Grain Market Comments 1-30-14

Grain markets are called mixed this morning behind a mixed overnight session.

When the overnight markets ended we had corn up 3 cents, KC wheat up 5, MPLS wheat up 2, CBOT wheat up 5, old crop beans unchanged, and new crop soybeans off a penny a bushel.  At 8:00 outside markets have a strong US dollar up 465 on the cash index at 80.965, gold is off 21 bucks an ounce, crude is up 80 cents, and the DOW futures are pointing towards a positive start of about 80 points.

Markets have continued to lack a reason to do anything other then what they have been the past several weeks/months.  The trend has been sideways to down for most of our markets and some of them have been in a total free fall.  We really need some reason to get the funds interested in owning grains or covering shorts.  We need something fundamentally to change and right now we really don’t seem to have anything positive fundamentally.  We may only be one event away from some sort of catalyst giving support to our markets but we still need that catalyst. 

Bottom line to sum up our markets the story has been very similar for months now.   Big supply, demand bouncing but not enough to offset the big supply, and a lack of a bull story for big money to buy into. 

There are some positives out there such as ethanol margin, soybean demand, the strong spring wheat basis we have seen for high pro spring wheat at times.  But overall none of it has been enough to spark a major rally.

This morning we did get export sales and they were supportive.  But enough to spark much of a rally?  Probably not without another bullish piece.

We did have export sales above expectations today and well above what we need on per week basis.  Wheat had 29.2 million bushels in export sales, well above the 8.9 we need on a per week basis.  Corn came in at the highest level this marketing year at 72.4 million bushels; we now only need about 7.9 million bushels a week to hit the USDA estimate.  Soybeans didn’t see major cancellations and actually came in at 18.2 million bushels; to not go over the USDA estimate we now need to cancel about a million bushels of sales a week.  So soybean demand remains very strong.

Wheat basis has been under pressure as of late as the offers are not trading like they did a few weeks ago.  This is all from rail logistics.  There are still good spot values out there but if one can’t get cars they can’t take advantage of the spot market. 

The other thing to consider on wheat basis is how deep the market is.  Yes a lower board has slowed sales down; but the big numbers that have traded on spot haven’t been for millions and millions of bushels.  It seems to be a train here and a train there.

Below is more morning market info from CHS Hedging Morning Highlights

Morning Highlights

By: Joe Hofmeyer

Highlights

• Outside markets as of 7:00 AM CT: The U.S. dollar is trading up 0.50% at 80.911, Crude is up 30 cents at $97.66 per barrel. Nikkei is off 2.45% closing at 15,007, the Stoxx 50 is down .20% at 3,006, and U.S. equities down about 1%.
• Index fund rolls start next week, and this Friday marks month end.
• Yesterday the FED announced that tapering will continue, as bond buying will be reduced by another $10 billion per month to $65 billion per month.
• The House passed an updated Farm Bill, and the Senate is also expected to approve the bill sometime this week.
• The U.S. Midwest and Plain States will warm up to more seasonal temperatures over the next 10 days with light to moderate precipitation expected.
• Beneficial rains are forecasted for Argentina, while dry weather in Brazil will aid early soybean harvest.

Corn

• Range bound trade between the support level at $4.20 and the resistance level at $4.40 continues for nearby March futures.
• Yesterday’s ethanol production data showed a rate reduction of 5,000 barrels per day to 900,000 barrels per day. Production is 17% above a year ago, and for the crop year so far annual grind equates to 5.04 billion bushels.
• For the 16^th consecutive week there have been no ethanol imports into the U.S, as margins currently don’t exist for importers.
• Export sales estimate for this morning: 500 to 900 tmt.

Outlook: Range bound trade and probably a follower to soybeans today… Mixed to start.
Oilseeds

• Rumors persist that China may have cancelled U.S. origin soybean purchases.
• China’s New Year’s Lunar holiday starts Friday, which should reduce soybean demand news for about a week.
• Poultry farmers in China are reducing bird inventories as the H7N9 virus (bird flu) spreads.
• Weather in South American is bearish prices, as Argentina gets beneficial rains and the Brazilian forecast is dry, aiding harvest progress.
• Early yields out of Mato Grasso continue to be very strong.
• Additional cases of the hog virus PEDv are being found on Canadian farms.
• Export sales estimates for this morning: 600 tmt to 1mmt for soybeans, 80 to 120 tmt for soybean meal, and 0 to 20 tmt for soybean oil.

