Country Hedging update after today's report

Here is a very good video update from Country Hedging on today USDA Stocks and Acreage Report

Mid day update for 6-29-2012 USDA stocks and acre report day

Below is mid day update from Country Hedging's Chris Steinhoff

Crude oil is up $4.50, US$ index is 1.16 points weaker…DJIA is 220 points firmer…all seems to be a result of Eurozone bailout fund and EU banks accessing that $...Month end  and quarter end positioning is prevalent.

I’ll be brief…

Corn---report day and the market was kinda volatile for about 5 minutes on either side of the 730am release time. Acres were slightly larger than expectations and about 500k larger than in March. June 1 stocks were 500mb smaller than a year ago according to the survey anyway. Farmer hauls old crop corn, and in many instances is surprised at how many bushels he still has left!!! Amazing!!! ….Garbage into the report, garbage out….Weather still remains warm and dry with a few scattered storms on the radar moving across ILL, but not really in the areas that need rain. Outside market strength and US$ weakness also provides major support. Cash markets seem to be steady at best and exporters seem to have a hard time finding homes for trains.  Domestic users appear to be slowing down with some ethanol plants beginning their scheduled downtime sooner than planned. CN enters first notice day and delivery and finds strength to lead spreads firmer. Not much else as we enter a weekend tasselling corn amidst hot and dry conditions. Are we factoring in the worst possible corn news???

Beans---lead the way in strength on tight world supplies, strong demand and the crop most influenced by world economics. USDA found a few more acres than expected but the double crop bean  acres are at risk because of dry weather. Personally I think those acres will get seeded, but whether they have the moisture to grow is the question ? All else is quiet as farmer selling has slowed, so has farm gate trucks. Be careful on new crop purchases as X forward is inverted.

Wheat—HRW harvest expands into South Dakota with strong yields reported, quality good and protein mixed. SRW harvest moves too. Summarizing KS, it seems the harvest was better than expected volumes. MGEx moves higher and the spring wheat crop looks pretty good in most places. Acres came in about where I expected as we saw a slight increase from March intentions. Stocks surprised me somewhat as it appears the USDA or farmer did not recognize an early HRW harvest. So the next stocks # may find a few bushels. Cash markets are mostly steady. Farmer movement is pretty strong for old crop DNS and steady HRW.

We have a watch box in IN…yoo hoo

Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

www.countryhedging.com

USDA Report Day - Morning note from Country Hedging's Joel Fitch

Below is morning note from Country Hedging's Joel Fitch

Good Morning,

Estimates for the report are below for comparison. 

The report was not that interesting.  Corn acreage at 96.4 was 400k larger than the guess.  Soybean acreage was 76.1 million, which was 500k above the average guess.  As I’ve been saying this number is now the high water mark because of the weather not allowing double crop bean acres to get planted.  Spring wheat acreage was only 12 million, which is below the 12.7 average guess.  I’m a little surprised, by this, it tightens the spring wheat market a little.

Stocks were in line with the guess on corn at 3.15 billion.  Soybeans were 667 million and above the 640 average guess, which could pressure the front end against the new crop.  Q-X could see some pressure, but the bean story is strong for both.  Wheat stocks were 743 million, not much here.

And now back to weather.  NE and IA are getting scattered rain today and this system should continue over into the Eastern Corn Belt.  

Questions?  Have a great day!

Joel Fitch
Market Analyst
800-328-6530
651-355-3792
www.countryhedging.com

Grain Market Comments 6-26-2012

Another very volatile session behind weather concerns for the grains.

New crop corn managed another 30 cent or so gain after having gained 40 cents yesterday, wheat was mixed on the day weaker for most of the session but at the end of the day mostly higher by 3-8 cents, beans where a little weaker down about 12 cents on Nov, outside markets where on the quiet side of things with equities near unchanged, along with crude, and the US dollar all just plus or minus a little bit.

It is after 5:00 so our markets have opened back up and presently they are down 3-5 on wheat, beans unchanged, and corn off 6 cents.

All about weather as it is very hot and dry in many places that are pollinating corn.  With the huge rally we have had and the fact that we have a crop stocks and acre report that seems to be limit move one direction or another some good risk management is really needed in the very near term.  The problem with weather markets is they can run really unlimited; but they can also fall as fast as they go up.  Overall I think we would much rather see a rally behind solid demand versus supply destruction which is happening presently.

You could paint a couple different outcomes come later this week with the report.  One possibility is we see a bearish report that has increased stocks, perhaps increased acres, and then maybe around the same time we see moisture hit the eastern corn belt and then add in a little weakness in the outside markets and you perhaps have a perfect storm for disaster for our prices; we could easily be lower then we where when our rally started a few weeks ago.  Likely no, but possible yes.

Another possibility is we have a bullish report; acres are light, stocks lighter then trade estimates, along with supportive outside markets that stabilize the equities while the dollar weakens up and it remains hot and dry lowering our production even more.  Now with that perfect storm to see new all time highs for corn wouldn’t be a stretch;  who knows how high we could go.  Longer term the dry weather and supply destruction would probably be the worst thing as it could break some end users such as ethanol plants and kill the demand much more then we could think.  Today with the firm market it seems possible and probable; now weather it really is or not remains to be seen.

