What did Friday's report do for the price out look for grains?

What did Friday's USDA report do for the price outlook for the grains?

My opinion is that we really opened some doors to possibly much higher prices in the future; but before one gets too bullish we still need to have a couple things happen.

First off we can't see a bearish report on Oct 11th; perhaps something that explains the bullish report we seen on Friday when the USDA came in well below trade estimates for both corn and wheat stocks.  From what I have read the most ever below a trade estimate.

So I think our first risk will be some weird Oct Supply and Demand report that explains a little what happened in the last quarter.  Perhaps there will be no explanation and in that case we still have some risk.  The risk being yields come in much bigger then expected or demand is cut more then expected.  I could see a little bounce in yields just from human nature of over reacting and the fact that it seems like yields are slightly better then expected; but are they better or worse then what the USDA expected?

If we can get by the Oct 11th USDA hurdle; or next or perhaps day to day hurdle will be the outside markets and global economic picture that can have just a huge influence on what is probably the biggest fundamental factor out there.  Money flow via the funds; we don't need to give them a reason to step aside and put money under a mattress so to speak.

Next and probably what most important is going to be demand.  Stages are set for a very tight starting spot for corn and the wheat feeding the last quarter was just huge and we all know the soybean demand situation that has us just a few short weeks into the current marketing year at nearly 80% of goal.

So if demand isn't curbed, and if it can stay strong and pick up some speed (especially needed for wheat) then the upside potential was really opened back up on Friday.

Where could we go?  Hard to say as I mention above there are some hurdles that need to be jumped first; but if we can get past them the area we could go is that area where demand slips or ECON 101 jumps in and fixes our problem.

As for marketing we need to realize that the market will fix it self and the stuff I am referring too isn't new news; it's old and potentially built into the present price.  So as always use a game plan that leaves you comfortable and spreads out and protects your risk should one of the unknown black swans come up at any time.  Bottom line is I would be playing things from the long side but at the end of the day using risk management that is taking risk off the table at good profitable levels is just what a person is suppose to do; with the present outlook should one be a little slower in making sales.......probably..........but don't do nothing either; be pro-active and manage risk.  Keep in mind that many that buy corn as example can't buy it and make money; don't still have nothing sold or protected should we see producers - end users profit roles reverse.

Closing Comments 9-26-2012 .......are lower prices curbing any demand?

Markets closed down hard behind fund liquidation and technical selling; even a slight increase in producer selling as some advisors put out sell signals after our markets failed to hold some chart support.

Corn was off 19 cents, beans were down 39 cents, KC wheat was off 17, MPLS wheat was down 13, CBOT wheat was off 17, crude off over a dollar, equities weaker with the DOW down 44 points, and the US dollar was firmer.

Just a horrible day for the grains; the bad thing is no real news behind the melt down.  Rather just a session of Risk-Off, we do have harvest happening with overall what one would say as better then expected yields, month end, quarter end, and the big USDA report on Friday that each of the last couple of years has been very bearish but also marked the lows.  Part of the reason for all of the risk off is just the simple fact that the funds own plenty of grain.

Basis is defensive for the row crops; buyers just don’t seem to be interested as many just have no bids.  Now I don’t know that demand isn’t there; I think we just have momentum going one direction and the buyers sense that so they are pulling away; like they probably should and just like producers do when the markets are going the other direction.  Now when we bounce or how high we bounce is partially dependent on whether some end users are scaling in; using a little risk management practicing and cost averaging as we go down.  This statement is probably more for sunflowers then it really is for corn and beans; as the fundamentals for both corn and beans still don’t support a long term price break; the fundamental supply and demand both say that we really need to curb a little demand and ECON 101 tells us that lower prices don’t curb demand rather they add to demand.

Another question we really need to ask our self is are yield really that much better than expected?  If the answer is yes and we also have a lot more supply then what we have thought for the past several months then perhaps our markets are fair priced or even expensive?  I don’t know the answer to this; my gut says that longer term we have some upside in our markets; but I still think we have rather good and very profitable prices that need to have the risk managed. 

Watch the report on Friday and hope that if it is bearish it will be the start of a sell the rumor; but the news.  But bottom line we are going to need to find some demand or a good headline if we want to get the fund back interested.  Money flow trumps supply most days and right now money is heading to the sidelines.

Technically the charts have done some damage and have really opened up more downside potential.  But at the same time they are very overdone and due for a bounce.

Once in a while we talk about what to sell and what to store.  The corn wheat spread has widened back out; to where it now makes sense to look at selling a wheat and perhaps holding corn; at least they are not par like they were a few months ago. 

One other thing that is quickly getting out of whack is sunflowers – millet.  From what I know I don’t think people will buy at par; at par they will buy sunflowers.  Now we have sunflowers under millet; longer term I think that is bullish sunflowers; but at the end of the day we still need overall demand and right now that industry is slow.

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

Thanks

Morning Update 9-26-12

Markets are a little defensive to start the middle of the week.  Many are testing some key support areas on the charts and some have broken down to new lows.

Around 9:20 markets have corn off 11-12 cents, beans down 24 cents, KC wheat off 9, MPLS wheat off 9, and CBOT wheat down a dime.  All of the grain markets are within a few pennies of the lows.  Outside markets have the equities flat with the DOW off 5 points, the US Dollar firmer by 300 at 79.875 on the cash index, crude off nearly a 1.50 a barrel, and Gold off about 15.00 an ounce.  European wheat is about unchanged.

There is a wheat tender out by Egypt but it looks like it will go to the French; it does look like the US is getting close to being competitive and from what I read the US SRW offer was actually lower than the Russia offer by about $16 a tonne.  Some of my sources do say that the French wheat is about exhausted.  Bottom line is we still need to see the US start to get some business before we can get too bulled up.

Most Australian crop estimates remain in the 20-20.5 mmt range; well below USDA estimates.  There is some rain in the forecast for both Australia and parts of the HRW belt; comments are that the rain might be too late in parts of Australia.  There was also a comment of cold snap effecting wheat in Argentina.

Despite some bullish type news wheat remains stuck in its recent trading range; dragging it down is the row crops today.

Corn has broke the lows from the past couple weeks in this morning’s trading; leaving it’s charts vulnerable.  The same has happened on beans; new lows for the move.  Perhaps this technical weakness leads to more fund selling as we approach end of quarter, end of month, and the USDA report. 

In theory the price break should help out our overall supply and demand situation; as it should add or at least stop curbing demand.  With the present tight fundamentals I don’t think one should get too bearish; but keep mind there are so many changing factors and at the end of the day if money flow wants to exit or if some world economic meltdown happens it really doesn’t matter how much, corn, wheat, or beans we have or don’t have.  If things are actually super tight and the board see’s extreme pressure continuing then basis will eventually do the work.  Right now basis for the row crops is defensive; many areas have no nearby bid on beans. 