Outlook: Trade will watch export sales closely this morning for direction, looking for cancelations… 2-5 lower.
Wheat

• Wheat rebounded slightly in overnight trade after reaching a 42 month low yesterday.
• As temperatures moderate in wheat growing regions of the U.S. conversations of winter-kill fade.
• Rail logistics continue to struggle for wheat, especially in the north.
• Bangladesh bought 150 tmt of wheat from India.
• Japan bought 179,343 mt of milling wheat. Of the total, 91,247 mt was U.S. origin and the balance was Australian origin.
• Export sales estimate for this morning: 350 to 550 tmt.

Outlook: Contract lows continue to be challenged as there are ample supplies of wheat in the world. Bouncing back slightly this morning… Up 2-4 cents.

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/

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Grain Market Comments 1-22-14

Grain markets are called mixed this morning after a mixed overnight session.  When the overnight session ended corn was up 2 cents, KC wheat was up 2-3 cents, MPLS wheat was up 3, CBOT wheat was unchanged, and soybeans ended down 1-4 cents.  At 8:15 outside markets have the DOW futures pointing towards a softer start of about 20 points, crude is up 80 cents, the US dollar is about unchanged, and gold is about unchanged.

First off I want to thank all of you that attend our grain marketing meeting on Monday.  We had around 120 at the meeting; so thank you to all that intended.  I also want to thank our speakers Darin Newsom from DTN and Tim Emslie from CHS Hedging.  For those of you that missed it make sure to attend next year; for those of you that were able to make it any feedback would be appreciated.

Yesterday we saw beans get hammered; on moisture in South America, wetter cooler forecasts and some rumblings of beans getting switched from the US to Brazil.  The funds long plenty didn’t help.

Export shipments yesterday where strong on beans; but not over market expectations.  Corn and wheat where near what they need to be on a per week basis.

We won’t have ethanol numbers today with the holiday.  Those will be out tomorrow.  We will have our MWC Marketing Round Table at 2:30 in Onida today.

Wheat basis remains very volatile; I like having offers out for high pro; but it sucks when the offers are so dependent on the rail road. 

In the big picture one of the things I got out of our meeting on Monday was the fact that long term things look better then maybe they have been the past few decades for the ag sector.  Over the next few years and this coming year in particular prices are really dependent on corn yield.  If we happen to hit a 160-180 bu national corn yield we have so much downside risk that it is scary.  2.00 cash corn???? 2.50???  If we grow 14-15 billion bushels next year and don’t find extra demand yes that low of a price is a possibility.  On the other side if we only grow 140 bu crop on less acres we potentially see a carryout next year that is under a billion bushels again.  We could easily have to find a way to curb demand.  5.00 corn?? 6.00 corn?  7.00???? 8.00????

Bottom line is the past few years corn yield has ranged from 164.7 to 123.4; If demand bounces back as much as they are thinking; all time record demand this year of 13.150; a step back words in yields will be very high prices in a hurry; but big yields in the US open so much downside risk that many could easily go broke.

So as guys are doing marketing plans we need to realize that we could easily see 3.00 type corn or 6.00 type corn.  160 or 140 is nearly a 2 billion bushel swing with the type of acres we now plant.

Below is more market info.  This is from CHS Hedging’s Morning Highlights.

Morning Highlights

By Ami L Heesch

Highlights

• Expectations are that there will be more stimulus cuts on improving global economy, which is said to be led by the US. The next Fed meeting is scheduled for next week.
• The gold market and the US$ are weaker this morning.
• Energy markets are trading mostly higher this morning.
• Decent rains are forecast for Argentina again late next week. 

Corn

• The corn market traded higher overnight in thin volume.                
• Weather conditions are improving in SA this week and focus will be on how well crops progress.
• The H//K spread narrowed in to a 6 ¾ cent carry overnight.  This compares to 7 ¼ yesterday.

Outlook: 1-2 better, technical bounce, market continues to be range bound     
Oilseeds

• The soybean market traded both sides overnight after yesterday’s beating.  Products are mixed this morning with soymeal trading higher and soyoil on the defensive.
• Palm oil closed 13 lower at 2574 ringgit on profit taking after 4 days of higher prices.
• Chinese bean prices were lower overnight. 
• SA weather conditions remain favorable on decent rain showers this week.

