The grain markets got beat up today in a choppy rather news
lacking day.
Corn was down 12 on old crop, new crop corn was unchanged,
soybeans seen new crop unchanged, while old crop beans were down 8 cents a
bushel, kC wheat was down 14, MPLS wheat was down 5, CBOT wheat was off 3,
equities bounced with the DOW up 56 points, the US dollar is back to about
unchanged which is a big reversal from earlier trading, and crude ended the day
down about a buck a barrel also about a dollar off of the lows.
Ugly day for the markets in general; but a couple of decent
things did happen. First off the US
dollar got to its highest level since last July and managed to leave a Doji on
most of the charts while trading above yesterday’s highs and yesterdays lows
leaving a reversal on the charts. Some would
refer to it as a key bearish reversal as we had made a new high for the move
and closed lower; other text book technical wouldn’t say it is a key reversal
because we didn’t close below yesterdays lows.
Either way it is a sign that perhaps the dollar strength is due for a
breather and that wouldn’t be bad for the grains.
We need something to get some money flowing back into the
grain markets to help stop the bleeding from the USDA report and a pull back or
weakness in the US dollar which in turn helps makes our commodities that were
are trying to export cheaper and leads to a risk on type attitude by the funds
can be a start.
The other positive today that I seen was beans able to
bounce well off of their lows and CBOT wheat hanging around despite all the
other weakness around. Perhaps CBOT
wheat hanging around there was simply spread unwinding but CBOT wheat has
always lead our bull market rallies.
News out is that China bout 14-16 cargo’s of Soft Red Wheat;
which could have also gave support to CBOT wheat; but at least that is demand
support. Nothing wrong at all with wheat
bouncing from end user demand.
Exports sales were out this a.m. and they were nothing
special for any of the grains. Wheat
came in at 5.2 million bushels of old crop sold; which is about ½ of what it
needed to be on a per week basis to meet current USDA projections. Beans came in at 14.4 on old crop which is
about 3 times what they need to be and the best in 3 weeks. Corn had its best week in 5-6 weeks at 13.9
million bushels which is very close to what it needs to be on a per week basis
to meet present USDA projections.
We have started to see more estimates out for next week’s USDA
report. It seems like most are looking
for a 200-400 million bushel increase in our present 632 million bushel
carryout. Not sure what the market is
trading right now; but a dollar plus break in the board to me seems like they
might be trading nearly all 400 million bushels. (Hopefully that’s not sure wishful thinking.)
Here is a link to the CHS Hedging estimates.
You will notice they have corn carryout at 857 versus USDA
at 632. Beans unchanged at 125 and wheat
at 706 versus 716. The report will be
released Wednesday the 10th at 11 am central time.
I haven’t see all the estimates to know were exactly the
average trade estimate is at; but I would guess based on the April stocks
report that most estimates will be for rather decent increases for all three of
the grains. The good news is that
hopefully any increases will already be priced into the markets and as the USDA
shown us last week they can always throw curveballs that are not expected.
The most realistic or possible curveball for next week’s
report looks to be a friendly curveball because the market has priced in
bearish news. Last week everyone was
looking for a bullish report and the USDA has that ability to do what most
think it won’t. Maybe that is a stretch but
it is possible that next week’s report does exactly what the last one did; catch
as many off guard as possible. We
mentioned before last’s weeks report that a huge amount were bullish (……… “that also left me feeling a little
cautious. First off the strong close by corn seemed to come from the
funds and idea’s that this week’s report will be bullish. The only
bearish forecasts I have seen for the report are those worried about the fact
that everyone seems to be bullish on it and I land in that camp”………) now
as producers the only thing we can really hope for is that the funds lean a
little too hard too much to the selling side and then the USDA throws another
wild card our way; but this time hopefully bullish or just not as bearish as
everyone is looking for. Realistically
it will not be bullish versus last month; but it could be bullish versus historical
and it wouldn’t take much for it to not be as bearish as the crowd is looking
for.
Having said that I don’t think I would be recommending to
guys to go out and buy things back on the board right now. If you want to play that game the right way
is probably just via cheap call options as volatility is fairly cheap right now
due to the skew that happens in grain market weakness. Along those same lines just owning some puts
in case the USDA was right and decides to take the whole 400 million bushel increase
in carryout at once might not be a bad investment or at least a move that
allows one to be comfortable.
The other thing we really need to keep in mind is that if
our old crop carryout’s have increased as much as some are talking weather
becomes less important for new crop prices via the fact we have a more
comfortable starting spot. That doesn’t
mean we can’t or won’t have weather scares; we could have plenty and hopefully
do have some power filled ones. But
supply and demand rules in the end and carryout’s of the 2.00-3.00 billion
bushels like some are talking about for new crop are not bullish.
On the flip side of things one might ask how much demand
does a dollar a bushel break add back in?
Elsewhere basis for wheat feels softer. Spring wheat spot floor was rather weak today
as it seems like some railroads are really catching up in a hurry. Winter wheat basis is also a little defensive
but the positive should be that some flour pricing has occurred and should
continue to occur should the board continue to break. Corn basis is choppy. Still hard to find nearby homes; but I have also
sold more the feed industry in the past few days then I had for a couple months
combined so there is some end user pricing happening.
Sunflower market and birdseed in general feels like demand is
decent but bids and offers are still wide and buyers simply don’t need much
yet. Supportive is the fact that the
crush is competitive with the birdseed market.
Also new crop should be supportive as the acres came in a little light
and more acres went to confections.
We are still offering free delayed price storage on wheat,
corn, milo, sunflowers, millet, and soybeans at our locations. Call for more details.
As guys get ready to get busy don’t forget to give us indications
on the levels you would like us to call you about. Many grain marketing plans make sales over
the next couple of months because typically we add some weather premium into
the seasonal price tendencies.
Please give us a call if there is anything we can do for
you.
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