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

Thanks

Closing Comments 9-25-2012 a few days ahead of USDA Stocks Report

Markets closed the day rather choppy; finishing on both sides of unchanged in a non-eventful market day.  Filled with talk of better than expected yield reports and position squaring ahead of the month end, quarter end, and the big USDA report that will be out on Friday.

Corn was down 1 on the nearby while Dec 2013 corn was up a penny, beans closed 1-3 cents firmer, KC wheat was off 2 pennies, MPLS wheat was off 8 cents, CBOT wheat was of a nickel, equities where lower with the DOW off 101 points, US dollar bounced to 79.682 on the cash index, and crude was off about a dollar a barrel.

Not a real eventful day; technically we held the recent trading ranges we have had and today’s price range was one of the more quieter ones we have seen in some time.  Typically inside days or consolidation periods act like springs or coils wrapped up; the tighter they get the more the eventual breakout bounces.  In our case we really don’t know where the breakout will take us; will it be another leg down on ideas that the supply won’t be as tight as we once thought?  Or perhaps the demand hasn’t been curbed nearly enough and our next bounce is to the upside.

Things might actually be easy; or should I say easier to predict if it was just as simple as supply and demand.  But the reality is it is much more complicated than that.  You have the other factors like the outside markets and the funds.  Some funds are just risk on or risk off on a given day; others are trading the technical factors.  You have even more factors like the position of the traditional end users and suppliers.  I.E. some end user margins such as ethanol plants have stressed margins while producers are generically better off today than they have ever been in terms of net worth, bin space, ….etc… and they just don’t have to move product like they used to. 

One thing that has lead pressure on the markets has been the better than expected yields.   But better then what is my question.  Are the yields for a given state actually better then the yields forecasted by the USDA in their last report?  Or are the yields just better then the worst case scenario that the USDA didn’t ever really put in print anyways?    If they are better than expected will the extra supply be offset with increased demand leaving a zero net effect?

Here is a good example; this is a yield report that I got from my guys at Country Hedging.  It is great information but does it really tell me that our crop is bigger or smaller than expected?  How can one really put it into perspective?

- YIELD corn/beans Renville Co, s.c. MN : Just getting started in mn. 40 acres soybeans. Buffalo Lake, Renville County. 55 bpa early maturity and planted early down to 9 percent moisture. Corn same area running 190 bpa 18 percent moisture.

- YIELD corn SE Champaign county : 50 acres corn 22bpa

- YIELD corn Hancock Co IL-western IL : Northern part of this county continues to see good corn yields

63 ac field 198 dry

40 ac field 170 dry

130 ac field 190 dry

160 ac field 220 (heavy soil- had a timely rain)

119 ac (various fields) 205 dry

- YIELD  Stark County Illinois Bean yields :

150 ac. 45.20 bpa

144 ac. 63.57bpa

80 ac. 57.20 bpa

We have yet to cut our good beans, above expectation

- YIELD beans LaSalle County IL (n central) : First real bean yield report from LaSalle County, IL is 40.2 bpa. Typical yield would be in the high 50's - low 60's .Two years ago, double-crop beans on this field made 42.

- YIELD corn & bean yields from sw MN : 900 acres of corn 191 bu/acre

950 acres of soybeans 58 bu/acre (range has been 48-63 on fields)  a few poorer fields left to go producer thinks final farm yield will still be above 55.  

- YIELD corn/beans Ford / Iroquois counties e.c. IL : Our corn yields are about like everyone else's.  We finished corn harvest last week--good soils, maybe a touch of rain during the summer ranged from 150 to 180 with an average around 160-165.  The good soils with no rain--averaged about 100 to 110.  The poorer soils with really no rain ranged from 20 to 70bu/acre averaging about 50 to 60.  The moistures were from 18 % to 23 % with no aflatoxin present

The first soybean field harvested made 40 to 45, past years made 70 plus; am certain the rest will not be that good.

- YIELD beans NW Minnesota : Pennington County, NW MN, 2500 acres 40 bpa.  APH is 30.

- YIELD beans southern illinois (Jackson & Perry Counties) : Early bean yields, mst running 12%, and reported a lot of beans on the ground.

Jackson Co good bottom ground and only a few acres going 48

Perry Co, 80 acres of beans avg running 47, corn on this farm made 61, which was very good for the county.

Jackson Co again running 42, only got started.

- YIELD  Miami Co, IN corn and beans (n central) : Miami county indiana

Beans 48 bpa first field, in line with 5 yr avg.

Corn 3 fields 120, 50,38 all adjusted dry. Horrible yields

- YIELDS - various Iowa locations corn/beans : SE IA – Louisa Co – 600 acres done  Right at 200 bpa avg…. About 40 bpa better than 2011. Area had a 4 inch rain at the end of July that saved the crop.

SE IA – Johnson Co – 50 acres went 160, 10 bpa less than 2011

C IA – Polk Co – Producer reports 3 corn fields done. All corn after beans 1 at 135, 1 at 180, 1 at 185. This would be slightly less than 2011

EC IA – Jones Co – 100 bpa corn on poor dirt, 150 on another farm, 215 best so far. Down roughly 20 from 2011

EC IA – Jones Co – 80 acres of beans went 59, down 5 from 2011

SE IA – Henry Co – 100 acres of beans went 61, same as 2011

- YIELD corn/bns Lee & DeKalb Counties, n IL : Lee County- 151 acres corn- 179 bpa- TW up to 60 lbs-Some hail damage

DeKalb County- 156 acres beans- 52.75 bpa-Moisture averaged 12%

- Lee County- 151 acres corn- 179 bpa- TW up to 60 lbs-Some hail damage

  

DeKalb County- 156 acres beans- 52.75 bpa-Moisture averaged 12% : West Point NE, dryland corn complete at 95 bpa, irrigated roing in the 240's

early dryland beans 40's

Bottom line is what I am trying to say is that we are in stages where we are overloaded with information and trying to determine what information is already built into the price is not easy.  So recommendation has been and will continue to be that of using good risk management techniques that help diversify risk and allow one to lock in profitable returns as there never has been nor will there ever be a right answer or plan that fits everyone; all situations, goals, and needs are different thus at the end of the day one needs to follow their gut in a way that get’s them comfortable; no matter what the next big move might be.  If you need help with this, want to put in some open orders or offers, or write a grain marketing plan please give us a call.

Other info out today is the big report on Friday.  More and more estimates are out there and here is the latest I have seen.

