Markets are called lower this a.m. behind a lower overnight
session. Less rain then expected was the main headline.
Realistically any rain in some areas stopped progress or continued to keep
progress stopped; but the main headline on the wires as to the weakness in the
overnight session was less rain then expected in many areas and some warmer
days ahead.
In the overnight session old crop corn was off 7 cents, new
crop corn was 9 cents a bushel lower, KC wheat was down 3 ½, CBOT wheat was
down 5 ½ cents, MPLS July was up ½ of a cent, MPLS September wheat was down 2 ¾
of a cent, July soybeans were off 16 cents a bushel, and November soybeans were
down 10 cents a bushel. Outside markets at 8:15 have the US dollar firmer
by a couple hundred points with the cash index at 81.96, crude oil is down 40
cents a barrel, gold is off 2 bucks an ounce, and the equity futures are
pointing towards a firmer start of about 50-60 points in the DOW.
We will have some key news items this week; so we might be
in a wait and see market. First off this a.m. we will have export
shipments; that isn’t major and likely doesn’t shift our market one way or
another at least not tremendously. But the trend as of late has been very
soft corn and soybean sales as well as shipments. Will that trend
continue and enough so that the USDA has some merit to lower export numbers on
the report later this week.
This afternoon we will have crop progress numbers as well as
crop conditions. Corn is expected to be nearly planted with estimates at
95%. It is early to really put much stock into the conditions; but the
trend of the corn crop conditions will be important. Has the crop
improved or got worse in the last week. Keep in mind that the guys that
trade this market and really move this market are not producers and they most
certainly are not agronomists; so they look at what the USDA says. Right
or wrong. The trend and were the crop will be rated a month or two from
now will be very important.
Soybean planting is pegged at 70-75% and spring wheat
planting up to about 85%.
Weather will continue to be very important; but weather
won’t exactly be easy to say bearish or bullish. How the funds and the
traders perceive weather will be important. Keep in mind that both the
market as well as the USDA have a history of being late to the game when it
comes to weather stories. I didn’t trade and wasn’t around in 1993; but
from what I hear the acknowledgement of the too wet weather didn’t come until
months down the road. Last year I would say the same thing that the trade
didn’t respond to the drought until we had been in it for some time.
The other big news this week will be the USDA updated supply
and demand report. Which will be out on Wednesday at 11:00 central
time.
Ideas are for old crop corn, wheat, and soybean balance
sheets to be left about unchanged. You can see arguments out there for a
decrease in exports; but also increase in soybean crush, and ethanol
usage. With a strong basis and the inverted board I don’t think we have a
huge downside risk in the old crop balance sheet changing on this report.
Now at the end of June; who knows. But we shouldn’t see a major change in
the old crop balance sheets on this report.
The bigger thing the market will be looking at is balance
sheet and production changes for the new crop. Ideas are for lower
carryout for all three of the major grains.
Here is a rundown of both the US and world numbers.
Ending
Ending
Stocks
Stocks
2012/13
2013/14
Wheat Corn
Soybeans Wheat
Corn Soybeans
Average
trade
0.733 0.759
0.121 0.640
1.795 0.268
estimate
Highest
trade
0.751 0.919
0.140 0.713
2.200 0.344
estimate
Lowest
trade estimate 0.715 0.684
0.080 0.501
1.175 0.185
USDA
May
0.731 0.759
0.125 0.670
2.004 0.265
Global
Ending
Global
Stocks
Ending
Stocks
2012/13
2013/14
Wheat
Corn Soybeans
Wheat Corn Soybeans
Average
trade 180.395 125.975
62.105 185.144 149.571
73.512
estimate
Highest
trade 181.550 128.200
63.000 188.500 155.200
76.000
estimate
Lowest
trade 179.800
124.500 60.500 179.800
141.510 68.200
estimate
USDA
May 180.170
125.430 62.460 186.380
154.630 74.960
The
big thing that stands out above is the fact that despite the idea that we have
lost a few million acres of corn; carryout ideas are still big.
I
read something today from the Van Trump report that mentioned that even with a
yield drop of a couple bushels an acre and the loss of a couple million acres
we still have a record corn crop on deck. Until that changes or the market
acknowledges that it has changed rallies are probably simply just pricing
opportunities. Keep in mind that last year we only used a little
over 11 billion bushels; from what I can tell most in the trade thing
production is now today closer to 13.5 to 13.8 billion bushels.
Other
news out there include harvest down south. I haven’t seen much for updates; I
seen a few cars of new crop winter wheat on the spot floor last week but not
enough to say better or worse than expected yield results.
I
did notice a few of the spring wheat cars on the spot floor got bid against the
September futures on Friday; we could see that market try to roll bids
early. So maybe be a little cautious on old crop spring wheat. It
seems that we have a lot to move before new crop harvest.
The
sunflower market felt strong going home late last week; a “seller’s”
market. So have your offers out there.
The
one thing to keep in mind with all of these markets is the fact that we have
rallied over the past month isn’t due to super strong demand. It is a
supply concern rally; supply concern rallies can be here and then be gone in a
flash. Demand lead rallies are the ones that tend to stick around.
For me that tells me to be ready to make some sales or at least have a grain
marketing plan that leaves me comfortable at the end of the day. If you
are comfortable that eventually the market and USDA will have to respond to our
current conditions then doing nothing might work for some. But if
you think that a rally from too much moisture is not a good reason for a rally
then perhaps making sales or getting some protection in place that might be the
move for you.
Please
give us a call if there is anything we can do for you.
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