for you.
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