The other possibility is just a neutral report where corn prices kind of chop around like they have the last year.  Hopefully this is what happens as it gives us some chances to make good sales but also allows the end users to be profitable without destroying demand.

Bottom line is I don’t know what storm our markets will brew up next.  I just want to be comfortable no matter what the outcome is.  It might mean making sales here and there and it might mean doing things like buying puts or using min price contracts when I am developing my marketing plan.  Bottom line is we waited for months for a weather scare to give us a selling opportunity.  Today that opportunity is in front of us.  Are you going to be pro-active in some shape or manner that is making good solid business decisions?  Or will the marketing emotions of fear and greed rule out?

If you need help with your marketing plan please give us a call.

Mid day 6.26.2012 from Country Hedging's Chris Steinhoff

Risk on or risk off…which is it today? Crude oil is down 60 cents…Gold is down $18.00. silver is down 7 cents so today would be a poor day to pawn your bling bling…DJIA is 40 points lower…

Corn---In modest fund buying volume, we are firm as it is still dry and hot but some say the GFS model is becoming slightly wetter, so we’ll have to see what the noon updates do…Weather is what it is about as crop conditions decline in the ECB and the WCB looks mostly OK for now. But a lot depends on whom is looking as one can say the crop is “burning up” and the next will not see that…Hearing some ethanol plants looking at taking down time earlier than they had originally planned, so is this the beginning of demand destruction? We’ll know for sure when the end user is a seller of more corn than they are buyers. National news really hasn’t picked up on this story too much yet. WCB farmer has been an actively engaged seller of new crop but have slowed selling of old crop as basis slides weaker. I keep hearing stories of more corn in the WCB farm bins than the farmer is telling anyone, so Friday’s June 1 stock report could be interesting,..garbage in garbage out…Old crop spreads are weaker on weaker cash markets, new crop spreads are firm on production worries…May be a good year of testing today’s genetics, but 5-7 weeks without rain can’t be good.

Soybeans---choppy two-sided and now weaker as beans allow it to be a corn story today. Beans still have time to recover with some rain. Many traders expecting a decent increase in bean acres, but dryness in the ECB may be slowing the increase of the double crop beans…china and world export news is quiet. World economy also a negative impact on the soy complex. Spreads vs old crop are firm as farmer movement is very very slow. X/F is a 1 ½ inverse. Other news is quiet.

Wheat---MGEx leads the way because? Why? Crop problems? NO, demand? NO,  Farm bins are empty? NO…HRW and SRW harvest expands amidst the heat and yields are better than thought as the crop is too early and  just didn’t have enough time to get “burnt” up by the weather. KC and CME are slightly lower as all three Dec contracts have rallied almost $1.00 is about a week. Selling is steady but slow from the farmgate. Farmers seem more concerned about the few new crop bushels they have sold than selling what they do not have sold yet.

Mid day models are sshowing rain across IA into N ILL into IN…se below

Call if you need anything

Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

www.countryhedging.com

Overnight Highlights for 6-26-2012 from Country Hedging's Tregg Cronin

Below are overnight highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.121 at 82.376; NYMEX-WTI up $0.17 at $79.39; Brent Crude up $0.72 at $91.73; Heating Oil up $0.0153 at $2.5538; Livestock markets are mostly weaker; Gold down $3.00 at $1584.50; Copper down $0.0040 at $3.3215; The Euro and Franc are softer, but the other major currencies are firmer; Cotton and Lumber are weaker; S&P’s are up 4.50 at 1311.00, Dow futures are up 37.00 at 12,468.00 and Treasuries are weaker.

Asian equities ended lower, but European and US stocks and futures are mostly better ahead of some key economic data here in the US.  Pressuring to trade was a selloff in European debt and a rather poor bond auction for Spain.  While watching its borrowing costs drop most of last week, Spain’s 10-year treasury yield is up 7.6bp to 6.633% this morning.  Even Germany’s borrowing costs are up this morning with her 10-year yield at 1.515%, up 5.3bp.  None of the aforementioned have given energy traders much to crow about, and crude continues to languish below $80/bbl.  Later this morning we’ll get the Case-Shiller home-price index for April and later consumer-confidence data for June.

Rainfall in the last 24 hours consisted of some very light, scattered showers in west river SD and some additional rain along the MT/Canadian border.  The current radar is clear aside from some rain off the PNW and more heading up the East Coast.  The 5-day forecasted precip map shows the best chances from Sioux Falls to the Quad Cities with the potential for up to an inch to fall in SE-SD.  The rest of the Midwest will be quiet as Debby looks to move up the Eastern Sea Board.  The 6-10 day maps were mostly clear with the exception of a decent storm across NE.  Yesterday afternoon’s maps showed rain in the ECB during the 11-15, and the overnight maps are once again putting rain there.  Again this is a bit far off to have much confidence.