Outlook: Weaker trade this morning after trading slightly higher overnight
Wheat

• The wheat market traded higher overnight on what was thought to be commercial buying. This week’s winter storm is not expected to create much damage to the winter wheat.
• Algeria bought 50,000 tonnes of optional origin wheat from $285-$288 per tonne C&F for April shipment. France was thought to be one of the suppliers.
• Chinese wheat buyers are said to be looking for as much as 200,000 tonnes of optional origin wheat for April.

Outlook: 1-3 better on improving demand and cold weather across US Plains area

Opening Grain Comments 1-7-2014 USDA report thoughts

The grain markets are called mixed to easier this morning after a mixed overnight session.  When the overnight session ended we had corn unchanged, KC wheat off a penny, MPLS wheat off a penny, CBOT wheat off 2 cents, and soybeans down 4 cents.  At 8:10 outside markets have the US dollar near unchanged with the cash index at 80.727, crude near unchanged at 93.57, gold down 5 bucks an ounce at 1232, and DOW mini futures pointing towards a positive 60-70 point start for the DOW.

Biggest thing in our markets is the hurry up and wait for Friday’s USDA report.  The January report has had a history of setting market direction for sometimes months.  It has a history of being a market mover and many times limit moves.   The one thing that I would say is that options; both calls and puts are pretty cheap heading into a historically big market moving report.  As example for corn you can buy both January calls and puts that are about 30 cents away from the market for 2-3 cents.  If the USDA gives us a report that moves us limit those are in the money and return 3-5 times of what one spent.  If we are limit for a couple days like last March we could see a 2-3 cents investment turn into 50 cents or more.  Personally if I had a lot of corn in the bin I think I would sleep better if I had some under the money protection for a few pennies.  I am always worried about what the USDA has to say.

The good news is that it should be hard to see a report that is super negative with where prices levels are at; as the market is already short and many have priced in a negative report with bigger production.  I emphasis “should be” because with the USDA anything is possible.  How would the market react if we have a corn carryout north of 2 billion bushels?  What if the USDA says corn production is 14.5 billion?

We will be having our marketing meeting this week in Onida on Wednesday at 2:30; at that time we will go over some possible strategies heading into the report.  But with implied volatility as low as it is and options as cheap as they are the right move might simply be to buy some extra insurance to get one comfortable heading into Friday’s report.

Here are some estimates for Friday’s report

U.S. 2013/14 ending stocks

                                 Wheat     Corn   Soybeans

Average trade estimate          0.557    1.861      0.149

Highest trade estimate          0.586    2.054      0.180

Lowest trade estimate           0.460    1.654      0.118

USDA December                   0.575    1.792      0.150

Source                       Corn    Avg.    Harv.   Soybean     Avg.     Harv.

                             Prod.   Yield    Acres     Prod.    Yield     Acres

Average trade estimate     14.066   161.2   87.174     3.279     43.3    75.749

Highest trade estimate     14.255   163.3   87.612     3.330     44.0    76.376

Lowest trade estimate      13.897   159.8   86.927     3.240     42.7    75.500

USDA November              13.989   160.4   87.232     3.258     43.0    75.688

USDA 2012 final            10.780   123.4   87.375     3.034     39.8    76.164

The other big thing I continue to see and deal with on a daily basis is railroad freight and how it is effecting basis.  We have seen basis all over the board and at times we are seeing some good numbers trade for high protein spring wheat.  Make sure to have offers out.

Here is more morning market information.  This is from CHS Hedging Morning Highlights.

Morning Highlights

By Kevin Stockard

Highlights

• The Senate voted to confirm Janet Yellen as the Fed Chair on Monday, the 15th chair in the Fed's history. She is the first female Fed Chair and helped develop the Fed's current communication policy.
• The USDA January Supply and Demand report comes out at 11:00 AM CT on Friday, January 10, 2014, as well as Quarterly Stocks and Planted Acreage.
• Outside markets as of 7:00 AM: crude oil is up 0.56, USD unchanged, and S&P futures are up 6.00

Corn

• Corn export inspections came in below expectations at 19.3 million bushels vs. 28.7 million last week.
• The Commitments of Traders report yesterday afternoon showed funds net short 163.8 contracts of corn vs. 156.9 the week prior
• Argentina is hot and dry, but rains are still in the forecast for later in the week. The market does not seem as concerned about South American weather as it shifts its focus to Friday's USDA reports.

