Grain Comments with charts and strategies

Markets had another rather choppy price action ride today as outside markets where stable and a big on going concern remains out there in regards to our potential tightening of our balance sheets.

Our bull markets kept going despite the weakness we showed in the overnight session.  When all was said and done we seen corn up 5-7 cents, beans where up 10-11 cents, KC wheat was off 7 cents, MPLS wheat was off 6-7 cents, CBOT wheat was down 4-7 cents, the US dollar was firmer, equities showed a slight balance with the DOW up 21 points, and crude was up about 1.50 a barrel.

Goofy price action today in that yesterday we had rather supportive information with the decreased crop conditions but last night we seen weakness in the markets as we did for most of the session; but about mid day things changed around lead by the row crops and we see corn and beans both put in new high closes to end the day.  Technically that is great price action and could lead to even more technical buying.

As for new news out there we really seem to be light on the headlines as of late; main focus has been the idea’s that mother nature is taking away yield and yield reduction along with a tight balance sheet gives us bullish fundamentals; at least until we see that projected supply and demand change.  Eventually high price are suppose to cure high prices; defining “high prices” remains a challenge and as long as end users can make money buying an end product such as corn the price probably shouldn’t be considered high.  Are we near those levels?  Perhaps as some industries are challenged and we have seen a lag in the exports; but the latest reports have been good profits for ethanol plants and they are the big dog when it comes to who’s buying our corn.

One negative that has happened lately has been the basis trends for corn and spring wheat; both of those commodities have saw plenty of basis pressure as of late; indicating a lack of end user demand.  The spreads between some of the markets and months also have shown bear market signs such as the Sept-Dec corn spread which has went from a big inverse to near full carry as our carry on corn today is very similar to what it was last year despite our balance sheet showing nearly ½ the carryout for old crop as it did last year.  That to me doesn’t add up and says there is some risk that we have under stated our 2010-2011 corn crop or overstated our demand?  Perhaps we have improved our ethanol effectiveness more then we realize thus we have been grinding less then what we think would be needed to get the type of ethanol production that we have seen reported?

Bottom line is our markets are scary and in more then one way.  Potential is out there for prices to continue to see strength because of the supply and demand along with the fact that it seems like the funds want to own grains many days.  If we are actually going to run out of corn the price should be the sky; and that is scary because things like basis could really get out of whack.  Also scary is the fact that it wouldn’t take much to see some of the mentioned possible negative factors happen thus we see our balance sheets get ugly in a hurry.

Technically we seem to have broken out of some markets; such as Nov beans.  But many of our markets still have a sideways technical picture painted on their charts.

I have attached a few charts.

Please give us a call if there is anything we can do for you.

Does the 2010-2011 corn spread price action give us any clues how we should be placing hedges for the 2011-2012 crop?

Grain Market Comments close August 22nd another wild day for markets

Markets are called firmer this morning behind a firmer overnight session and supportive outside markets.  MPLS wheat continues to lead the surge higher as spring wheat harvest continues to lag and be disappointing.

In the overnight session MPLS Sept was up 21, Dec 15-16 cents higher, corn was up 9 cents, KC wheat was a dime higher, CBOT wheat was up 12 cents, and beans where firmer by 13-14 cents.

Adding support to our markets has been weather; some are talking that the soybean crop has really missed moisture as of late and things are relative unsupportive to either harvesting or growing grain in many areas too wet in the North to harvest spring wheat and too dry in the south.

Pro Farmer does have a crop tour this week and it should help give additional market information with possible direction.

Once again I failed at my time delegation as I never got the comments sent out this morning.  So as a recap of what happened in today’s session when all was said and done we ended up seeing corn up 9-10 cents, beans where up 15-17 cents, KC wheat was up 3-5 cents, MPLS wheat was down 2 on the Sept while the Dec was up 2-3 cents, CBOT wheat was a nickel higher, the DOW closed up 37 points nearly 170 off of it’s highs, the US Dollar is slightly firmer, and crude oil was up about 2.00 a barrel.

A mixed sort of session; one that saw the highs made in about the 1^st five minutes of trading when we opened up this a.m. and then we slowly drifted lower.  The MPLS market really turned around and left a candle on the charts indicating that perhaps we have at least temporarily ran out of buyers at least on the nearby month.

Technically it is always disappointing when one makes a new high for a move and then closes lower; sometimes it is referred to as a key reversal. 

Fundamentally we had export shipments out this a.m. and they lagged the needed pace to meet current USDA projects for wheat which came in at 17.4 million bushels, beans which came in at 10.9 million bushels, and corn which came in at 29.5 million bushels.

Basis is also a little weaker on some various commodities; to arrive spring wheat bids where softer today as a couple major players even went no bid stating that they where overbought and plugged.  Corn basis continues to soften with buyers showing coverage or at least acting as though they have the needed coverage.  Could there be another spike in old crop corn basis?  Depends when harvest get’s here; same answer as to if we see old crop sunflower price show a bounce; depends on when harvest hits.