Average wheat production – 2.271 billion bushels; versus the USDA currently at 2.268 billion bushels; so a small increase.  I have seen some expected a small decrease in winter wheat yields with an increase in spring wheat yields.

For Sept 1 stocks; corn is pegged at 1.145 billion bushels versus 1.127 last year.  Beans at 130 million bushels versus 215 last year.  I am rather surprised the market isn’t expecting the USDA to have a higher number considering the fact that in their September report they mentioned all of the new crop corn that would be harvested.  Plus what has happened numerous times in the past is that this report has shown that we used new crop corn instead of old crop corn.  I don’t know how they distinguish as I know that it is tough for us as an elevator who has to report the stocks to keep things straight between what is old and what is new.  So how does the USDA do it with hundreds of thousands that they have to get their info from?  Bottom line is I would be a little nervous off of this report.

One positive this report has it that a few days after it is when we have made our lows the past couple of years and bounced or traded sideways. 

Basis is firmer for wheat as elevators and producers focus on fall harvest.  We still need some export business if we really want to make another leg up on the flat price.  I think the wheat market having consolidated for nearly 3 months now has the stages set for a major move sometime later this year or early next; but once again there are way too many unknown to know which way that move will be.

The birdseed market is quiet; buyers are looking for millet on most days; but sunflowers are getting very tough to sell.  Bids are weaker and the buyers sense harvest.  The one thing that isn’t happening is they are not buying a lot at cheaper bids; so if one has staying power holding product isn’t the worst idea in the world; but know if you are going to have to sell in a couple weeks and know you are going to have to sell you might be better off selling today then tomorrow; at least until we get to that point that the buyers jump in.

Don’t forget we are still offering free DP on corn and milo.

Also if you are not getting our daily voice update on your phone around noon please give us a call and we will sign you up.

Thanks and have a great day and safe harvest!

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/

This communication may contain privileged and/or confidential information and is intended only for the use of the individual or entity to which it is addressed.  If the reader of this message is not the intended recipient, you are hereby notified that any unauthorized dissemination, distribution, and/or use of this communication is strictly prohibited.   This communication makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.  Nothing herein shall be construed as a recommendation to buy or sell any commodity contract.  There is a risk of loss when trading commodity futures or options.

Overnight Highlight's - from Country Hedging's Tregg Cronin 9-25-12

From Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.046 at 79.479; NYMEX-WTI up $0.93 at $92.86; Brent Crude up $1.11 at $110.92; Heating Oil up $0.0206 at $3.1193; Livestock markets are all firmer; Gold up $4.50 at $1766.70; Copper up $0.0300 at $3.7755; The Euro and Loonie are weaker, but all other major currencies are firmer; The softs are better; S&P’s are up 2.00 at 1453.50, Dow futures are up 25.00 at 13,514.00 and Treasuries are up 0.32%.      

World equity markets are very lightly mixed today ahead of a fair amount of data in the US.  The FTSE 100 is up +0.07%, the CAC 40 -0.20% and the IBEX 35 +0.10%.  The NIKKEI was up 0.25%.  It was interesting to note in a Bloomberg article this morning the ECB’s bond market intervention is essentially making it cheaper for investors to de-risk out of Spanish debt and into safer, German bonds.  By buying up Spanish debt, it’s making German debt cheaper to own, and if Spain does end up requesting a bailout, it will fall on German shoulders which will inevitably raise their borrowing costs.  German 10-yr yields are currently at 1.532%.  Economic data in the US data includes the Case-Shiller 20-city home price index, expected up 0.75% m/m.  We also get consumer confidence and the Richmond Fed.

The last 24 hours saw rain in N-MO and W-IL to the tune of 0.10-0.50” with localized totals up to 3.0”.  The system is now perched atop IL/S-IN and should bring decent rainfall totals there to the tune of 0.75-1.00”.  The next 3-day rainfall totals are expected to bring heavy rains to the southern plains and Midwest with OK/KS/MO/IL/IN/KY/OH all seeing a general 0.50-1.00” with the heaviest amounts in E-KS at 3.40”.  These couldn’t be timed better, although the N-TX plain might be a little short changed.  NOAA maps keep the northern plains dry and mostly above normal on temps in the 6-10, while the 8-14 looks closer to normal on both.  A patch of below normal temps are excepted to run north to south from MN-LA and east to MI and south to GA.  In S.A., the forecast sees an active pattern to produce average to above average rainfall in much of the growing regions the next 10-days.  They are sitting in good shape looking at % of average precip Sept 1-22.  Australia is still waiting on rains to begin Friday-Saturday as heading starts on the wheat.

Markets are letting loose a bit of relief bounce on a “turnaround-Tuesday,” although all three of the major Ag’s remain firmly entrenched in recent ranges or downtrends.  Crop conditions yesterday afternoon were unchanged on corn at 24% G/E, but harvest continued to chug along at 39% vs. 26% last week and 13% average.  Most were expecting 40-45%, but it’s still fast.  Soybean conditions up-ticked 2 points to 35% vs. 53% last year.  Soybean harvest was estimated at 22% vs. 10% last week and 8% average.  This was in-line to slightly faster than estimates.  ND leads harvest progress with 56% complete, followed by SD at 47% and MN at 45%.  Winter wheat plantings were seen at 25% vs. 11% last week and 27% average.  SD has just 37% planted vs. 52% average.

Wires overnight showed Iraq issuing a tender for at least 50,000MT of wheat from all origins with a bidding deadline of Oct 1.   Last week, Iraq bought 150,000MT of Russian wheat at $412-413.89/MT C&F.  It will be interesting to see if US wheat comes anywhere close to being competitive.  If Russia doesn’t win, it should likely be EU wheat.  The EU’s crop monitoring service cut the bloc’s corn yields again to 6.05MT/ha from 6.28 last month.  Temperatures and lack of rainfall were cited.  South Korea also bought 120,000MT of corn for February delivery at $308.45-308.85/MT C&F from Bunge on an optional origin purchase.  Should be Brazilian corn at that price with US-FOB offers at $316/MT.  From IKAR we saw that Russian wheat for export hit the highest price since the collapse of the Soviet Union last week at $340/MT.  While an incredibly important development, our markets need to be careful as the latest COT report from Friday showed managed funds amassing some huge net long positions in both KC-HRW and MPLS-HRS.  It’s that boat getting tipped thing.

