Opening Grain Market Comments 7-31-2013

Markets are called mixed this a.m. after a choppy mixed overnight session.

When the overnight session ended corn was up 1 on the September contract, the Dec was down 3 cents, KC wheat was up 1, MPLS wheat was down 1, CBOT wheat was unchanged, the US dollar was up 225 points, crude is up a dime, gold is off 3 bucks an ounce, and it looks like the DOW is going to open up about unchanged with the DOW futures off 4 points.

It’s been about weather and the funds as of late.  Don’t look for it to change; we will have a USDA report August 12^th; so look for more production forecasts to come out from the various players in the trade.  But also look for some position squaring ahead of that report.  Ideas as we sit right now from most are increased corn yield while most are in the camp of decreased bean yield.   It seems that we only have a couple bullish cards left in the deck and I am not sure if they will ever hit the table.

The bullish cards I see out there include; early frost concerns, China demand and the Chinese wheat situation, production concerns someplace else in the world as we don’t seem to have those concerns here at home.  The other big bullish card is always the “Black Swan” which could be a big bull card or a big bearish card.  Perhaps charts turn and funds simply start buying and covering some of their shorts.  Perhaps they look at corn versus crude and say yep its plenty cheap.  Maybe we see ethanol policy change in a way that the present blend wall we are up against goes away or gets bigger?  Who knows in our market?

The thing we need to keep in mind is that yes we could see some bullish cards at any time.  But as it sits right now the big headline right or wrong is ideal weather and big crops and carryout’s for corn and beans that are projected to be more than double year over year.  One must realize that carryout numbers more than double is not bullish; sure we could run up for any of a hundred reasons.  But if you look at simple ECON 101 and then look at our fundamentals you have to be a little concerned on price.

I don’t want to promote more fear or panic selling; but I do think one needs to be pro-active in getting comfortable.  Be it making sales, getting protection, or even re-owning sales via cheap call options.  To think that we couldn’t lose another buck or more is just unrealistic; I am not saying it will happen but we have to realize that we are walking into unknown territory with the funds and short corn.  How far can they press it is not known.  Having said that perhaps China looking for some corn will hit the market and we will make our lows in the next few days. 

As for the weather card it still looks to be on the headline as bearish.  Cool and wet for the most part.

Other news out there.  USDA reported sale of 120k tones of soybeans to unknown for 2013/14.

It sounds like South Korea cancelled a corn tender citing prices too high or that they are looking for lower prices in the future.

Egypt bought some wheat, but looks like it was Romanian/Ukrainian wheat.  From what I heard the US didn’t even offer and if we would have our HRW offers would have been 10-15 bucks a ton too high.

Not a lot else that I see today.  It feels like wheat wants to and maybe has made a bottom.  If you look at the wheat fundamentals year over year it is the only one of the big three grains that is seeing things tighten up.  So perhaps wheat can help out our other markets?  Keep in mind that the 2007-2008 rally started with wheat.  As did the 2010 to now bull run in the grains.  It started with wheat.

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

Thanks

Closing Comments 7-30-13

Markets closed mixed today in rather choppy trade.

Corn was up 4 to 6 cents, KC wheat was up 6, MPLS wheat was up 3 cents, CBOT wheat was up 4, August soybeans closed down 18 cents, November soybeans were down 17 cents, the DOW was off 1 and the US dollar up a couple hundred points.

Look like some fund squaring up as it looked like they sold some soybeans that they are long and bought back some corn and wheat that they are short.  Will the funds continue to get short wheat and corn?  Will they decide to move from long soybeans to short soybeans?  If they do decide to get short soybeans what type of price could we see for that market?  Will that add even more pressure to corn/wheat?

One of the big headline that has been out the last day or two is bigger South American corn and soybean crops.  Some think that the present corn crop is understated in South America and projections for soybeans for this coming year are off the charts.  Right or wrong the headline that we are starting to see is big crops and not only big crops in the US but big crops in the world.

Wheat to me looks like it is still in the bottom building phase.  It acts like it wants to rally; but we need a reason and the market just hasn’t had that reason. 

I did see a little chatter of some grain export business today.  First off did see some beans sold to unknown; most likely China.  I also heard from a couple of good sources that China is looking for some new crop corn boats.  Also heard talk of China and Egypt looking to buy some wheat.  The wheat story in China might be one bullish card that hasn’t been truly played out.  Our export pace for wheat is very strong given the present projections.

Talk of freeze and snow in parts of South America is also being considered bullish wheat.  Plus it was announced today that Japan will now take US white wheat again.

Corn basis feels better or at least like it has stabilized.  I had several buyers looking for offers and I don’t think they like the offers that I had from our growers.  Yes buyers have bid things much cheaper; but if you are a grower does that mean you have to sell it cheaper?  At least right now?  Most guys are looking at the cheaper board and basis and say while that helps demand.  Then looking at the cool weather and saying well that takes new crop and pushes it further back.  That then doesn’t cheapen up the offers for old crop; if anything it makes the offers higher.  Right or wrong.  Bottom line is old crop corn and soybeans remain volatile.  The bid ask spread should continue to widen out; if buyers need something they might have to pay up; if they don’t well then it might not a be a pretty price.

I have seen some winter wheat trains get rejected for being too high on protein.  Not sure how that all shakes out; but it is going to make marketing challenging.  Most still think that the North Dakota won’t have much protein and that should let areas like ours get paid for protein.  But how much carryout old crop spring wheat is high in protein?

Weather as far as headlines go is really showing no changes.  Not many issues other than slow development.  Potentially huge issues with an early frost; but I don’t think many are concerned yet.  Perhaps they should be; but the market isn’t trading like it has much concerns about anything.