Grain and oilseed markets were mostly choppy overnight, although both did open sharply better at 5:00 last evening following the worse than expected condition ratings from the USDA.  It seems we have a serious supply issue brewing with several analysts dropping their national average yield to 156bpa with some already talking of yields angled towards 150.  While we have the buffer of more acres this year, which probably go up on Friday, we can’t afford to have a repeat of last year in terms of yields in the major production states.  Even more salient is the fact soybean yields are probably headed lower, the one commodity which absolutely had to have trend yields to prevent serious rationing.  Wheat markets are leading losses this morning as it has the most comfortable balance sheet.   

Overnight headlines included one from Cairo which said Egypt’s state wheat buyer has enough supplies for at least 7-months and is looking at a new tender for delivery in August.  There was another headline which said both Koreas are suffering their worst drought in a century, with one major cooperative farm saying they would lose half their corn without imminent rain.  South Korea is a major buyer of US grains.  On yesterday’s crop progress report, thought it worth pointing out IN lost another 10% G/E on corn to put them at just 27% G/E vs. 57% last year.  IL was down 13% to 37% G/E vs. 64% last year.  CO/TN/KY/TX also saw double digit corn declines.  Conditions are now the worst for late June since 1993.  The soybean condition rating is also the lowest since 1993.  Noted crop scout Dr. Cordonnier traveled throughout Indiana, Ohio and E-IL over the weekend with his trip summary stating conditions looked like late August, and were worse than he expected.  “Most crops have already suffered yield loss and will continue to with current weather.”

Open interest changes during yesterday’s session saw mostly short covering with Chicago wheat down 3,550, corn down 4,920, beans down 2,750 and oil down 6,430.  Meal was up 5,990 contracts.  There are still 120,000 contracts remaining in July corn.  China’s markets were mixed overnight including beans down 7.75c, meal down $2.10, oil down 47c, corn up 1.25c and wheat up 2.50c.  There were more articles overnight talking about the lack of profitability in ethanol production.  Unfortunately, the lack of production appears to be rolling forward into new crop.  Remember, we have millions of gallons of RIN’s which can be used in place of actual ethanol production should margins remain negative or corn become hard to source.  Declining crude and rallying corn can’t continue forever.

Call things mixed to start, although corn and beans are both pushing positive as we cross 7:00.  If outside markets can stabilize and even rally, our markets could tack on additional premium.  Producers want contracts with a “6” on them, although that didn’t offer a great deal of resistance overnight.  Demand is iffy on corn, but supplies are declining.  Soybeans have both, and wheat has the potential for higher exports if conditions continue to decline in the Black Sea and Australia.  Protect margins and take profits.

Trade as of 7:05

Corn up 1-5

Soy up 1-3

Wheat down 11-12 WW/ up 2 SW

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Concept of rolling covered calls for grains

Below is an example of what one might do if they sold a covered call in soybeans.

On March 1st July soybeans where trading at about 13.30; on this same day you could have sold a 14.00 July bean call for about 38 cents

fast forward to today June 20th; July beans are trading around 14.46; so your call is now in the money.  Good thing versus beans going down and never getting to the 14.00; but it also means that perhaps you sold too early if the rally is going to continue.

So what now?

One strategy that can be used is what is referred to as rolling out the short call option.

For about the same price you have a couple different options that allow you to get a higher futures price despite the present inverse.

First off you buy back your short 14.00 July call and then you go and sell one of the following for about the same price.

You can sell the 14.60 Sept call for the same price as the July 14.00 call; thus raising your max price by 50 cents; the bad thing is you have opened back up downside risk and passed making a sale that at one time was a very good price target.

You also are going threw an inverse that makes this move more tricky as the Sept futures are about 35 cents less then the July futures.

The other option is rolling out to a Nov 14.80 call for once again about even money.

The thing that rolling out the option does is it gives you a chance to get a better number then your first thought when you sold the call option back in March.

When you sold the call option on March 1st you where hoping to make a sale about 70 cents above the market.  Via rolling you take a short call option from nearly 50 cents in the money to nearly a dollar out of the money in the Nov 14.80 call example from above.

Keep in mind that with the rolling of a short option you are also opening up downside risk and not making a sale that at one time was very good.

Neutral Nick update booking more profits.

Well we are nearing July option expiration; so it is time for our mock trading character Neutral Nick to update some positions.  Take profits on some positions and add some more positions in his attempt to collect premium and dollars.

So to start with today our trading character is updating his July bean positions; pulling them off a few days ahead before they expire.  The good news is he is up about $250,000; minus about $12,000 in commissions he is net up about $238,000 after he pulls his positions.  The bad news is that if he where to leave his positions on and July beans stay where they are to up just slightly he could add nearly $150,000 more to his bottom line.  So why not leave positions until things expire.  One word

Gamma; his delta position could swing big time if we have more volatile days like today in the next couple of days.  With today's strong market he is up much more then he hoped so he doesn't feel like risking exposure should we have two or three more days like today.

