grain markets close 2-8-2011 Day Before Feb USDA Crop Report

Markets closed mixed today ahead of another USDA which will be out in the a.m
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Corn was off a penny, beans where up 10, KC wheat was up 19 cents, MPLS wheat was up 18 cents, CBOT wheat was up 16, crush sunflowers where up 10-30 cents, equity markets market closed stronger with the DOW up 72 points,  crude was off about 50 cents, and the US dollar is near unchanged.

When we came in this a.m. the markets had protection on; as news had broke that China raised it’s interest rate.  The markets did open weaker but it didn’t take long and we seen the markets rebound as wheat lead the way higher once again.  Most of the CBOT Wheat contracts and KC wheat contracts made new highs today.

Wheat’s strength continues to come from good export demand as Jordan purchased some of our wheat and it seems like every day we see headlines of some sort of wheat business going down and most of the time the US has been in the middle of that business.  The weather also continues to add premium into our markets as we simply don’t have the best growing conditions out there. 

Tomorrow’s report isn’t expect to show much or have many major surprises as the USDA doesn’t do much in terms of updating tons of numbers having just had the stocks report last month.  But the last year the USDA has had plenty of surprises and our markets have plenty leaning in the bull camp so it shouldn’t be a major surprise if we see price action that doesn’t make sense or we see a USDA report that throws another curveball to the market players.

New highs lead to new highs is the typically theory in trading as well as reading charts and price outlook.  But wheat making new highs a day ahead of a USDA report leaves me with wondering if that gives us the potential for some negative chart action; as any bearish surprise on tomorrow’s report could leave charts looking like they simple had buyers rejecting these levels (assuming a bearish USDA report that leads to a hard price break).  With the market having such a high percentage on the bullish side some break in prices could lead to a fast free fall no matter how strong our fundamentals. 

So for risk management I think one needs remember that things always look the best at the top and they always look the worst at the bottom.  But eventually some boiling point hits and we find no more sellers and many more buyers in down markets,  or in up trending markets (like our current market) we find more sellers (with more product then any buyer thought) and many less buyers.

Along the risk management lines we will be having a marketing workshop in early March.  As we have Frayne Olson, PhD, Crop Economist/Marketing Specialist North Dakota State University coming in.  We will have workshops in Pierre and Philip.

Please watch for more details to come.

As for the report coming out in the a.m. the average trade estimates are decreases across the board from the January report for 2010/11 ending stocks. They are pegged at 810 million bushels for wheat, 729 million bushels for corn, and 136 million for soybeans.  The wheat number by it self isn’t bullish; it is bearish in my opinion but the quality won’t be defined via this or any report so wheat should have a chance to continue to be a sleeper; while everyone knows the fundamentals for beans and corn are friendly.  But one thing that has changed is the margins for those that buy the feed crops.   Just ball parking some of the stuff I have read I would say that margins are down 25-50% for nearly everyone in those industries on a per head crush basis versus a year ago.

Thanks