The last thing I want to mention is that almost all buyers for all the different commodities have ran for the hills the past week.  Buyers of corn, milo, millet, sunflowers, soybeans in particular have really softened up bids.  Now if any of those buyers come back and want to buy big tonnage and from me in particular I don’t think I can buy a huge amount of bushels/pounds extremely cheap.  Yes some would be available a little cheaper than it was a week ago; but not much.  I asked a couple farmers today for some corn offers and most of those offers were levels fairly similar to where bids were at before the market melted down.

I know I don’t have interest getting caught short old crop with as tight as the stocks situation is.   Bottom line is look for more and continued volatile markets for the little bit of old crop that is out there.

As for marketing in general I think we need to realize that we are walking into unknown territory in regards to potentially big corn crop and what the funds might want to do.  We don’t have anything written in sand more or less stone that says the funds can’t continue to add to their shorts.  At the same time we could at anytime see a catalyst help turn the charts and then help push our markets back up.  The only thing that can really be recommended is to get oneself comfortable; which shouldn’t be easy.  I would say that options for the grains are on the cheap side with implied volatility low; so they can be used to help re-own or protect grain relatively cheap should a big move happen.

Don’t forget we will have our marketing meeting in Onida tomorrow Wednesday at 3:00.

Thanks

Opening Comments 7-30-2013

Markets are called better this a.m. behind a firmer overnight session.  Dead cat bounce?  Or reversal in the happening?

In the overnight session corn was up 4-5 cents, KC wheat was up 2, MPLS wheat was up 3, CBOT wheat was up 3, and Soybeans were up 4-6 cents.  At 8:20 outside markets have a US dollar about unchanged at 81.637 on the cash US dollar index, crude is down 70 cents at 103.84 on the September contract, gold is off 4 bucks, and the DOW futures are pointing towards a positive 40 point start.

Not much new news that I see out there this a.m.; the main headline is markets overdone and due for a bounce and weather.  On the weather front we see more talk about the crop falling further behind; but the main headline that the funds seem to be focused on is cool and wet which has to be considered bearish prices and leads to a bigger crop.  As I mentioned yesterday I think we have some potential issues down the road; but it is hard to argue the fact that corn is filling much better in the weather we have had this year versus what we had last year.  Yes hit and miss areas are bad; but the question I still see out there is..... “ is this crop only 33 bushels bigger than last year’s?”

I have seen some advisors and others in the trade talking about much bigger corn yields.  Not going to argue whether that is agronomically correct; but it is the headline the many are throwing out at this time. 

Crop conditions didn’t provide much market direction yesterday with most of the conditions steady.  Soybeans dropped; but that was it.

We did sell some soybeans to unknown this a.m.; most likely China.

Also looks like Egypt is tendering for some wheat; doesn’t look like the US will get any of that business.  Wheat exports overall have been solid and if we can keep up the pace and get more swing business you could see talk a tighter US wheat balance sheet; so perhaps wheat can lead us higher????

It looks like Japan has resumed US white wheat imports; after having that GMO wheat headline a few months back.

Also looks like the EU raised their wheat crop estimate to 131.7 MMT versus the 128.9 MMT they previously had.

This morning I had a not good conversation for winter wheat and basis.  I was applying a train of HRW out and the buyer didn’t want the train because it was too high and protein.  In the past few days I have seen more than one comment about max protein levels for contracts.  My comment back to the buyer was it might be a struggle today but won’t these mills want the higher protein winter wheat if North Dakota spring wheat ends up being 12 or 13 pro.  His thoughts were if that happened we would just completely kill the mill demand for winter wheat.

Now don’t get me wrong there are still some markets that are and will look for protein; such as the gulf market.  But as it sits right now I scratch my head when I try to figure where one will go with 14 pro winter wheat from locations that don’t spread well to the export markets.

I think the old crop corn market is still in discovery mode.  No clue what I can sell today; but also not a very good handle on what it would take to actually buy some corn from the producer.  

A lot of our markets are like that; very soft bids; but has anything actually traded much cheaper than it did a week or two ago?  Not much for some of the grains is my opinion.  Don’t get me wrong we still have a huge inverse between old crop and new crop and at some point they come together for the row crops.  I just don’t know if that day is as soon as it appeared based on the recent basis weakness.

Sunflower market is very similar.  Bids are ugly; but I don’t think I can exactly buy sunflowers much cheaper then I could a week or two ago.  The thing end users need to realize is that producers don’t have to sell it cheaper just because they say they want to buy it cheaper.  Be it corn, soybeans, millet, milo, sunflowers, and even wheat.  Many producers don’t have to sell it period; but end users need to always buy and stock their shelves or have their end product for sale.

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

Closing Grain Market Comments 7-29-2013

Markets closed weaker today in rather choppy trade action.

When everything was said and done corn closed down 3 cents, KC wheat was down a penny, MPLS wheat was down 2, CBOT wheat was up a penny, August soybeans were up 18 cents, November soybeans were down 9 cents, crush sunflowers continue to be under pressure down 40 cents a cwt, the DOW was down 37 points, crude was about unchanged, and gold was up 7-8 bucks an ounce.

Nothing great to report today; but I did see a couple decent signs.  First off the severe pressure wasn’t that bad; not like we had last week at least.  The wheat price action also continues to be ok; perhaps some would even say good versus what has been happening with corn and soybeans.  I wonder if we are making our HRW seasonal lows?  Harvest is basically done for winter wheat and now is the time when they need to try and get some acres.

Bottom line is I have nothing good to report that says our markets are anyplace close to putting in a bottom.  But some of the charts did leave doji or doji like days and we do have momentum slowing down.  Some momentum indicators actually look like it wouldn’t take much to produce a buy signal.

The other thing I look at for new crop December corn is on July 5^th we traded down to 4.91 and today July 29^th we are at 4.73; or only 18 cents less.  When I look at what has happened for the big weather headlines over the past 3 weeks or so and say we have only lost 18 cents; I feel fairly good.  Weather has been much close to ideal for many areas over the past 3 weeks; not everywhere; but almost no place has got blasted with hot and dry.  Some areas dry; yes and need a drink rather bad.  But overall in the big picture you have to say that weather and the weather outlook has been close to ideal especially regarding the cool weather during pollination. 