Here is a look at his profit and loss graph and it shows he is giving up a little potential income; but it also shows that should we move out of the range show (plus or minus 40 cents) he would be worse off then he is today.   Bottom line he is taking risk off the table as his game plan isn't and never really has been to try and out guess the market but to sell volatility and time premium.

For July corn he is taking off all of his positions as well; spending about 16,000 in commissions but locking in profits of 166,000 or net $150,000.

You can see by the below graph that there is not much left to gain and still plenty to lose should corn come under pressure in the next few days and that risk is once again why he is locking in profits.  No reason to get greedy.

A couple weeks ago Neutral Nick locked in his profits for wheat which can be found here http://grainmarketingplans.blogspot.com/2012/06/neutral-nick-update-as-he-locks-in-more.html

With the above beans and corn trades he has now locked in net after commissions of profits over $500,000 off of the July options and another 200,000 or so off of the May options.  So net he is up over $700,000

His remain positions are currently up about 154,563; but it is now time to add some adjustments and try to do more of the above in the future.

For his trades to keep things simple he is selling 40 of each of the following

6.50 Dec corn calls
5.00 Dec corn puts

6.50 March corn calls
5.00 March corn puts

15.00 Nov bean calls
13.00 Nov bean puts

15.00 Jan bean calls
13.00 Jan bean puts

6.50 CBOT Dec Wheat puts
7.50 CBOT Dec Wheat calls

6.00 CBOT March Wheat Puts
8.00 CBOT March Wheat Calls

Generic theme of the above that he sold is we are close to the middle with the present price; so he is trying to continue to sell time and volatility premium without having a strong market direction bias.

The below screen shots show all months for the various commodities with the new trades included

Grain Market Comments 6-18-2012

Markets closed firmer across the board today behind dry and hot weather.

Corn was up 20 on old crop, new crop corn was up 28, beans where firmer by 8 cents on old crop, new crop beans where up 25 cents, KC wheat was up by about 21 cents, MPLS was 12-15 higher, CBOT wheat was up 21, equities closed mixed with the DOW off by 25 points while the NASDAQ was firmer, crude was off 70 cents a barrel, and the US dollar up 330 on the cash index at 81.957.

With the mixed to weaker outside markets all one can really say for the grain markets today is impressive.  But keep in mind where these markets where just last week; so maybe I should say impressive one day price action as most of our markets are still well below last week’s highs.

This afternoon we had crop conditions and this is really what helped our price action out today.  Not the new numbers that saw decreases in the conditions this afternoon but the stress the our crops are under from hot and dry weather with more forecasts calling for the same in many parts of the eastern corn belt; at a time when some area’s are starting to pollinate. 

The thing about weather driven markets is they can be extremely volatile; give it all back and then some in a hurry or run for an extended period of time.  They are not for the tame at heart.  In regards to marketing grain during a weather rally usually people are making comments that once we get a weather scare I will make a sale and then it happens typically fear and greed keep the sale from happening.  Fear that they are being effected by the weather rally such as experiencing drought or greed from the idea that the prices will run for an extended period of time and no one wants to sell to early and miss the 2008 spring wheat type of rally.  I don’t know if today’s bounce was the start of another big rally for the grains or just another selling opportunity in a longer term bear market.  I do know however that price bounces give producers opportunities to help manage their risk.  If you need help in managing your risk or looking at a grain marketing plan please give us a call.

As mentioned above crop conditions where down this afternoon with corn conditions down 3% to 63% G/E.  Soybean conditions where down 3% also to 56% G/E.

Corn basis is under pressure and very volatile as many bids are in the process of rolling to the September futures.  Look for our local basis to see plenty of pressure because as of this moment our two main buyers have no bid for corn until new crop.  One of the ethanol plants has to buy more if they run at full speed; but if the scale back they probably have coverage to get until new crop.  The other still has to buy for August September; but only if they run.  Talking to them it looks like they have no coverage but with margins don’t have a lot of interest buying either.

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

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670

605-295-3100 (cell)

605-258-2166 (fax)

jeremey.frost@chsinc.com

www.midwestcooperatives.com

http://grainmarketingplans.blogspot.com/

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Mid Day Report from Country Hedging's Chris Steinhoff 6-18-2012

Crude oil is $1.00 lower…Gold  is $2.00 lower…Greece and now other EU countries have their hand out too…DJIA is  down 4 points…US$ is 0.300 firmer

Corn----modestly higher early, then the pit opened at 930am, volumes increased and buy paper pushed things higher, now pressing 18 cents higher. Parts of the ECB are critically dry, not having seen any substantial rain for 5+/- weeks and some of this crop gets ready to tassel. IN missed most of the rains and rain chances the next few days is hit or miss. Parts of ILL, WI and MN are sitting in very good shape…so the 166bpa USDA yield estimate is getting harder to achieve by the day and it was a lofty # to begin with as that seemed unattainable from the beginning as these monster yields the seed corn companies keep promising never seem to show up. But this year the US farmer had the $ to spend, and spend he did as fertilizer and micro nutrient salespeople should be getting some good commission checks. This spending may surprise everyone on yields, but we will have to wait and see on that. Farmer selling is relatively slow as they want $7.00 or seem willing to sit on the old crop, fully aware of the inverse. At least for now!!! USDA acres report in a few weeks and 96 mil or 97 mil or 95 mil may get trumped by weather! New tin piggy banks provide a lot of storage capacity. Spreads are mixed as N/U is steady/firm at a 70 inverse. The N/Z is a 72 ¾ inverse as the U/Z narrows toward even $ on the early harvest/crop potential. . Z/H is a 12 ¼ carry and the Z/N is a 26 ½ c arry. Hearing some ethanol plants are slowing or shutting down ans margins are poor and origination is tough. Export inspections of 24.7mb is behind the 33mb weekly pace needed.

