Day after the report markets are consolidating and trading a
little weaker around 9:00.
Presently corn is off a nickel, KC wheat is down 7, MPLS
wheat is off 5, CBOT wheat is off 8, and beans are down a dime. Outside
markets have a weak US Dollar, equities are up with the DOW up 65 points, and
crude is up 50 cents.
The story yesterday was the friendly USDA report. The
story today is a little consolidation and demand talk. Corn demand really
is soft and some of the commentary I listen to think that any rally won’t be
lead by corn despite yesterdays friendly report. They think that if we
have a rally it will have to be lead by bean demand in the short term; perhaps
a South America weather story; or if we can eventually see some demand from the
smaller wheat crops around the world it could be lead by wheat. I tend to
agree; I don’ think corn can go super cheap any time soon just based on the
tight balance sheet; but I think the market is comfortable too and if corn is
going to rally it could be several months and that only happens if we see nice
solid profitability from those that buy corn or see some sort of solid
demand.
Bottom line is I think for our markets to take another leg
up some demand will be needed or a headline story like weather that the funds
can jump on board. I am not saying I want to get bearish here by any
means; but I think we need to realize that if demand doesn’t stay solid and we
don’t give funds a reason to buy in but give them a reason or headline to sell
that there is some (plenty) of downside risk.
One of the reason for the demand comments this a.m. is
because of the once again horrible corn exports. Under 1 million bushels
of corn; which is just horrible. Beans continue to be good; but not
nearly as good as they have been coming in at 18.4 million bushels; well above
what we need on a per week basis but less then ½ of what we did a week
ago. Wheat came in at 10.3 also much less than needed and a decline from
last week.
Recap from yesterday is corn carryout at 619 million
bushels………very bullish; but we still need to see solid demand. World corn
carryout at 117.27 mmt; also very bullish and tight well below trade estimates
and probably biggest positive from yesterday.
Bean carryout at 130 million bushels; bullish but an
increase from last month and bottom line here is production increased big time;
that was met with demand. The bigger supply says we don’t need to ration
off as much demand; so some think the bean number isn’t super bullish but yet
bearish just from the 200 million bushel production increase. World
numbers at 57.56 well above last month and above trade estimates.
Wheat at 654 million bushel carryout; above estimates but
below last months. Says we do have plenty of wheat in US but tighter then
past years. World wheat in line with trade estimates at 173 mmt; but a
decrease from last months 176.
Overall a good report; a little disappointing on the wheat
and bean price action and even more disappointing today as now around 10 our
markets have took another big let down. The report gives us plenty of
upside POTENTIAL but we need solid demand and a reason to get money flow or the
funds involved; without demand or money flow most grains are more than fair
priced. Bottom line don’t be afraid to make some sales here and there on
bounces as with all the above mentioned unknowns and other black swans practicing
good risk management is all one can really do. Keep in mind there is
nothing wrong with making sales that make sense.
Please give us a call if there is anything we can do for
you.
Jeremey Frost
Grain Merchandiser
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