Bottom line is when I look at the big headline and say we only lost 18 cents I got to be rather happy.  Now if I look at what we have lost in some of the other corn contracts (September) or look at what we have lost versus our highs; yes one has to be disappointed.  As for whether we have or have not made a bottom that is still to be determined.  Hindsight usually works best and honestly in our market we have way too many unknown variables that need to be answered first.

One last positive  that we had today was a bullish key reversal in August Soybeans.  It only took losing 1.81 from last week’s highs; but we did have a classic bullish key reversal.  Could that lift a little more life into the other markets?  Without a doubt; but also keep in mind the funds are already long beans…………and many wonder if we need to get that fund length trimmed down.  Plus keep in mind that wheat didn’t exactly get hammer last week when the August soybean contract lost what it did.

The biggest thing that our grains really need is that headline for the funds to cover shorts and consider going long.  Maybe China will be in buying more wheat and corn?  Plus they are already always buying beans.  Maybe the headline will eventually turn towards weather?  Or the funds will get back on a commodity inflation type of run?  Maybe the funds will just look at the charts and compare corn, crude, and the DOW ………..and say yep that corn’s cheap enough???

As for weather and our markets the big headline that the funds are seeing is that things are great.  We have cool weather and some areas getting moisture; which is good for pollination.  But I think we have a major can of worms for our weather too.  As it simply is too cool; the crop is getting further behind each day instead of catching up.  Maybe it will turn around by as it sits today one should be concerned about the too cool of weather and lack of crop development.

Along those same lines one has to ask what the scoop is for old crop basis for corn and soybeans.  Last week ethanol plants seem to drop bids all at the same time.  I could see the basis pressure happening; it has the last couple years; but I really thought it would take a little more time for it to transpire.  Perhaps it was the Wednesday ethanol numbers that acted as a catalyst to our basis pressure in corn?

My thoughts on old crop basis are that I don’t know that the game is over.  I think the end users are simply playing more games.  I am not saying we will get back to the levels we had; but I do question if end users have enough cover to get them to new crop.  More specifically one might want to question if there is enough corn (buyable or not) to get them to new crop.  How can end users drop basis like they have with the tightest stocks we have ever had?  Easy; it was just a snowball effect.  One plant dropped and before you knew it every other plant had followed.  Elevators and traders seen things starting to drop so they instantly became sellers.  But did they actually buy much corn? And if they did buy corn did they buy it from the farmer? Some areas did; but I also talked to some other guys that didn’t buy much. 

Now add it the tight old crop stocks with the present weather and present forecast.  Locally I would be shocked if we had corn within 2 weeks of when we did a year ago.  That shouldn’t be negative for old crop corn.  Bottom line is just because buyers dropped old crop corn and soybeans basis.  It doesn’t mean they can and will be able to buy it cheaper.  I still think the stages are set for some very volatile markets.  The game might be over for old crop; or the game playing might have just started.

On the FYI front I did ask several buyers what they had bought for corn last week; and you would think they all bought tons because of the heavy basis pressure.  I don’t think that was the case; one buyer mentioned that they had bought a little but the majority of what they bought was at another one of their locations.  I did have several buyers call today and ask if I had corn for sale.  (But I thought you were covered and hence that’s why you dropped your corn bid last week????)

Other news today; I am hearing some talk/concern on wheat in Brazil.  Some of it has got hit with a frost and snow.  I don’t have great details on this but I have seen some talk of it. 

This afternoon we had crop progress.  Not much for new news in it.  Here is the CHS Hedging Recap

https://www.chshedging.com/UserFiles/Documents/2013/Research/Crop%20Progress%20first%20conditions%20072913.pdf

Spring wheat conditions and corn conditions were both steady in the G/E slot.  While soybeans dropped 1%

This a.m. we had export inspections.  Wheat was solid at 25.4 million bushels.  Soybeans were poor as expected at 1.3 million bushels.  Corn was as expected at 11.1 million bushels.  The corn and wheat numbers were above what we need on a per week basis to hit present USDA projection while soybeans lagged the number needed.

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

Thanks

Opening Grain Market Comments 7-23-2013

Markets are called mixed to weaker this a.m. behind a weaker overnight session lead by the weather headline of cool during pollination.

When the overnight markets closed or paused corn was down 7 cents, KC wheat was down 2, MPLS wheat was unchanged, CBOT wheat was down 4 cents, August soybeans were down 5, and November soybeans were off a penny.  At 8:20 outside markets have crude off a buck, gold off 5 bucks, the US dollar about unchanged, and DOW futures look like they are pointing towards a bounce of about 40 points on the opening.

A little disappointing price action for the corn market.  Yesterday afternoon we had crop conditions drop 3% which was on the high end of the range that most were expecting.  Yet corn didn’t even manage to get back to unchanged once on the overnight session.  Why?????

Weather is what most are saying.  That some parts of Iowa got some moisture.  When I looked at http://www.cocorahs.org/  It looked fairly spotty to me.  But you did get some areas in Iowa and other parts of the corn belt that got some moisture.  Enough??? 

The other negative for weather is when you look at a radar you have areas that have some green showing up right now and other areas that had some green last night.  Enough moisture actually hitting the ground???  Maybe it doesn’t really matter to the funds.

The last thing on weather has to be the forecasts which right or wrong are reading as a headline of cool with some moisture during pollination. 

Technically the new crop corn chart is starting to look a little scary.  As we made a new low this morning; the December 13 contract got to its lowest spot since November of 2010.  We have to wonder if the funds will try to press this thing even lower.

Below is an article from Bloomberg.  Note the headline that the funds are seeing of 6.8% above the 2007 to 2011 crop.