Soybeans---Double digits higher but well off today’s highs. Acting to follow corn and bean weather is the same as corn weather. Plus many believe Brazil is nearly out of beans, so I guess they didn’t have muddy dirt roads to truck these beans over this year in record time. China has been quiet as they want to sell more soybeans from reserves. US acres report on June 29 may be a surprise, did the US farmer switch acres or just find a way to plant more of everything this year? Many bean fields are still in their ugly phase but rain and heat can do wonderful things to a growing soybeans crop. It appears there is plenty of heat coming but rain is the large ?...Farmer sells a few and elevators sell some basis length to the processor. Shuttle qtys are getting hard to come by in the WCB. Sounds like ECB may still have a few beans left and with the crop dry, selling may be slow too. Spreads are slightly weaker. N/Q is a 16 inverse. N/X is a 56 inverse and the X/F is even to 1/2 carry…Export inspections of 7.9mb is slightly behind the new export pace needed to reach 1.335bb

Wheat---HRW harvest is in full swing in Kansas. Hearing reports the mills do not like the milling/baking quality of this crop even though quality is very good and proteins are decent. But not hearing this from everyone so I do not know what or if there is an issue or is someone talking position?????? DNS crop looks fabulous in most of ND, what will USDA say on acres. Hearing a lot of barley acres got planted because growing contract were quite high priced. MGEx is inverted while KC and CME are carries. Bids roll early and people panic. A lot of new tim piggy banks in wheat country too, so what is actually still on farm? More than people think I would guess.  World demand remains steady with Russia/Black Sea having been a concern since last fall’s seeding. Aussie dryness a concern to some too as they finish seeding. EU winter wheat appears OK for now as they get ready to harvest. Argentina seeds wheat too.

…current radar moves a system thru Michigan and scattered across MN and WI…ILL and IN may not get much rain the next 24 hrs…see DTN map below…next 5 day map from NOAA also included

Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

www.countryhedging.com

Morning Highlights for Monday June 18 2012 from Country Hedging's Chris Steinhoff

Crude oil is down 70 cents…gold is $5.50 lower, silver is 30 lower…Greece situation is still quite fluid but they did have elections…Who is next inline for a bailout??? Nikkei , Hang Seng and Shanghai were firm…Dow, Nasdaq and S&P futures are lower…

Corn…rains are light in Indiana and the forecast doesn’t look real good this week..meanwhile the ECB looks very good in many areas

                …some ECB corn will begin pollination soon and some of that corn is under stress

                …weather is becoming critically dry in parts of the ECB

                …last Friday Informa raised their acres to 96.759 million.

                …farmer movement is slow, but at some point the inverse will disappear

                …keep hearing reports of small ethanol plants shutting down until margins improve…...corn origination is difficultn

Old crop trading up 5, new crop trading up 10

Beans…mainly higher overnight as dry corn weather = dry soybean weather

                …higher on the Greek election? Sure let’s go with that.

                …China demand? Seems to be kinda slow lately, as they try to sell reserves

                …informa acres guess is 75.959

                …supplies are tight in SA too

Trading 10 to 15 better…

Wheat…US SRW and HRW harvest moves forward adding to US supplies

                …there are scattered concerns throughout the world like Argentina, Aus, Russia etc etc

                ..Iraq bought some wheat over the weekend, but not from the US

                ..india and iran are in talks for some wheat business

Trading 3 to 8 higher…

Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

www.countryhedging.com

Overnight Highlight's from Country Hedging's Tregg Cronin 6-14-2012 Firm markets to start

Below are the overnight highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.035 at 82.093; NYMEX-WTI up $0.12 at $82.74; Brent Crude down $0.21 at $96.92; Heating Oil up $0.0018 at $2.6127; Hogs are firmer and Cattle are mostly weaker; Gold up $1.90 at $1620.00; Copper down $0.0010 at $3.3390; The Yen and Loonie are firmer while all other major currencies are firmer; Cotton is better, but most of the softs are weaker; S&P’s are up 0.75 at 1316.25, Dow futures are up 11.00 at 12,512.00 and Treasuries are a bit weaker.