Keep in mind that as buyers once harvest comes or heavy supply comes their job is to be as empty as possible when cheaper product becomes available; they don’t want to be long and wrong allowing competitors selling cheaper then them.  Sometimes it works great for the buyers; but many times it is why you see a spike when the combines first hit; I would guess that stages are set for rather volatile cash markets depending on how and when harvest hits us.

This afternoon we did have a crop progress report update; it showed corn conditions down 3 % in the G/E, Spring Wheat down 4 %, and beans down 2%.  Spring wheat is 29% harvested versus 56% on average the past 5 years.  On the surface the conditions decreasing and the slow harvest rate sounds friendly the grains but with our price levels and the rather volatile outside markets we have to be cautious that any information that isn’t exactly new or different then the trade has been thinking could be information that is already built into the market.  As example perhaps the reason we have corn and wheat at the levels we do is because it is dry in the South, Wet in the North, and overall yield outlook is softer; bull markets typically need to be feed a steady diet of good news.

For more info on the latest crop progress report check out Country Hedging’s info at http://www.countryhedging.com/media/Research/Archive/2011_08_22Crop%20Progress8-22-2011.pdf

The Pro Farmer Crop tour started today information on that should be updating as it happens; so far the main thing I have read is just volatility when it comes to yields.  Here is a link http://www.agweb.com/profarmer/article/preliminary_day_1_observations_from_the_midwest_crop_tour/

Please give us a call if there is anything we can do for you.

Charts for Aug 21st; up - down - sideways price movement expected for the commodities?

HEre are some Charts and possible strategies for some of our markets. 

Mainly spreads to open the door of thinking what should be sold and what should be stored; no reccomendation here.

grain market opening comments 8-16-11

Markets are called weaker this morning behind a weaker overnight session which was partially lead by crop conditions stabilizing versus deteriorating as they had.  Also leading to the lower opening calls is weakness in the outside markets as many continue to be nervous of a melt down.

In the overnight session corn was off about 7 cents, beans where off about 9-10 cents, KC wheat was 7-8 cents cheaper, MPLS wheat was 4 cents softer, and CBOT wheat was off 5-7 cents.  At 9:20 outside markets have European wheat down about 2 %, crude is off about a buck a barrel, equities are softer with the DOW down 72 points, and the US dollar is firmer with the cash index at 74.011. 

The outsides are off of their lows so perhaps that gives a little bit of support to the grains? 

Fundamentally the biggest change I have noticed as of late is the softer basis for some of the commodities or as some would put it the market showing more supply then demand; that in it self is a little scary as it really feels like supply is light and producers are not very willing sellers.  So what happens if we reach a point when most become willing or have to sell sellers.

Quality on wheat has been very challenging as of late and I don’t think that is exactly good if we want to keep demand coming our way; poor yields do take supply off the table but sometimes poor demand takes away demand faster then pro yields takes away the supply.

Protein scales have been jumping all of the place the past couple of weeks; look for that to continue and until the market has more demand then supply I would tend to think that one will continue to get paid less and less for protein; I have seen some that just a few weeks ago where paying over a dollar a bushel a point above spring wheat basis of 14; that are now paying 0 premium above 14 pro. 

The birdseed market remains on the slow side or at least the buyers are not panic looking for product. 

Overall fundamentals feel like they are slowing switching as old crop demand has slowly slide the past couple of months and projected demand for next year is smaller in most of the grains then what it is pegged at for this year’s crop.

Please give us a call if there is anything we can do for you.

Thanks

opening grain market comments August 15th

The grain markets are called firmer this a.m. behind supportive outside markets and firmer overnight session.

In the overnight session we had corn up 4-5 cents, MPLS wheat was up 9-10, CBOT wheat was 10 higher,  KC wheat was up about a dime, and beans where up 7-10 cents.  At 9:20 outside markets are firmer with equities stronger as the DOW is up 165 points, Crude is about 1.75 cents firmer, the US dollar is softer by about 800 points  with the Cash index at 73.854, and European wheat is up about ½ to 1 percent.

Not a lot for new news out there for the grains.  The main driving forces for our prices as of late have been the weather as it relates to the yield and the outside markets as they relate to money flow.  Last week the USDA trimmed the yield for both corn and beans to levels that should make us ask if the yield reduction is already priced into the markets.  One thing that should be noted is that on the supply side of things we have to consider the outside markets shaky and our old crop supplies have been slowly moving up showing some sort of demand rationing. 

Our balance sheet trend isn’t as bullish as it once had been when it was month after month of cuts and smaller ending stocks.  Even with the decreased yields our balance sheet for 2011-2012 on corn is more then it was just a few months ago.

Basis is softer on spring wheat as the protein premiums have fallen out of bed as of late and we have seen corn basis softer as of late too.