Illinois Corn Yield Potential Jumps From 2012, Doane Tour Shows

By Jeff Wilson - Jul 22, 2013 11:52 PM CT

Corn yields measured in the western third of Illinois, the third-biggest U.S. grower, were projected higher than a year earlier as warm temperatures and adequate soil moisture boosted plant populations, according to the Doane Advisory Services Co. crop tour.

Yields measured yesterday from St. Louis to Sterling, Illinois were 183.3 bushels an acre, 60 percent higher than a year earlier when the worst drought since the 1930s damaged crops. They were also 6.8 percent above the average from 2007 to 2011, based on field inspections during the first day of the 30th annual Doane tour. Yields ranged from 168 bushels measured in Macoupin County to 198 bushels measured 250 miles north in Whiteside County.

“The fields that were planted closer to normal dates have high yield potential” because plant populations in the western third of the state are above average, Marty Foreman, a senior economist at Doane, said from Cedar Rapids, Iowa. “While plant population were consistently high, the 20 percent that was planted two to three weeks late could see yields fall by a third to as much as half.”

Futures on the Chicago Board of Trade tumbled 29 percent this year, signaling lower food prices and reducing expenses for producers of livestock feed and ethanol. The U.S. harvest will climb to a record 13.95 billion bushels, the Department of Agriculture estimates.

Corn in Illinois was rated 65 percent in good or excellent condition on July 21, down from 69 percent a week earlier and just 7 percent a year ago, the USDA said in a report yesterday.

Soybean Yields

Soybean fields in Illinois graded by Doane economists showed yields were 12 percent higher than that of last year’s drought-damaged crop. Yield potential was estimated at 44.3 bushels an acre, down from 44.5 bushels on average from 2008 to 2012, Doane data show.

“Plant size is variable and that is a direct result of later plantings and dryness in the western third,” Bill Nelson, a Doane senior economist, said yesterday in Cedar Rapids, after traveling more than 360 miles. “We clearly did not see as many outstanding fields as usual and some crops need rain soon.”

Soybeans in Chicago dropped 8.6 percent this year.

About 72 percent of Illinois soybeans were rated in good or excellent condition, down from 73 percent a week earlier and 13 percent a year ago, according to the USDA report.

An estimated 11 percent of the state’s crop was beginning to set pods, down from 36 percent a year ago and 17 percent on average in the past five years, the USDA said. About 27 percent of topsoil was rated short or very short of moisture. Illinois temperatures averaged 3.9 degrees Fahrenheit (-15.6 Celsius) above normal during the week and rainfall in the state was 0.5 inches (12.7 millimeters) below normal, the report showed.

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

Thanks

Closing Grain Market Comments - Bottom in or has the free fall just started?

Markets closed mixed today in a tale of two stories. The tight old crop situation for some of the row crops and the weather being the two stories out there. 

When everything was done corn was down 3 cents, KC wheat was down 3 cents, MPLS wheat was lower by 4 cents, August soybeans were up 30 cents, November soybeans were up 15 cents, crude was down a buck, the DOW was about unchanged up 2 points, the Dollar was under some pressure with the cash index at 82.216, and gold was up 42 bucks an ounce.

August soybeans were the bright spot for our markets and they helped pull some of the other markets well off of their lows.  The old crop soybean situation is just extremely tight.  No other way to put it.  Now trading the old crop beans is tough because basis seems to move 20 cents or more a day.  I did talk to an end user at one point today and he mentioned how bids were getting weaker 20 cents a day; yet he also really seemed to want an offer so that the beans I was working on didn’t go to another spot.

The bottom line for old crop grains like soybeans, corn, milo, and even millet is things are thin.  If an end users needed the product they have to pay up.  If they don’t it is tough to move things. No offer is unreasonable; yet at any time all the offers could be way too high.  Just a very high stakes poker game with many components.   The end users need to have enough so they don’t run out; but they also don’t want to have any extra once prices become cheaper.  When will prices be cheaper?  Sometime when they are covered or once new crop supply starting hitting them.  Bottom line is the old crop situation for some of these grains will remain explosive and volatile with lots of head games.  We might see basis bids drop 20-50 cents in a couple days only see it bounce as much or more should the buyers actually need something.

As for the weather it is really debatable.  But the headline that the funds seem to be trading is that we have cool weather during pollination; with many areas also getting moisture to go along with cool weather.  Don’t get me wrong plenty of areas have issues and have missed moisture or maybe even got too much.  But as a whole the headline is a much bigger crop then a year ago for corn.  The question many are asking is our corn crop this year only 33 bushels more than a year ago.  I guess we really won’t know that for some time and as far as I am concerned we are now just enter the phase when we should start guessing the crop size.  The real estimates shouldn’t start until about now or maybe not even until the Aug crop report.

As for the bean crop many are talking the opposite; talking that the bean yield the USDA has is too big.  That the bean production number should come down.  Same thing here I really thing we are jumping the gun even guessing at the bean crop size this early in the game.

Elsewhere we did have export shipments this a.m.; overall ok to good for wheat at 23.1 million bushels; which is more than the 19.7 that we need on a per week basis to hit current USDA estimate.  The corn and beans shipments were light of what we need on a per week basis; beans came in at 2.8 million bushels and corn came in a 8.9 million bushels.

The other big news was this afternoon was crop conditions. 

Here is CHS Hedging link with recap.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress%20072213.pdf

I didn’t see any major surprises; we had corn conditions drop 3% in the G/E slot.  Very much as expected but a drop in conditions nevertheless.  Corn silking came in at 43% versus the average of 56%.

Spring wheat conditions dropped 2% and soybean conditions dropped 1%.  Pod setting was at 8% compared to the average of 19%.

As mentioned I don’t see any major surprises in the condition update.  I think weather will be more important than this afternoons crop condition report; and those forecasts can change with little notice.