Headlines on financial websites read something like this today: “Spanish Crisis Deepens.”  Yesterday, Spanish government bonds saw their yields rise to euro-era records during auctions for 10-year debt.  The yield hit 6.96%, dangerously close to levels considered unsustainable, following a report which said Spanish housing prices fell 12.6% in the first quarter.  Moody’s became the latest rating agency to downgrade the country, all of which increases the odds a bailout won’t be far away.  The terrible housing market in Spain is what makes their situation larger and potentially more serious.  Obviously this is in addition to the fact Greece will hold her latest round of elections Sunday which likely aided in the selloff yesterday afternoon.

Rain in the last 24 hours was confined to two areas in the US with ND/SD/MN/MT seeing rains as well as places in TX.  Looking at the rainfall maps, it looks like the two dry areas in ND (SW and SE) should have received some nice 0.25-1.00” rains.  Totals in S-OK and TX looked similar.  The system in the northern plains is moving into N-MN at the moment and is expected to bring severe weather to the Twin Cities tonight and tomorrow.  The 5-day forecasted precip map shows heavy rains on a line from S-NE to the UP of MI with totals across IA and WI as high as 3.8-4.0” while the Dakotas/KS/MO/MN should also see good rains.  N-IL should see some measured precip, but the storms don’t look to get into the driest areas of IN/OH.  NOAA maps are looking a bit less warm and a bit less dry today with normal weather forecast in the 6-10 and 8-14.  Private models generally agree with rainfall amounts and placement in the 6-10, although push moisture into the S-Midwest for the 11-15.  The better chance of rain next week for IL/IN/OH will keep prices under pressure.

Grains are bouncing a bit overnight while the soy complex is fairing about like it did late in the session yesterday.  The impressive cash markets won’t seem to let corn die a slow death into July delivery with the type of premiums being paid along the river, at ethanol plants, off the west coast and in feed lots.  Unfortunately, with World FOB prices being what they are, the hefty basis levels aren’t helping our corn get any more competitive with Brazil, Argentina or Ukraine.  Luckily, domestic demand remains firm enough, and producer selling slow enough to support things.  Weekly ethanol production continues to motor along, beating expectations and grinding more corn than we need to.  The liquidation in the soy complex seems speculative and tied to the shaky outsides.

From China, we see the government sold 17,922MT of soybeans from reserves in an auction of about 600,000MT.  The sales are a bit higher than last week’s, but the demand for these old, poor quality beans is apparent, especially given US and SA beans are price competitive.  India said overnight they will allow 2MMT worth of wheat exports from government reserves, but at no less than $228/MT FOB, or around $6.20 bu.  Also from New Delhi, the Indian government approved increases in the minimum purchase prices for rice, soybeans and corn, a move which is sure to keep food inflation high.  Overnight, Taiwan bought 47,050MT of US-DNS at a price of $333.94/MT FOB as well as some HRW at $301.35/MT FOB.  Japan bought 147,118MT of wheat from the US and Australia, but mostly US.

Open interest changes during yesterday’s session included an increase of 6,441 wheat and 4,025 soybeans.  Corn was down 1,585, meal off 1,038 and oil down 7,482 contracts.  Chicago wheat closed almost unchanged which is interesting given the big O/I increase.  Corn looks like short-covering in the July as people blow out ahead of delivery.  Chinese markets were down sharply with soybeans off 20.50c, meal down $6.40, oil off 107c, but corn was unchanged.  The Reuters commodity wire carried a couple stories worth noting last night.  First, the scramble for US corn has heated up, pushing CIF basis to the highest price in a month.  They also said estimates from 15 analysts polled have dropped the US national corn yield 3% to 161.5bpa vs. the USDA’s current 166bpa.  Argy has slowed soy crush.

The firm cash markets looks like they’ll be enough to propel us higher today, at least in the grain markets.  It should be noted, however, outside markets appear to be easing, and tensions will remain high as we head into the weekend and prepare for Grecian elections.  The speculative length is still in the soy complex, and when they liquidate it will be felt their first.  Specs are near flat or even a bit short corn, and back to being sizable shorts in Chicago wheat.  Weather remains a big driver, and right now it looks more favorable.

Trade as of 7:10

Corn up 7-8

Soy down 2-5

Wheat up 4-7    

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Mid Day Comments from Country Hedging's Chris Steinhoff 6-13-12

Below are mid day comments; they are from Country Hedging's Chris Steinhoff

Crude oil is up 30 cents as draw was a little larger than expected. …gold is up $8.00, silver is up a penny or 2….DJIA is 14 points lower as JP morgan exec attempts to explain things to congress…

Corn—Stronger CN(spot business? Or guldmon roll over?….the the rest is lower led by CZ as the N/Z firms 2 dimes as some forecasters are calling for a weather pattern shift to better rain chances the LH June timeframe. Spotty rains have fallen in parts of the ECB the past week, WCB coverage has been decent with more on the radar screens this morning and possibly for the next 5 days. The ECB looks to have a good chance Tuesday through Thursday of next week. Computer $ still sees a 1.8bb carryout and 166bpa yield and signals sells. Even paper directed by humans is selling without much buying to lend support.USDA will give us acres and June 1 stocks on June 29..could get interesting…. US still has a chance at a very good yielding crop and the USDA says it is 19bpa larger than last year’s crop. Warm nights were the excuse last year…farmer is a slow seller but keeps showing his hand alittle in that he still has old crop left at home to sell? Hummmph? Someone will get caught carrying old crop into the inverse. Some endusers cover July and August needs vs CN so there may not be much of a reason to be bidding against CU for long if at all. Be carefull on your hedges. Z/H is a 11 ¾ carry and the Z/N is a 26 ¾ carry…Guldmin Saks talks their position.  Weekly ethanol production was higher week on week so ethanol plants do not appear to be slowing down or running out of corn, at least not on June 13.