Open interest changes yesterday included wheat down 280, corn down 400, soybeans down 2,720, meal down 3,670 and soy oil down 5,540.  Soy oil got taken to the woodshed as Palm Oil prices hit the lowest level in two years as supplies are estimated to grow considerably this year.  Funds were loaded up on longs there.  Based on the latest COT report, it looks like the lack of change in O/I on wheat is length being transferred from the commercials to the managed money, which is a concern.  Corn looks the opposite with funds dumping length to the end users.  Chinese markets rallied sharply with beans up 35.75c, meal up $8.70, oil up 17c, corn unchanged and wheat down 5.50c.  Paris Wheat is up 0.67%, Rapeseed up 0.81%, Corn up 0.10%, UK feed wheat up 0.22% and Canola up 0.75%.

Looks for a bit of recovery today, but it doesn’t look like markets are going anywhere.  We’ve got month end, quarter end and big USDA reports all on Friday.  The propensity for managed money will be to “de-risk” and take money off the table, not add to positions.  We still have 60-80% of harvest to bring in, farmers are selling a lot of grain off the combine and quality is a concern in the central belt.  Yield reports remain better than expected on soybeans and more mixed on corn.

Trade as of 7:15

Corn flat/up 1/2c

Soy up 11-15

Wheat 1-2

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

Morning Update

Markets are choppy this a.m. with a lack of new news.

Around 8:45 markets have corn off a nickel, beans are off 9 cents, KC wheat is about unchanged, MPLS wheat is up a penny, CBOT wheat is off 2 cents, the US dollar is very strong and that is adding a little pressure to the grains up 500 points or so with the cash index at 79.587, equities are a little weaker with the DOW off 40 points, and crude is off about 30 cents a barrel.

We did have export sales out this a.m. and they continue the same trend; good on beans and wheat while horrible for corn.  Corn sales where horrible at 2.8 million bushels; by far the worst ever for this week in a marketing year; the previous low was 19 million bushels.  Bottom line harvest is typically a time when we see a little export demand; but not this last week for corn.

Soybeans are a whole different story; they were 26.2 million bushels and only 2 weeks into the marketing year we already have 75% of the total year’s goal on the books.  This is very bullish but is also known and part of the reason beans are where they are at.

Wheat continue to be in line to slightly better than expectations; but slightly below what is needed on a per week basis.  Keep in mind that most of our wheat exports are not suppose to hit until the Black Sea area runs dry on what they have.

Keep in mind that some of the headlines the past couple weeks haven’t changed.  First off we still have very tight balance sheets; projections are that we will need to curb demand historically because of the small crops from the drought.  The world wheat situation continues to tighten up with many exporters getting close to running out or projected to run out……….maybe run out isn’t the correct phrase but have very tight stocks that leave them uncomfortable.   Demand remains very solid for beans as shown by today’s export sales.  Ethanol demand has picked up a little bit; yesterday’s production numbers where the highest in 11 weeks.  Profit margins for some of the livestock industry are very good for some of the deferred slots.

The above are just some of the positive or bullish things out there; most of them in my opinion don’t say the markets need to go up today; or anytime soon.  They just paint a bullish picture out several months down the road should things not change or should we do something to take away from supply or add demand.

Also not changing much have been the headlines causing weakness lately.  Harvest progress is going great; with yields generically better than expected and no weather issues.  Funds remain long; probably too long and we have seen some technical selling along with fund liquidation.  Issues over sea’s that could lead to possible trade disputes between us and China; the Japanese Chinese conflicts.  Idea’s that acres are increasing based on higher FSA acres.

Bottom line is we can see both some positive and negative things in our markets; so at the end of the day our recommendation is going to stay the same of getting yourself and your operation comfortable.  If you need help with your marketing plan please give us a call.

Thanks

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/

Overnight Highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.452 at 79.507; NYMEX-WTI down $0.27 at $91.71; Brent crude up $0.47 at $108.67; Heating Oil up $0.0154 at $3.0594; Cattle are weaker and hogs firmer; Gold down $7.00 at $1762.00; Copper down $0.0715 at $3.7500; The Yen is firmer while all other currencies are weaker; Sugar is firmer this morning but all the other softs are weaker; S&P’s are down 4.00 at 1455.75, Dow futures are down 34.00 at 13,536.00 and Treasuries are mostly better.

Economic data from around the globe last night was fairly negative, setting up the stage for a big day of economic reports here in the US.  Last night, China’s flash preliminary-PMI climbed to 47.8 in September from 47.6 in August.  While better than the previous month, it remains below the economic expansion/contraction line at 50.0.  Japan also confirmed the reasoning behind their latest round of stimulus Tuesday night when they reported exports down 5.8% in August y/y, and imports down 5.4%.  Euro economic data wasn’t much better with their PMI falling to 45.9 in September from 46.3 in August.  The Euro is currently down 0.87%.  In the US today we have jobless claims, the Preliminary PMI, Philadelphia Fed and Leading Indicators.  Note the Dollar strength this morning.

Rains in the last 24 hours were confined to the Great Lakes region where trace to 0.25” amounts fell in WI/MI.  Radar is mostly quiet this morning aside from a small system working across C-IL/N-IN. The 5-day forecasted precip map is mostly unchanged from yesterday with the WCB dry the next 5-days while precip will fall in S-MO/S-IL/IN/N-OH/MI with heaviest amounts in the northern Great Lakes at 0.75-1.25”.  The ECB areas should see 0.30-0.60” in general.  NOAA’s latest extended look still shows much below normal precip the next 10-days for the corn belt as well as cool temperatures in the East, but a warming pattern sitting in the Rocky Mountains and moving East.  The coolest day of the next 10 should be Saturday where widespread frost chances are likely.  South America appears to be catching some showers ahead of planting season which begins in earnest in October.  No change to the Australian forecast with dry weather the next 7-10 days while any showers which do fall look to be 0.10” or less.

In-keeping with the choppy nature of the last several sessions, our Ag markets find themselves under a bit of pressure this morning, but clinging to the top-end of yesterday’s gains.  There isn’t a heavy amount of overnight news, and hedging activity last night was the lightest in recent memory, so the general theme from earlier in the week seems to hold: large spec positions moving for the exit as harvest ramps up and yield reports continue better than expected.  Most are still calling for a lower corn yield on the October report, but more analysts are arguing for an uptick in the soybean yield.  A                 Bloomberg article seemed to sum up the funds attitude towards commodities as of late quite well: Fed Stimulus Fading as Forecasters Say Best is Over.  Demand for paper can decline while physicals rise.  Ukraine’s Ag Minister said in a story last night Ukraine won’t need to ban exports this year as sales slow in November when harvest rises.  “We will be a stable supplier.  Our wheat exports won’t exceed 5MMT.”  Some privates have them at 6.5MMT currently. 