The North Dakota Wheat Quality Council tour is this week, with field observations beginning tomorrow. CHS Hedging will be reporting from the tour via Twitter at @hedgeit and @hedgeit_jhof

The thing that our area will want to watch is what type of protein North Dakota will have; not sure if they will have any estimates and really it is probably going to be determined over the next 30 days.  Right now it looks like ND doesn’t have much stress.  So when I guy that has high protein winter wheat or high pro new crop spring wheat asks me if he should bring it in and sell it or take it to his bins and store it my response is typically.  “Probably store it and hope ND doesn’t have any pro; but also realize that your flat price risk probably comes from corn and soybeans as I don’t think we have 8.00 wheat if we happen to have 3.50-4.00 corn.”  I just don’t see that happening.

So the bottom line for wheat and protein is that yes it might make sense to gamble and store some hoping to get paid another 10-50 cents or more for your protein.  But realize that by trying to gain 50 cents for your protein you might be risking a buck or more in flat price.  It doesn’t do any good to store wheat and get paid 50 cents more for protein if you take a buck less in the base price. 

I don’t mean to say that wheat’s going down either; more so I think one needs to realize where the risk lies.  Wheat in my opinion is close to fair value and maybe even fundamentally undervalued.  But I also don’t think that wheat can rally by itself.  It needs corn and beans to be at the very least somewhat stable in price.

As for the price of corn or beans I think we are entering unknown territory.  I believe that the corn crop ends up someplace between 13.5-14.5 billion bushels; based on current weather forecasts.  If that is the case I really struggle to try and determine what they funds might do and what is fair value.  I look at crude oil and think well maybe corn right here is more than fair; heck maybe corn is cheap.

I look at China’s demand and think that maybe all of the grains are cheap at these levels.  But then I look at possible record production coming off of a year that we had to curb demand and I wonder how can prices do anything other than see pressure.

The bottom line for corn and the rest of the crops the likely follow at least a little bit is we are dealing with a situation that we have never had before in history.  We don’t know how short the funds might go; the only thing we can do is look for other clues and practice risk management that helps one stay profitable and comfortable.  By nature it shouldn’t be easy.

One thing that they say we need to make tops or bottoms is everyone leaning on one side of the market.  I don’t know that clue has been met; yes we have the funds record short; but have the farmers sold enough new crop corn for us to put in a bottom?  Have producers really made any new crop fear sales to speak of??? 

I hope that over the next few months and years we can find some sort of medium level that helps us build demand yet is profitable for producers.  I am fearfully that we keep doing what we have always done.  That is overdo market moves; both to the upside and to the downside.

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

Thanks

Opening Grain Market Comments - China still buying???

Markets are called mixed this a.m. behind a mixed overnight session.

In the overnight session corn was down 4-6 cents, KC wheat was off ½ of a cent, MPLS wheat was unchanged, CBOT wheat was up 1 ½ cents, August soybeans were up 11, and November soybeans were up a penny.  At 8:10 outside markets have the US dollar slightly softer at 82.739 on the cash index, crude is up a buck now over 109 on the August contract, the Sept crude contract is at 108.67, gold was up 6 bucks an ounce, and it looks like a weaker start for the stock market with the DOW futures off about 30 points.

Another day same story.  Weather and the funds.  The forecasts that I seen this a.m. see a little more moisture in a little bigger part SD & NE; while MN and IA look a little drier in the 1-5 day forecast.  While the 6-10 look at little cooler.

Here is CHS weather link.  It does a good job of showing present forecast along with old forecast.  https://www.chshedging.com/UserFiles/Documents/2013/Research/Weather/7.19.13%20agtraderbriefusacountryhedging.pdf

For weather it is all over the board; I do think the stages are set for some volatile markets come Sunday night depending on what the forecasts end up showing.

I do think we have to ask the question what type of weather and weather forecasts will it take to get the funds back involved in a way that helps our prices.  What does it take to get the funds to cover shorts and what does it take to get the funds to want to get long.

One positive or reason the funds might look to get long is the price relationship between say corn and crude.   Could that attract some sort of buying for our grains????

The other thing I noticed this a.m. was more talk of China and the grain they are buying.  More rumors of them buying both wheat and some corn.  Sounds like they might have bought Australian wheat, French Wheat, and some US wheat.  Bottom line is that China still seems to be a wild card and potentially bullish card.  It seems like China wants to support these type of price levels; does that mean we are near a bottom on the board????

Egypt has also been back in the game buying wheat again; it had been several months.  It doesn’t look like the US got any of the business; but at least they are back in looking to buy.  The business yesterday looked like it all went to various black sea countries.

Old crop corn basis remains extremely volatile; but also very inverted.  As example some of the bids are much stronger for nearby corn then for August or September.  For us as an elevator it makes it tough because of the fact that we have a wheat harvest starting.  We can only ship out so many cars and you can only get so many trucks underneath product.  So the fact that we can’t get corn in and out today or yesterday and if we ship product couldn’t ship it until late August or maybe even early September makes bidding for old crop corn very tough. 

But I would say having offers out is probably the right thing to do.  Things are hot for old crop corn and with every day that goes by we get closer to new crop.  One day a cliff will happen for basis; but we really won’t have big yellow warning signs.  Those signs are already out there just from how volatile basis is; plus how some end users are bidding big inverses; while others have small carries or flat markets.  Other e-plants say they are about covered.  Corn is going into areas that it maybe typically doesn’t.  It feels to me like we have one last panic push by the market.  If we see successful pollination over the next couple of weeks I think many producers will start to let go and once this corn market basis is over it could be over in just a few hours.   It literally should be that volatile; where one afternoon someone trades just a huge number; but in the morning the only bid left might be new crop values.

Bottom line is use caution holding old crop corn basis too long and realize it is very much like playing a high stakes poker game.  When it’s over it won’t be fun; in the meantime the path of least resistance will be up.