Soyabeans---getting hit hard as fund selling is quite heavy amid slow cash movement. USDA says we are in for tight soybeans supplies for the next couple of years, but traders of the corn/bean spreads drive it this way then that way as they keep the range and try to make $ at it. Beans lose on corn today! Some are still talking 3:1.  If corn weather is to improve so will bean weather. Many expect USDA to raise acres on June 29, but that will all hinge on how the US farmer filled out his survey, and you never know on that!!! Farmer selling is light and commercials price beans to the crusher. Overall news is quiet and so is China, but they are the world bean market and no one really knows what is going on there currently or in the future, and trying to guess is futile. Spreads are weaker as N/X is 4 weaker at a 94 ¼ inverse after seeing $1.00 earlier today…X/F is a pennhy carry…

Wheat---HRW harvests finds a pretty good crop that burned up in Kansas, average or better, but yields are variable…World carryout is less than it was 2 months ago…Supply the reason, what happens if demand picks up? Could get interesting…spring wheat cash markets roll to basis MWU. Not feeding much wheat in US and will world slow down and wheat/corn spread? Aussie says their crop is going to be alittle smaller. We know black sea is because of dry fall and tough winter…India has wheat to sell but is not a traditional big seller. US has a projected stocks/use of 29%...Spring wheat crop looks like it is getting larger. KC and CME are carries, MGEx inverts further, is it because of all this demand we have or is it someone playing games causing panic?

Better get this out before something else changes on me. Call if you need anything

Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

www.countryhedging.com

USDA Supply and Demand Report Comments - Grain Market Comments

To start with today was a USDA report day and here is a recap of the report versus last month and versus trade estimates.  You can see that we got neutral to bearish report for corn, neutral to wheat, and neutral to friendly beans.  Price action indicated we had a bearish report for wheat; but the numbers really didn’t indicate that.  But wheat really has been a follower for some time as corn seems to remain king; especially on crop report days.

June 2012 USDA Supply & Demand Worksheet / Trade Guesses

2011/12 Ending Stocks Estimate (billions of bushels)
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	0.851	0.821	0.688 - 0.901	0.851
Soybeans	0.175	0.189	0.130 - 0.218	0.210
Wheat	0.728	0.753	0.727 - 0.775	0.768

2012/13 Ending Stocks Estimate (billions of bushels)
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	1.881	1.750	1.223 - 1.950	1.881
Soybeans	0.140	0.143	0.052 - 0.220	0.145
Wheat	0.694	0.714	0.647 - 0.772	0.735

2011/2012 Global Ending Stock Numbers
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	129.19	127.630	126.000 - 128.800	127.560
Soybeans	53.36	52.090	51.000 - 53.000	53.240
Wheat	195.56	197.124	196.000 - 198.835	197.030

2012-2013 Global Ending Stock Numbers
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	155.74	149.745	145.000 - 154.000	152.340
Soybeans	58.54	58.140	55.700 - 62.000	58.070
Wheat	185.76	184.791	180.800 - 190.674	188.830

As you can see we continued the trend of disappointment for the corn bulls with this latest USDA report as we once again left the numbers unchanged from last month.  The only change was a decrease in exports that was offset by an increase in ethanol usage.  No changes where done for new crop corn balance sheet at all.  It feels like the trade doesn’t believe the 166 bushel yield for new crop corn that was left unchanged; but eventually the trade will have to start believing or the number will have to come down.  I would say that we are very high priced if next January’s report shows the type of yield that is presently being used; so keep that into consideration as we move forward.  From what I hear most in the industry are using a corn yield someplace between 155-163.  Bottom line if we end up close to the 1.8 billion bushel carryout that is presently projected look for prices to drift lower.

World corn stocks actually rose from last month for both the current marketing year and next year’s projection.  Another bearish headline that is being partially offset by the ideas that yields and crop production potential isn’t near where the USDA pegged it at.  But bottom line is the same here plenty of risk if the USDA doesn’t change and ideas have always been that big crops get bigger……..hasn’t it?

Bean numbers where good with the decrease in ending stocks for the US both this year and next; but the world numbers where increased. 

Wheat numbers still say that there is plenty of wheat in the US and in the world; but the trend is going the correct direction.  Less then last month in both the US and in the World for both last crop year and the present crop year which started June 1^st. 