Technically most of our markets remain sideways; still consolidating waiting to breakout one direction or another.  Most are near the high end of the range and we do have a good chance to see Dec corn trade at new highs in today’s session with the strong outside markets and lack of producer selling.

Please give us a call if there is anything we can do for you.

Below are some different types of trades that one might consider ahead of the USDA Report or anytime one is looking for potentially big moves.

I do feel that we have a massive risk out there based on the fact that so many are super bullish corn fundamentals; so eventually if everyone is long who will be left to sell?  Ideas are that we see a cut in this weeks S & D report; cut in yield thus cut in supply and carryout projected.   But what happens if that isn't the case and we see something different.  Add to the contrairian type of thinking to our outside markets it becomes easy to see an ugly picture is possible.  Really at any given time;

More then the trades them self take a look at the type of concepts involved as one never knows when they might make sense.

Sales that Make Sense!

Many of you know that one of my favorite lines for marketing grain is "You don't go broke making Sales that Make Sense"

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One of her first test projects was putting a sign or wall word in my office

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Opening Comments

Markets are called mixed to weaker behind follow threw weakness in the outside markets.

In the overnight session corn was off 8 cents, Beans where down 8-17 cents, KC wheat was off 6 cents, MPLS was off 8 cents, and CBOT wheat was 6 cents weaker.  At 9:25 outside markets European wheat down about ½ of a percent, equities are in the positive with the DOW up 40 points after being down over 500 yesterday, the US dollar is softer down about 460 at 74.653 on the Cash index, and crude oil is off about 20 cents a barrel.

It seems to be all about the outside markets and money flow the past couple of days; the volatility has really spike for some of the markets as of late.  Most calls for the early price action are that where the overnight session left off at.  Many have pointed out that a large part of yesterday’s weakness in the outsides happened after the grains closed so we could have a little catch up to do.

Fundamentally we do have a USDA crop report that will be out next week and the market will be watching for the yields and carryout projections.  Ideas are that yields will be slashed a little in many of the grains; corn in particular; thus giving us a tighter balance sheet.  One are of concern has to be the recent price action seen in corn and crude; I read something today that crude was down about 10 a barrel while corn was up a dollar over the past month or so.   I don’t think that has added to the ethanol margins.

One risk that I see out there is that we see next week’s report show a bigger crop that what is expected; no comments at all have been that we could see an increase in yield from the USDA in next week’s report.  But what happens if we do; as markets sure have a history of doing the opposite of what many think will happen.  Plus we have the outside markets just a little nervous and the old crop corn basis is starting to turn weaker as has the Sept-Dec spread went from a big inverse to a carry. 

With the basis weaker and the board going to a carry on old crop corn one has to think we have opened a door to the old crop corn balance sheet getting bigger; that would give us a bigger starting spot on the new crop balance sheet.  

If we where to get a couple of the possible negative things happen in our market place it is possible to paint a very negative price picture despite the fact that overall today’s information has to lean towards the friendly side with the expectation of the outside market movements as of late.

Please give us a call if there is anything we can do for you.

Grain Market Opening Calls- Commentary start of August; end of bull markets?

Markets are called better this a.m. behind a strong overnight session which seemed to be lead by an agreement to raise our debt limit.

In the overnight session we had corn up 9 cents, beans where up about 15, KC wheat was 17 higher, MPLS was 16 higher, and CBOT wheat was up about 12 cents.  At 9:20 outside markets have European wheat up about ½ of a percent, crude oils is up about a dollar a barrel, the US dollar is up 294 on the Sept at 74.330, and the equities are weaker with the DOW down 47 points.

Many of our markets did end the overnight session well off of their highs as most of the wheat markets where a dime off of their highs at 7:15 and since the grains closed the outside markets have weakened up a lot; with the US dollar going into the positive, crude about 2.00 a barrel off of it’s highs, and the equities in the red; after having started up rather nicely.

Perhaps the markets are saying that this debt ceiling getting raised isn’t the best thing in the world after all as right now we have one of those trading action that is similar to a buy the rumor and sell the fact.

As for the grain markets them selves they still have overall good to friendly fundamentals based on demand growing and crop sizes not exactly much if any bigger then the demand.  If we do see a sell off in the outside markets and it get’s as bad as many thought it could have if we wouldn’t have reached an agreement for our debt ceiling there really remains huge downside risk because our biggest fundamental seems to be money flow; not supply and demand of the actual commodity. 

Basis is a little weaker over the past week or so and many spreads have widened out which is a sign of a lack of upfront demand and typically associated with bear markets.

The next big crop report is August 11^th; we have seen talk of the corn yield estimates all the way from 160 down to 150 or less.  If the outside markets and world economy’s don’t change the demand side of things; our price direction really should come down to yield; as we simply won’t have much if any if yield continues to slide; whereas a rise in yield could easily turn our balance sheets bearish.

Please give us a call if there is anything we can do for you.