Overnight headlines updated us on Lock and Dam 27 north of St. Louis which remains shut down due to damage from the drought.  As of Wednesday morning, nearly 60 tugboats and more than 400 barges were caught up in the logjam.  This is undoubtedly part of the firmer CIF basis on corn and beans this week.  In export news, South Korea’s MFG has issued a tender for up to 140,000MT of corn for delivery in February.  Japan bought 101,158MT of milling wheat from the US and Canada in a regular tender with 82,103MT coming from the US.  Yesterday, the UN’s FAO forecasted Brazil’s 2012 corn harvest at 72.8MMT, up 29% from a year earlier and a new record.  This is directly correlated with the lack of US exports the past 6-weeks.  As noted in last night’s afternoon comments, there are four more vessels set to discharge in Wilmington, NC between Oct 3-22 carrying Brazilian maize.  Expect it to continue.  Bloomberg also reported China overtook the US as the world’s largest imported of Ag products, going from $108.3 billion in 2010 to $144.7 billion in 2011.

Open interest changes yesterday were fairly light with wheat up 340, corn up 2,850, soybeans up 340, meal down 2,010 and soy oil down 2,080.  The lack of open interest changes during moves which are pretty exaggerated would suggest a fair amount of ownership continues to change hands.  Early in the week it seemed to be funds dumping into the hands of end users.  With yesterday’s bounce, it still could have been the same.  Chinese markets were firmer overnight with beans up 1.25c, meal up $1.40, soy oil up 1c, corn up 5.75c and wheat up 4.25c.  Paris Milling Wheat is up 0.19%, Rapeseed down 0.44%, corn unchanged, UK feed wheat down 0.29% and Canola down 0.71%.  The Canola/Soybean spread (weight and currency adjusted) is back to $32/MT from even money in late August.

Call things a shade weaker to begin with, but don’t rule out two-sided trade once the pit gets open.  Short and intermediate term trends are still down, harvest pressure will be increasing the next two weeks, yield reports are still better than expected and the funds seem more apt to sell positions than add.  Longer-term, the bullish underlying principles still exist and will likely mean higher prices down the road.  Until then, however, prices should continue their sideways/lower trend, providing good call buying opportunities.

Trade as of 7:05

Corn down 2-3

Soy down 4-9

Wheat down 1-2

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 Morning Update 9-19-2012

Around 9:15 we have markets bouncing after the melt down the past couple of sessions.  Presently corn is up 7, beans are up 21, KC wheat is 14 higher, MPLS wheat is up 14, and CBOT wheat is up 14.  The dollar is slightly weaker down a little over 100 ticks, equities are bouncing slightly with the DOW up 36 points, but crude is getting smacked down 2.50 a barrel.

We will have ethanol numbers at 9:30 and they could effect the market or at least help give us a better idea on the demand side of things.

Harvest seems to be going full steam ahead with no real weather issues anywhere this is adding to the selling pressure and has been one of the headlines the past couple of days for weakness.

Appear to have a little end user pricing the past couple days on the break; which is a good thing.

Our biggest risk going forward is still the fund position; they are still loaded up and liquidation could continue to cause pressure.

Watch next week’s stock’s report and small grains report to see if it is a major market mover.

Wheat basis feels firmer today while corn basis feels a little defensive.

From what I am hearing many of our export competitors selling wheat in the world haven’t exactly followed our price break the past couple of days.  Bottom line we are getting close to getting some US Wheat export business. 

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

Overnight Highlights from Country Hedging's Tregg Cronin

Below is overnight highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index up 0.105 at 79.354; NYMEX-WTI down $0.64 at $94.65; Brent Crude down $1.28 at $110.75; Heating Oil down $0.0251 at $3.1020; Livestock are all in the red; Gold up $10.10 at $1778.50; Copper up $0.0095 at $3.8120; The Yen and Loonie are firmer, while the other major currencies are weaker; Cocoa and Lumber are positive; S&P’s are up 1.00 at 1460.25, Dow futures are up 14.00 at 13,584.00 and Treasuries are bid.

Japan is still making headlines overnight, but for a change, it doesn’t have to do with the China/Japan conflict.  Overnight, the Bank of Japan unexpectedly increased their asset purchase program by $126 billion as officials try desperately to stave off economic contraction in the world’s third largest economy.  The NIKKEI equity index rose 1.19% last evening, but the Yen is currently 0.15% higher.  The EURUSD briefly ticked below $1.30 last night following comments from the European Commission which said strict conditionality will accompany all aid programs.  That wasn’t a provision to begin with?  The US economic calendar today has housing starts, building permits and the already released MBA Mortgage Applications which came in -0.2% vs. 11.1% the week previously.

The Midwest was mostly devoid of any moisture the last 24 hours, but the East Coast did see rain from NC to NY.  Some light showers are working across N-MN this morning.  No big change to the 5-day forecasted precip map, although the storms impacting MO and bringing 0.70” will extend east through S-IL/IN/OH/MI to the tune of 0.40-0.80”.  The WCB will be dry through Monday.  NOAA’s extended maps last night show above normal temps building over ID and beginning to push the cold air mass east, centering over the US-SE.  The WCB should see normal/above temps by September 24^th, but moisture will remain below normal, aiding harvest, through the end of the month.  The coldest day the next 10-days will be Saturday with chances of frost present as 33* temps will be witnessed.  Australia saw a few light showers of less than 0.10” in most wheat areas with some totals up to 0.35” in W-Aus.  The forecast sees things quiet for the next week or so, but the very end of next week sees a front to bring 0.20-0.60” to NSW and Queensland.

Grains are seeing “green across the screen” this morning for the first time since Friday as a relief bounce makes its way through the Ag space.  Following the $1.00+ break in soybeans the past two days, it is generally believed end users will grow more interested down at these levels, and the balance sheet can ill-afford a ton of new demand cropping up.  It also doesn’t hurt the US’s largest export destination enacted another $126 billion worth of monetary stimulus last night.  Today’s bounce doesn’t change the lower trend mind you, and prices are still expected to work lower through the balance of the month which will mark month end, quarter end, increasing harvest and the September 28^th Grain Stocks report.  The last several Sept 1 Grain Stocks reports have been especially bearish to our space.

Harvest progress in Ukraine was pegged at 28.49MMT as of Sept 18^th, which covered about 72% of the total area to be harvested.  Average yields were pegged at 2.63MT/ha vs. 3.08MT/ha last year.  Ukraine had harvested 36.48MMT at this point last year.  Russia’s Ag Minister is still pegging total grain harvest to hit 72-73MMT.  Harvest has covered 76% of the total acreage to be harvested with 63MMT in the bin.  In export news, South Korea bought 28,700MT of US wheat from LD for shipment in December.  The wheat was 8.5-9.5% protein soft white wheat at $328/MT FOB.  The mills also bought a small quantity of HRW (11.5) and DNS (14) at $362 and $378/MT FOB, respectively.  Taiwan’s BSPA is tendering for 40-60,000MT of soybeans from the US or South America for shipment April 26-May 10.  South Korea’s MFG is also tendering for 55,000MT of soy meal for arrival by Jan 5.  Japan bought 51,890MT of feed wheat and 36,555MT of feed barley in a S-B-S tender.  Deliverable Stocks in Duluth/MPLS rose to 25.349mbu, up 3.5mbu and vs. 13.8mbu last year.