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

Thanks

Closing Grain Market Comments

Markets closed mixed today in rather choppy price action.

September corn was up 3 cents, December corn was down a penny, KC wheat was off a penny, MPLS wheat was down 5, CBOT wheat was down 5, November soybeans were down 18, the US dollar was near unchanged with the cash index at 82.76, crude was up 1.50 at 108 a barrel, and the DOW closed at a new all time high up 78 points.

Weather and the funds, maybe a little old crop corn and soybean fundamental story was and has been what the markets have been about.  Today the talk for weather was a little normal or cool weather for parts of the corn belt in the deferred forecasts.  Nearly 100 here today has some local guys I talk to a little concerned as we could really use a drink.

Overall I think weather is getting view by the trade as negative to prices; hence we have been under pressure over the past few weeks.  The weather market for corn is getting closer to being over; weather will start being more of a focus for the soybean market as we move forward.

When I say weather for the corn market being over; I should probably say it differently.  The forecasts out today go out towards the end of the month; which is when most of the corn will be pollinating if not sooner.  Now if the present forecasts change and we add some heat and moisture that is forecasted doesn’t hit we easily could rally from weather.  Just as it sits right now with present forecasts and good conditions in the eastern corn belt the odds of a bullish weather card seem to be falling by the wayside as each day goes by.  More and more are starting to feel like the bean market will be taking the lead.  Looking at the charts and the wedges/triangles on some of the bean charts I tend to agree.

Don’t get me wrong I still think weather is important for corn; but I think the market is in the process of taking some of the risk of 11-12 billion bushel production out of the price.  So over the next couple weeks look for beans to start to take a little bigger lead.  The other thing to keep in mind for corn and the bean market is the demand side.  A month from now most will have a solid number for corn and bean production.  It might not be final but the number should at least have something behind it.  Presently the numbers are just thrown out of thin air via the USDA.

Once the market feels like it at least has a clue of production we will shift over to a demand market; or should shift over to a demand market.  If production does come in as high as the USDA presently has or higher look for some pressure to come on the market until the market proves it has demand like the USDA has forecasted. 

I am not going to argue if demand is stated to light or too heavy; but I do feel very strongly that the funds and players in our market will put the burden of proof on the side of “show me the demand”.   They should simply based on history. 

First off however we need to find out what our supply is.  I know most producers don’t want to think that it might go up.  But if have many of you asked yourself the question “is this corn crop only 33 bushels more than last year?”   I guess from where I sit I would think it is bigger; but maybe that is a case of backyardagains???

News out today was light but we did have export shipments out this a.m. and they were solid for wheat and corn; while poor for beans.  But overall not new news; as the big numbers are from the reported sales last week to China.

Egypt did buy some wheat today; 300 tmt; but none of it was US wheat; not a surprise but also not a headline that is good for US wheat demand.

Old crop situation for corn and beans is still super tight; but also very volatile.  Some places have big inverses while others have some carries in their bids.  I would caution that when we see harvest down south that we will slow or shut down one of the outlets that some of the corn is going to.  Right now that market is making the other markets really pay for corn.  Bottom line for old crop corn basis is sky looks like the limit for now; but one day and maybe one day soon before we know it things will fall to new crop values.  Huge reward still out there; but also a huge risk.

Watch Sunday nights forecasts and see if they give our markets a leg up or continue the pressure.  Also we really need that headline for the funds to want to cover shorts or simply get long.

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

Opening Comments 7-17-2013

Markets are called mixed this a.m.  behind a mixed overnight session as we continue to trade the weather forecasts.

In the overnight session corn was down 3-4 cents, KC wheat was up a penny, Soybeans were down 1-5 cents, MPLS wheat was up 3, and CBOT wheat was up 1.  Outside markets have the US dollar softer by 100 points or so at 82.40 on the cash index, gold is about unchanged at 1290 an ounce, and crude is about unchanged at 105.85 a barrel.  The stock market looks to open up about 30 points higher based on the DOW futures.

For the grains it is and has been about a couple things.  First off the funds have been rather short some of the grains so we have seen some hints of short covering the past few days.  The headline driving some of the short covering or maybe even flat out buying has been weather and crop conditions.  There is a concern with weather and pollination of corn.  So the two big things are the funds and weather as it relates to production possibilities.  I have seen production possibilities all over the board and that headline to have the funds buy….buy……buy……….hasn’t been seen lately.

The other big headline I seen yesterday was ethanol Rin’s out to new all time prices.  Ethanol plants and corn basis have been everywhere lately; I have heard of a couple saying they are covered until new crop; while I have seen others get very aggressive on bids.  Very volatile game right now; watch for lots of games to be played for both corn and soybeans.  On the bean market I have seen on processor bid things with a 50-60 cent inverse for beans from now to August; while I have seen another bid it with a small 4-5 cent carry. 

Things for old crop are all over the board for a lot of grains; in my opinion the old crop situations don’t seem to be solved.  But each day that we get closer to new crop the old crop situations get closer to being solved.

Today we will have ethanol numbers out; later this a.m.  Watch that for direction.

I did get an email today from a buyer indicating some inverted protein scales for some HRW in some areas.  Discounting 13 pro.  Not sure how that will develop but it was interesting to see.

It sounds like China is in trying to buy some more wheat; I seen some talk of 500 tmt Australian wheat this morning.  I read something that it might be milling wheat; which would be good.

Bottom line is that China might be one bullish card or at the least a wild card that could help our prices.  Is it enough to keep prices supported?  Or trigger fund buying?  I guess that remains to be seen.

We will have our marketing meeting in Onida at 3:00 this afternoon.

Thanks

Opening Comments - Bottom in?

Markets are called better as the crop conditions and latest weather forecasts sparked a rally in our markets last night.  Short covering is what most think?  But I guess how the weather actually shakes out probably will determine if the rally is a short covering thus short lived rally or if we have enough traders bearish enough that we have a reversal??