Below is a little history of the crop supply and demand numbers; it comes from Mike Sperry……..the big think on it is looking year over year and month over month.  You will see that we now have a US and World wheat carryout numbers as low as they have been since 2008.  While we have corn numbers potentially as high as they have been since 2000 in the world with the US numbers pegged at their highest spot since 2005.  Bottom line is if those number or these trends don’t change things for corn price outlook are not very good.  I am in the camp that doesn’t believe the carryout or yield that the USDA posted today; but the below trend really shows one that there is plenty of risk so I am also in the camp of practicing good risk management.  Making some sales on the bounces and maybe buying some puts for protection or selling some covered calls.

World	/	US	Ending	Stocks	6/12/2012
Data	Provided	by	Central	Plains	Services,	L.L.C.
1	Metric Ton of corn = 39.36825 bu				Metric Ton of Wheat/Soybean = 36.7437 Bu
All	Ending	Stocks	expressed	in	Billions	of	Bushels
Year	Corn			Soybeans			Wheat
	World	US	Yld.	World	US	Yld.	World	US	Yld.
’00	6	1.899	1			-	7.5	0.876
’01	5.8	1.574	1.2			-	7.4	0.687
’02	4.8	1.087	1.5	0.178			6.1	0.491
’03	3.6	0.958	142.2	1.2	0.112	33.9	4.8	0.547	44.2
’04	5.1	2.113	160.4	1.8	0.256	42.2	5.6	0.54	43.2
’05	4.9	1.967	148	1.9	0.449	43	5.4	0.571	42
’06	4.3	1.304	149.1	2.3	0.574	42.9	4.7	0.456	38.6
’07	5.1	1.624	150.7	1.9	0.205	41.7	4.4	0.306	40.2
’08	5.7	1.673	153.9	1.5	0.138	39.7	6.1	0.657	44.9
’09	5.7	1.708	164.7	2.2	0.151	44	7.4	0.976	44.5
’10	4.9	1.128	152.8	2.6	0.215	43.5	7.3	0.862	46.3
’11	5.1	0.851	147.2	2	0.175	41.5	7.2	0.728	43.7
’12-’13 May Est	5.997	1.881	166	2.134	0.145	43.9	6.913	0.735	45.7
’12-’13 June Est	6.131	1.881	166	2.151	0.14	43.9	6.826	0.694	45.4

Question; anyone know what our low price has been since 2000 for corn?  Under 2.00 on the board; even in 2005 we where under 2.00 at one point in Dec of 2005.  Is our present pegged world corn estimate higher today then it ended up being when we where under 2.00 a bushel on the board for corn futures?  Yes it is.  Therein lies our risk

I don’t want to come off trying to tell one to panic sell as I have mentioned numerous times I am not that bearish; but I do want to come off as telling producers that we have perhaps more price risk then one might realize.  So if you need help marketing or want to look at some protection strategies please give us a call.

At 1:20 we have our markets show old crop corn down 9 cents, new crop corn is off by 13 cents, old crop beans are up 11, new crop beans are up about 6 cents, KC wheat is off a dime, MPLS wheat is off 12-15 cents, and CBOT wheat off 12 cents.  This are not the closes and the grain futures will be trading for about 30 minutes or so; but the above should be close to the settlements.

Outside markets are also still open but as of 1:30 equities are firmer with the DOW up about 100 points,  crude up about 70 cents a barrel, the US dollar near unchanged, and gold up 9.00 an ounce.

A little disappointing for the grains is the fact that we couldn’t brush off the bearish USDA numbers and trade positive for corn.  Perhaps if we consider the fact that we where not down the limit given the difference between new crop corn projected carryout versus the estimate you could consider today a small victory for bulls; but overall disappointing; nice to see the outside markets stabilize at least for a day.

As we go forward weather will be extremely important but it might be on the bulls to prove the USDA wrong, also important will be the outside markets and the June 29^th stocks and acre update. 

One thing that some have talked about is that they look for the USDA to cut yield in July but keep overall production for corn near unchanged behind ideas that the good spring allowed more corn to get planted.  We also have to remember last year’s stocks number for corn; one that caused July corn to be down over 70 cents a bushel.  Cash markets today and really all year have felt tighter then they did a year ago; but there will be the risk that our high prices or strong basis has curved some demand.  There might also be some risk out there that ethanol plants are much more efficient then they used to be; perhaps the 2.7 ethanol to bushel coversion get’s changed sometime?  Locally I know we have shipped milo to ethanol plants that never used it before and that means that they are not using as much corn.

The big thing that the markets will watch for fundamentally is if we do cut corn supply how much will we cut corn demand?  If you use some of the corn yields that some in the industry have thrown out there with the present demand forecast it is easy to get bullish in a hurry.  But ECON 101 should remind us that less supply also equals less demand; and that brings us back to what happened last July high prices curved demand and stocks came in higher then expected as we went from below 700 million bushel for a projected carryout to over 1.1 when all said in done on the September stocks report.

Don’t forget that we will have our weekly MWC Grain Marketing Round Table tomorrow at 3:00 in Onida; as we will discuss today’s report as well as go over charts and possible strategies to consider when pricing your crops.

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