Open interest changes yesterday included drops on everything including wheat down 5,440, corn down 3,000, beans down 3,230, meal down 3,840 and soyoil down 8,260.  These all fit with modest liquidation, but still seem light considering the severity of the drops.  Still arguing end users are stepping up a bit of pricing at these levels.  Chinese markets finally stabilized seeing beans up 7c, meal up $1.70, soy oil up 27c, corn up 2.50c and wheat up 6c.  Paris Milling Wheat is currently up 8c, Rapeseed up 14c, corn up 11.5c, UK feed wheat up 8c and Canola up $8.00.  The US remained the world’s largest exporter of Ag products in 2011 at $168.2 billion according to WTO data.  We were followed by the Netherlands at $108.1 billion, and Germany in third place at $94.5 billion.  Cattle-on-feed out Friday.

Call things firmer today as we enjoy a bit of a relief bounce.  Ethanol production at 9:30 will be watched closely, but the themes of the week haven’t changed: specs are still loaded up, harvest is going to advance rapidly the next 15-days, harvest prices are record high, and the monetary silver bullets are being spent by the ECB, Fed and BOJ as we speak.  The long-term fundamental stories haven’t changed, but that doesn’t mean short-term direction can’t deviate.

Trade as of 7:10

Corn up 3-6

Soy up 12-19

Wheat up 10-16

Closing Grain Market comments 9-18-2012

Markets followed up yesterdays weakness with more weakness today.

Corn was off 8 cents, beans were off 29 cents, KC wheat was off 12 cents, MPLS wheat was off 6 cents, crush sunflowers where unchanged, CBOT wheat was down 15 cents, equities were unchanged as the DOW was unchanged, the US dollar was near unchanged to up slightly, and crude was off about a dollar a barrel.

Not a lot of new news today; just more of the same from yesterday.  Light harvest activity and hedge pressure, ton’s of fund liquidation along with technical selling, trade dispute between China-Japan and just a lack of overall new bullish news.  Nothing has really changed from a week or two ago other then maybe yields are slightly better than expected on potentially a few more acres.  But fundamentally have we seen a major change; I would say no we haven’t.  First of if and it is a big if our supply is bigger it can easily be offset with the rather robust demand we have seen; keep in mind that the USDA is saying on paper that demand is cut big time and we really haven’t seen that yet.

Now keep in mind there are some arguments out there that the funds still have plenty of ownership and some ideas are the crop is a lot bigger than the USDA pegged it at.  I am not in that camp but keep in mind things tend to get over done especially in our markets.  So over the next month or two a further and possibly accelerated price break can’t be ruled out.  So as always make sure to practice good risk management that leaves you comfortable at the end of the day; after all we are still at rather good prices and just because one didn’t pull the trigger at the highs doesn’t mean that one’s game plan going forward should be a deer in the headlight style; it still needs to be pro-active.  After all if anyone knew for sure what these markets where going to do on a daily basis they wouldn’t be where they are at.  So getting one’s self comfortable no matter the future price direction is very important; if for nothing else peace of mind.

As for other news out there we have seen harvest start to progress; corn in the US is 26% harvested and starting to pick up speed with no real weather threats to slow it down.  Locally we are taking in a lot of 13-20 moisture corn; with yields near expectations.  It does feel like basis is slightly firmer for corn in many areas. 

Wheat basis is firmer the past couple of days with the declining board; but I still haven’t seen the great export demand that we need.

I did see a comment that Russia may discuss a duty on grain shipments that would take at a predetermined price level.  It should also be noted that many of the estimates for wheat put the exporting countries at the tightest stocks to usage ratio since 2007/2008.  Bottom line is we are getting closer to export business and this should help out basis and potentially leaves wheat with a major bull story as we move into the new year.  But before one gets too bulled up remember this not new news it is part of the reason we traded 9.00 plus wheat last week and before we can make a major leg up we really need to see the demand show up.  Plus this is one that we simply have too many too bullish; in one of the commentaries I read I seen where the funds had 100% long in KC wheat versus 0 short.  That just doesn’t work; you have to have some balance and some arguments on both sides of the fence or you will eventually run out of buyers and then they typically all become sellers.

The birdseed market has been choppy the past couple of days.  Millet market is on fire; we now even have some very attractive new crop bids.  I even have a couple of buyers that might look at an act of god contract for millet planted early to be harvested in July or August next year.  Talking to some of them they are afraid that these high millet prices could really wreck demand.

Sunflower prices should benefit from the high millet prices; it should add more demand to sunflowers.  But this won’t be an overnight thing; it will take some time.  Most sunflower buyers still think they will buy cheaper at harvest on idea’s of a big crop.  I agree the crop is ok and good further north.  But I really think the buyers are underestimating the current situation of most of the American Farmers.  The financial situation is better than ever before and many have really increased on farm storage.  I think the days of weak harvest basis and harvest pressure are gone or at least not nearly as bad as they used to be.  The game has changed and this should and will continue to add to the volatile price patterns we have seen.  This doesn’t mean to get all bulled up on the ideas that producers control the markets; it just means to keep in mind that the game changes every year as do the playing conditions and the players.  It means good risk management needs to be done; for both producers but for buyers too.  An end user not using good risk management also helps create lots of volatility to our grains.

Don’t forget we are offering free delayed price on some of the row crops; make sure to give us a call for more info.

Lastly a few weeks ago we starting sending out a mid day voice update.  If you want to get on this list please give us a call; it is a quick 90 second update on where the markets are and some of the reason behind the price moves.

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

Thanks

Re-owning on Paper..........from Country Hedging's Tregg Cronin

Below is good info from Country Hedging's Tregg Cronin on re-owning on paper for soybeans.

A lot of guys have expressed interest in taking advantage of high priced soybeans by selling them off the combine but wanting to re-own them on paper with calls, call spreads or some sort of option strategy.  Below I’ve outlined two such strategies using today’s settlements.