In the overnight session corn was up 11-13 cents, soybeans were 20 cents a bushel higher, KC wheat was up 6 cents, MPLS wheat was up 5-6 cents, and CBOT wheat was higher by 8 cents.  At 8:15 outside markets have a US dollar softer by 200 points, crude up 30 cents a barrel, gold up 5 bucks an ounce, and the stock market looks like it will open near unchanged with the DOW futures up a couple of points.

Two things; first off some were looking for crop conditions to continue the trend they had previously which was improvement.  But that wasn’t the case; as conditions dropped for corn, soybeans, and spring wheat.

Here is CHS Hedging recap of the conditions. 

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress071413.pdf

Secondly and probably just as important is the weather forecasts.  First off remember these will continue to change numerous times. But basically what happened is the forecasts Sunday afternoon were for cool in plenty of areas and then the forecasts yesterday afternoon had turned drier with more heat.  Some areas really need some moisture and no one really wants much heat during pollination.

So the bottom line today is the headline looked to change a little with yesterdays crop condition recap and weather also looks to be a little more supportive to prices at least this second.  Two cautions about the little bounce we have in our markets.  First short covering can be short lived.  Secondly weather markets tend to change tons.

Elsewhere we did see our first load of new crop winter wheat get dumped this a.m.  Very high pro and surprisingly good test weight with the pro it had.

Attached is a crop condition rating index.  Notice that that so far 2013 is tracking 2011 fairly close.  But also take notice where the crop condition index is at versus a year ago.  We are probably a cool and wet forecast away from many talking about yield getting increased. 

The index at this point is very much in line with where it was at in the years we had yields of 145 ish to 165 ish; in 2008-2011.  Plus Indian, Ohio, and Illinois are higher than they have been over the last several years.

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

Thanks

Opening comments 7-15-13 15 billion production??? What!

Markets are called weaker this a.m. with follow up weakness from Friday’s markets.  Latest weather forecast and carryout/production ideas are not helping anything.

In the overnight session Corn was down 7-8 cents a bushel, soybeans were up 2 in the August contract, November soybeans were down 5 cents a bushel, KC wheat was down 9 cents, MPLS wheat was 6 cents lower, and CBOT wheat was down a dime.  At 8:15 outside markets have the US dollar up a couple hundred points at 83.320 on the September futures, crude is down 50 cents a barrel, gold is up 4 bucks, and the Dow futures are pointing towards a positive 30 point start for the stock market.

It’s about weather and the funds right now.  Funds are simply not buying the present story that many are trying to pitch.  Funds have moved to an area that they haven’t been for some time.  Check out the latest CFTC report recap here.  http://chshedging.com/UserFiles/Documents/2013/Research/CFTC%20Commitments%20of%20Traders/CFTC071213.pdf

Bottom line regarding the funds and money flow are two important points.  First off their trend has been sell for an extremely long time.  How long can that continue?  Not sure but it is scary.  The other thing on funds is when they get to an extreme we open the door to a reversal.  Have the funds sold enough for us to be near a reversal for some of the grains like corn?????   A little early to tell as we don’t know how short they could get.  But with the funds short corn it does open the door for them to buy; we just need  catalyst and right now at least at this very moment weather isn’t that catalyst.  

In regards to weather most are now looking at the 6-10 and 8-14 day forecasts; most of these lack areas that are well above normal for temps.  Yes it is forecasted to be warm but not much more than typical.  Now I realize that some of the shorter forecasts are for plenty of heat the next few days with not much moisture; but the market seems to take more focus on the deferred forecasts that seem to change hundreds of times then the nearby and present weather. 

The market will be watching the crop conditions this afternoon and export shipments this a.m.

One thing I have noticed is a couple local ethanol plants mentioning some down time for regular upkeep.  Enough to effect anything?  Probably not but it could be a good scare card with the huge inverse that is out there between new crop and old crop.

I read the Van Trump report this a.m. and I thought he had some good thoughts as to what some in the market might be thinking.  He lists one possibility that is simply scary.  Don’t get too bearish from what he says; but take note that some have opened the door to higher production.  Many producers haven’t really even considered that as a possibility; maybe they are right?  But I think the correct thing in marketing is to realize that there are way more possibilities then we give credit for many times.  The difficult thing should be what is the probability of the different possibilities and how can you weight them out.

Below is from the Van Trump report.

“Corn bulls who have been riding the recent "weather train" may soon find themselves running out of track. For some producers the crop certainly needs a drink, and the next 2-3 weeks will prove to be mission critical for those who are in harms way. But with a "mild" forecast for most, I suspect "weather premium" will start to be carefully monitored and more heavily rationed. If the rains come like many are now forecasting, and conditions continue to improve, talk of a 14.5 to perhaps even a 15 billion bushel crop may soon start to circulate. Keep in mind with a projected 89.1 million acres "harvested," a 169 bushel average yield would puts the US corn crop over 15 billion bushels.  I am NOT saying this is going to happen, but as long as traders believe there is still this type of "potential" it will be hard for new-crop prices to gain a ton of longer-term traction to the upside. To change the markets overall "psychology" we are going to need to hear rumors and thoughts of new-crop ending stocks falling below 1 billion bushels. Which means we need to essentially start hearing talk of a national yield falling to sub-145 levels. Form where "crop conditions" sit today, that seems like somewhat of a long-shot. We will need to really heat up and rainfall will have to essentially be shut off for the next 2-3 weeks in several of the big production states for this to play out. There is no debating the fact it will be all about "weather" the next few weeks, and I am certain the bulls will win a few battles, but in the end I have this hunch the US corn crop is getting bigger NOT smaller. My opinion is that producers should continue to keep hedges in places but leave the top-side open just in case "Mother Nature" deals us an unexpected bullish "wild-card." Specs should continue to look for small bullish victories (or rallies) as an opportunity to establish more longer-term bearish strategies.”

Not a lot out else out there today.  It will be about weather and the funds; but we are also back near levels that might interest some more demand.  If that demand happens to be China that would be a headline and if I was a fund and all of my fund buddies were short and I started to see China in buying I might get a little nervous.

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

  

Opening Comments - USDA report thoughts

Markets are called mixed to weaker this a.m. behind a weaker overnight session and ideas that some of the ridging concerns are eroding in some of the forecasts.

In the overnight session corn was down 2-3 cents, KC wheat was up 3, MPLS wheat was up 4, CBOT wheat was up 3, and November soybeans were down 4.  At 8:10 outside markets have a US dollar up 300-400 points at 83.10 on the cash index, crude is up 50 cents at 105.40, gold is down 4 bucks at 1276 an ounce, and it looks like an unchanged start for the stock markets with the DOW futures up 4-5 points.

It was all about the USDA report for about an hour yesterday and then the market quickly went back to trading the weather as it probably should. 

Here is a recap from the report; this is from the Van Trump report.

US Carryout Stocks 2012/13 & 2013/14

	July Est.	June Est.	Avg. Trade Guess	Trade Range
2012/13
Corn	0.729	0.769	0.725	0.537 - 0.800
Soybeans	0.125	0.125	0.121	0.104 - 0.135
2013/14
Wheat	0.576	0.659	0.632	0.566 - 0.690
Corn	1.959	1.949	1.896	1.618 - 2.338
Soybeans	0.295	0.265	0.263	0.164 - 0.329

World Carryout Stocks 2012/13 & 2013/14

	July Est.	June Est.	Avg. Trade Guess	Trade Range
2012/13
Corn	123.57	124.310	124.222	122.600 - 127.590
Soybeans	61.52	61.210	60.938	60.185 - 61.300
Wheat	174.47	179.870	179.344	177.000 - 181.030
2013/14
Corn	151.00	151.830	152.404	149.700 - 158.897
Soybeans	74.12	73.690	73.557	69.486 - 75.000
Wheat	172.38	181.250	180.293	175.000 - 183.000

US All Wheat Production

	July Est.	June Est.	2012 Totals	Avg. Trade Guess	Trade Range
All Wheat	2.114	2.080	2.269	2.070	2.015 - 2.140
All Winter	1.54	1.509	1.654	1.507	1.454 - 1.555
Hard Red	0.793	0.781	1.004	0.773	0.730 - 0.808
Soft Red	0.539	0.509	0.420	0.525	0.506 - 0.552
White	0.211	0.219	0.222	0.214	0.199 - 0.220
Spring	0.571	NA	0.542	0.499	0.452 - 0.540
Durum	0.058	NA	0.082	0.063	0.055 - 0.080

Most called it a non-event.  Which maybe it was; but I seen a couple things of interest on it.  First off the China 2013/14 carryout numbers for corn and wheat.  Corn at 54.8 MMT versus 60.9 this present year and wheat at 57.2 versus 61.8 in last month’s forecast.  It seems like we have a smoking gun where China and our grains are concerned.  They have been in for both wheat and corn lately and when you look at SRW sold we are just starting the marketing year and commitments are off of the charts.

The second thing is the wheat numbers.  Very friendly; friendly enough for us to rally without corn or beans helping?  Probably not?  But could wheat maybe add some support to the row crops?  Potentially.  I put it this way it wheat has had a heck of lot bigger carryout numbers the past few years and much higher prices.  But wheat carryout is just one component that goes into helping project a price.

The other thing that stood out to me on the report was the USDA increasing both corn and soybean new crop carryout’s.  Both still over two times the present old crop carryout.  When you carryout’s double to nearly triple you can not consider that bullish fundamentally.  Now it doesn’t mean we have to go down; but it is why some are very bearish.  Looking deeper into those numbers you see that new crop corn supply went down slightly via a smaller starting spot with smaller old crop stocks and few harvested acres.  But the USDA took off more demand than then supply slipped. 

I am concerned in the future that if we do see supply or production slip that the USDA will simply curve demand and thus keep our balance sheet projections fairly big.  At least over the next few months.

Yield left unchanged isn’t a major surprise and it is what they typically do and probably should do.  We have had the weekly crop conditions show a strong up trend in conditions but we have many that are also thinking conditions are over stated.  The reality is that our yields will be determined over the next few weeks/months.  We probably shouldn’t even have a production number before August because it is simply using trend line methods that seem to be broke when you consider the fringe acres that have been added.  These acres added for corn over the past few years are acres that typically hit home runs or strike out.  It adds plenty of volatility to our yield projections.

Longer term the report to me still opens the question to what is fair price for 13 or 14 billion bushel production?  What about a 2 billion bushel carryout with demand 10-14 billion?  I don’t think we know the answer to these questions.   I think proper risk management is warranted; but for me to say that if we hit a 2 billion bushel carryout with a 14 billion bushel crop that we are going down to 4 bucks or 3 bucks; just isn’t known.  I have no good info to know how the funds could react should thinks actually shape out like some have predicted.  We could have a couple dollar downside risk or we might already be more than fair priced.    Way too many components and moving factors to have a good solid pinpoint price.  The only thing one can really do is realize the potential risks and rewards; and how human emotion tends to over move our markets.  We could see things much lower or higher than most think.

The things to watch going forward will be weather.  Eventually we will have to start watching demand; but for now it is all about determining what our supply is.

We are still searching for a reason to get the funds involved and long the grains.

The July contracts do expire at noon today; watch to see if things get explosive for corn or beans.  How tight does the cash market or big boys think things are?  Basis has been a big moving target for both of these commodities and probably continues. 

Sunflower market feels soft with just too many flowers trying to move too quickly.

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

Thanks