The first is a simple call diagonal spread.  It would consist of buying the January $17.00 call for $0.51 and selling the March $18.00 call for $0.38375 for a net cost of $0.12 5/8 or $630.  At expiration, this would have a break even at $17.12 5/8, or the bottom strike plus the cost of the strategy.  The maximum gain on this strategy is $0.87 or $4,350 per 1 lot contract.  The maximum loss, provided both options are exited at the same time, would be $0.12 5/8 or the cost of the strategy.  This particular example has differing expirations which would need to be managed if the desired outcome hasn’t been achieved by December 21^st when the January $17.00 call expires.  The nice thing about this method is it has a favorable delta and gamma ratio, especially as we get closer to November/December.  It should be noted this strategy carries a bit of spread risk, in that if March soybeans were to all of the sudden rally sharply against January soybeans, it could put more value in the March call vs. the January call, making the position worth less.  I can go further into detail if needed.

The second strategy is  known as a 3-way because you buy 1 call, sell 1 call and sell 1 put.  In this example I used March options which would expire on February 22^nd.  One could do a similar strategy for January if they wanted.  The particular strikes I used on this one was buying the $16.00 March call, selling the $18.00 March Call and selling the $15.00 March put for a net cost of $0.11 1/8 or $550 per 1 lot position.  This strategy would have a maximum gain of $1.88, or $9,443, at expiration if soybeans closed above $18.00 on February 22^nd.  The maximum loss is a bit more tricky because of the short put.  You would actually be unprotected to the downside and would lose penny for penny below $15.00 should beans drop that far.  Obviously if soybeans were headed below $15.00, something big would have changed in our market place and the correct thing would be to exit the trade at a loss.  The nice thing about this strategy is it offers more upside for the tradeoff of downside vulnerability.

It really comes down to how much a guy wants to spend and what sort of risk profile he is willing to carry.  For what it’ worth, an at-the-money January $16.60 call would cost $0.67 ($3,350), and an at-the-money March $16.00 call would cost something around $0.94 ($4,700).  Owning strictly calls would limit one’s risk to the premium paid.  There are also serial options which offer a guy to calls without so much time premium and should therefore be cheaper, but we would also need the market to respond faster before our option expires.  If anyone has interest in these or other strategies, let me know and I can put together some charts which show the profit and loss graphs.  Thanks.

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

Overnight Highlights from Country Hedging's Tregg Cronin

Below is from Country Hedging's Tregg Cronin; his overnight highlights.

Outside Markets: Dollar Index up 0.093 at 79.099; NYMEX-WTI down $0.70 at $95.93; Brent Crude down $0.38 at $113.93; Heating oil down $0.0028 at $3.1606; Cattle are firmer and hogs weaker; Gold down $9.30 at $1758.70; Copper down $0.0450 at $3.7650; The Yen, Pound and Franc are trading firmer; Cotton is the long soft commodity trading better; S&P’s are down 1.75 at 1459.00, Dow futures are down 19.00 at 13,522.00 and Treasuries are firmer.   

Grabbing most financial headlines this morning is the ongoing tension in the East China Sea where anti-Japanese demonstrations have ramped up, causing many Japanese companies such as Honda, Toyota, Panasonic and Mitsubishi to suspend operations or close plants.  The friction stems from a set of disputed islands in the China Sea, compounded by the fact today marks the 81^st anniversary of Japan’s occupation of parts of China that preceded the invasion of Manchuria.  Needless to say, Asian equities aren’t taking it likely, selling off on most indices overnight.  This could easily stifle the good-time feelings from QE3 and the European Central Bank intervention.  Doesn’t hurt China is the world’s largest consumer of soybeans.  This will have impact on our markets.

Moderate to heavy rains were seen in TN/KY/WV and parts of the Gulf Coast overnight with TN seeing localized amounts as high as 6.0”, but generally a 0.50-2.00” rain.  In the corn belt, IA/IL/WI/MI saw rains to the tune of a trace, but as high as 0.50” in C-IL.  The radar has pretty heavy rains moving across the ECB and much of the upper-East Coast.  OH should see decent rains, and promote SRW planting once the row crops are off.  The Midwest should be dry the next 3-days with the exception of a system in C-MO which should bring 0.25-0.75”.  By Friday, IN/OH/MI have some chances, but the WCB is expected to be cool and dry.  NOAA is keeping things cooler than normal and drier than normal the next 10-days on the extended maps.  Keeping some chances for rain in Australia the next few days with totals in the 0.25-0.75” which should keep the crop from going backwards any further.  The forecast in S.A. sees a strong front to bring rains of 0.50-1.50” to N-Argy and Uruguay tomorrow.  Northern Brazil also has chances which are badly needed.

Grain markets are picking up pretty much where they left off yesterday with the soy complex down another 1.50% while corn ticks lower and wheat straddles unchanged.  As noted above, the tensions in Asia aren’t helping matters, but more saliently are the larger than expected yields being harvested in the upper-Midwest.  Soybean harvest was estimated at 10% nationally last evening with SD at 15%, ND at 28% and MN at 16%.  There are more soybean piles in South Dakota this year than most can remember, which speaks to the better than expected yields as well as the poor performance of the railroad and the back log of wheat still around the country.  With gutslot still about a week away, the direction of futures should remain sideways lower through the balance of the month.

Other highlights from the crop progress included corn harvest at 26% nationally, almost 3 times the average.  SD was 19% complete, ND 10%, MN 12%, IA 22%, NE 23% and IL 36%.  Conditions on both corn and soybeans improved marginally, but not sure how much weight they carry at this point.  Winter wheat planting progress was estimated at 11% nationally, slightly below the 14% average.  SD was 14% complete, NE at 21%, KS at 5%, OK at 8%, TX at 11% and CO at 15%.  The uptick in moisture down south should help progress.  ABARE (Australia’s USDA) was out last night saying earnings from Aussie wheat exports are likely to rise to their highest in 27 years despite lower than expected production.  Wheat exports are expected to remain flat on the year at 23MMT, but the value of the exports is expected to jump 15% to around $7.6 billion.  They remain at 22.5MMT production, but larger carry in stocks are going to aid the export program.  Japan issued a tender for 101,158MT of US and Canadian milling wheat for Oct 21 and Nov 20 shipment.

Open interest changes yesterday saw a drop in wheat of 8,390, corn down 3,250, beans down 220, meal down 980 and oil down 2,770.  Heavy liquidation in the grains, but interesting to note the lack of liquidation in soybeans despite a limit down move.  Could possibly mean there was end user pricing on the way down.  Chinese markets were down sharply overnight with soybeans down 41c, meal down $20.00, soy oil down 205c/lb, corn down 1.25c and wheat down 10.25c.  Paris wheat is currently up 0.10%, Rapeseed is down 0.54%, Corn is unchanged, UK feed wheat is unchanged and Canola is up 1.19%.  One other soybean note, export inspections yesterday dropped 23% from the week before, a possible sign importers are putting off taking shipments.  Could be a one-week anomaly also.

Look for the soy complex to remain under pressure as harvest ramps up, end users remain patient, upper-Midwest shippers look for homes for the piles lying around their elevator and Asian tensions escalate.  Wheat and corn could see more chop today as yield reports are more mixed in corn than the universally better than expected soybeans, and wheat is waiting to see if forecasted rains actually fall in Australia, and as basis seems to have found a bottom.  September is a seasonally weak month for both commodities and equities.

Trade as of 7:10

Corn down 1-2

Beans down 24-31

Wheat up 2-5

USDA report recap - market comments 9-12-2012

This a.m. we had a USDA report that looks to be another non-event as the USDA made very little changes to our balance sheets.

For the corn balance sheets we seen old crop ending stocks come in a little higher then estimated as they where pegged at 1.181 million bushels which was about 150 million bushels above the estimate and by far the most bearish thing seen on the report. 

New crop corn balance sheet was pegged at 733 million bushels; an increase of 83 million from last month and also over 100 million more then the average trade estimate.  Production came in at 10.727 nearly unchanged with yield only drop .6 bushel per acre while harvested acres where left unchanged.  Overall I don’t think the market will believe this production number; most think the harvested acres are well under the 87.4 that the USDA is using.  On the demand side of things the USDA cut exports by 50 million bushels but increased feed usage by 75 million bushels.  Add in the increased starting spot and they pegged our carryout at 733 million bushels.  Bottom line is there is and will be debate on the crop size………..it probably won’t be known for sure until the January report and the market needs to keep in mind the huge demand cuts being forecasted.  We can’t afford a price break that doesn’t allow demand to be curbed or we have a legitamite argue that we run out of corn sometime next year.  Does that mean we have to go up today or anytime soon.  No especially considering that our supply nearby is going to be heavy..........maybe not like a normal year but still we will have around 10 billion bushels or so getting harvested in the next month or so. 

World corn carryout was also a rather non-event as the USDA left carryout near unchanged at 123.95 mmt versus 123.33 last month.  No major changes other then the old crop US carryout that spilled over into the new crop balance sheets as well as the world balance sheets.

Wheat numbers where unchanged with carryout at 698 million bushels.  The world balance sheet also seen very little changes especially considering some of the other estimates that have been out for production.  Perhaps this is still something to come later too?  Case in point the USDA left Austrailan production at 26 mmt; while just in the past few days we have seen estimates from 20-22.5 mmt.

The bean carryout for old crop was lowered to 130 million bushels; but new crop carryout was left unchanged at 115 million bushels.  Yield was lowered by .8 bushels per acre and production dropped by about 60 million bushels but ending carryout was unchanged.  To offset the lower starting spot and less production they lowered exports by 55 million bushels and cut the crush number down by 15 million bushels.   In my opinion the market is really going to need to do everything possible to curb demand.  Exports as example are way ahead of last year at this time yet the USDA is projecting nearly a 300 million bushel cut.

Here is a recap of report.

September USDA Supply & Demand Worksheet 

2012/2013 US Corn & Soybean Crop Estimates
	USDA September	Avg. Trade Guess	Avg. Trade Range	USDA August
Corn Production	10.727	10.400	9.860 - 10.780	10.779
Harvested Area	87.400	86.173	83.000 - 87.400	87.400
Corn Yield	122.8	120.600	117.600 - 124.000	123.400
Soy Production	2.634	2.650	2.400 - 2.739	2.692
Harvested Area	74.60	74.447	73.300 - 74.745	74.600
Soybean Yield	35.3	35.600	33.500 - 36.700	36.100

2011/2012 Ending Stocks Estimate (billions of bushels)
	USDA September	Avg. Trade Guess	Avg. Trade Range	USDA August
Corn	1.181	1.015	0.800 - 1.175	1.021
Soybeans	0.130	0.135	0.100 - 0.170	0.145

2012/2013 Ending Stocks Estimate (billions of bushels)
	USDA September	Avg. Trade Guess	Avg. Trade Range	USDA August
Corn	0.733	0.600	0.475 - 0.700	0.650
Soybeans	0.115	0.107	0.087 - 0.117	0.115
Wheat	0.698	0.709	0.670 - 0.795	0.698

2011/2012 Global Ending Stock Numbers
	USDA September	Avg. Trade Guess	Avg. Trade Range	USDA August
Corn	139.60	136.50	134.50 - 139.45	135.97
Soybeans	53.65	51.60	51.00 - 52.35	51.94
Wheat	198.64	197.25	196.00 - 197.65	197.59

2012/2013 Global Ending Stock Numbers
	USDA September	Avg. Trade Guess	Avg. Trade Range	USDA August
Corn	123.95	121.02	118.75 - 123.00	123.33
Soybeans	53.10	51.90	48.80 - 53.00	55.38
Wheat	176.71	174.50	172.00 - 178.00	177.17

Bottom line is report came off neutral to bullish beans, neutral wheat, and neutral to bearish corn.  Now is a 733 million bushel corn carryout bearish……….no.  But it isn’t bullish considering what the market was looking for.  At the end of the day prices need to maintain levels that allows the USDA demand cuts to be seen.  Price breaks that allow demand to stay at a high pace potentially open the door to much higher prices later.

For risk management purposes and marketing purposes we need to keep in mind possible black swan’s such as ethanol mandate waiver or a ban on exports……etc.  Basically something unknown at this time that catches the market off guard.  We also have to watch out for the fact that everyone is still bullish and today’s report probably doesn’t change that.   Top’s  in markets are made when everyone is bullish or no one is expecting the markets to break.  That alone at good prices should promote spreading out some risk.

We also need to watch for signs of demand slipping or picking up.  If we don’t see wheat demand pick up with the US getting some exports from the smaller crops in the world then we have plenty of wheat.  If demand doesn’t slow down for beans what could happened to prices if the SA crop is closer to this past year’s versus the big projection? 

As for the price action today look for it to remain choppy; closing positive would be good and help the charts out a little bit.  As of 8:45 we have corn off 7 cents which is about 12 off of it’s lows, KC wheat is down a penny about 13 off of it’s lows, MPLS wheat is unchanged up a dime from it’s lows, and beans are up 25 cents nearly 36 off of their lows.

A couple other announcements are DP for row crops.  For corn and milo we are giving free DP until the end of the year; 20 cent charge with 4 cents a month after.  Sunflowers are 30 days free.

We also started sending out mid day updates on the markets.  This is a voice recording around noon everyday with an update on what the markets are doing and why.  If you don’t receive please give us a call and we can get you added.

Thanks