Outlook: March corn couldn't quite take out yesterday's high overnight, and will likely be choppy and leaning lower as markets wait to see the effects of index re-balancing.

Oilseeds:

• China's Dalian soybeans were up 19 in overnight trade, while soymeal was down 4.5 and soyoil was down 78. There were deliveries of 245 bean oil contracts.
• The Commitments of Traders report yesterday showed funds net long 116.5 contracts of soybeans vs. 135.5 the week prior.
• Brazilian growing regions saw somewhat disappointing rains of less than 0.25" and look to receive below average rainfall over the next 10 days.

Outlook: March beans look set to test nearby support again after taking out yesterday's low overnight.

Wheat

• Argentina's wheat harvest, which is now about 75% complete, has been better than expected and there is talk that they will begin exporting as soon as Jan 10. This would cut into potential U.S. HRW business to Brazil.
• India's PEC is set to offer 160 MT of wheat in a Wednesday tender, the first of three offers which will total 630 MT.
• Temperatures remain very cold across the wheat belt. There is sufficient snow cover for most areas, but parts of eastern Indiana, north central Kentucky, and southern Ohio lack snow cover and could be in danger of winterkill.
• The Commitments of Traders report yesterday showed funds net short 103.8 contracts of Chicago wheat vs. 102.4 the week prior, and net short 6.3 contracts of KC wheat vs. 4.9 the week prior.

Outlook: Wheat had a disappointing close yesterday and took out the low overnight. Strong export demand is being outweighed by huge competition.

Lastly I would like to invite you to our FREE Grain marketing seminar. January 20, 2014 -10 a.m. CST at the Ramkota in Pierre. Darrin Newsom, DTN Senior Analyst and Tim Emslie, Research Manager from CHS Hedging will be speaking on the grain markets. A Free Lunch will be served.

KC Wheat Chart

A low????

Closing Grain Market Comments 1-2-2014

First off I would like to invite you to our FREE Grain marketing seminar. January 20, 2014 -10 a.m. CST at the Ramkota in Pierre. Darrin Newsom, DTN Senior Analyst and Tim Emslie, Research Manager from CHS Hedging will be speaking on the grain markets. A Free Lunch will be served.

Today markets started the new year off in the red.

When the markets closed we had corn down 1 ½ cents a bushel, KC wheat down 9 cents, MPLS wheat down a dime, CBOT wheat down 8 cents, soybeans down 18, the DOW off 135 points, crude down nearly 3 bucks, gold up 22 bucks an ounce, and the US Dollar firmer by 500 some points at 80.563 on the US Dollar Cash Index.

Some rain in Argentina help put some pressure on the soybean market.  While wheat didn’t manage any follow up from the strength to close out the year.  Instead wheat in the first trading day of the year has already took out all of last year’s lows.  Corn tried to firm up but it looked like the selling pressure from wheat and beans was too much. 

Charts looking rather ugly; wheat new lows, corn double bottom; but also a new contract low close.   Catch a falling knife for the grain charts right now.  It does sound like we should have index fund reallocation that should include buying of quiet a bit of corn.

Here is a yearly price change report for some of the commodities.

	31-Dec-12	29-Nov-13	31-Dec-13	Monthly	Year-to-date
				% Change	% Change
nat gas	3.351	3.954	4.23	7.0%	26.2%
cocoa	2236	2791	2709	-2.9%	21.2%
oj	117.35	139.7	136.45	-2.3%	16.3%
cotton	75.14	78.14	84.64	8.3%	12.6%
crude oil	91.82	92.72	98.42	6.1%	7.2%
euro	132.08	135.87	137.88	1.5%	4.4%
rice	14.860	15.960	15.510	-2.8%	4.4%
soymeal	420.6	456.6	437.7	-4.1%	4.1%
cattle	129.9	133.47	134.62	0.9%	3.6%
palladium	703.35	718	718.3	0.0%	2.1%
heating oil	3.0451	3.0478	3.0772	1.0%	1.1%
dollar	0.79885	0.80657	0.80189	-0.6%	0.4%
hogs	85.72	85.67	85.42	-0.3%	-0.3%
rbob	2.812	2.6841	2.7858	3.8%	-0.9%
lumber	373.9	364.8	360.1	-1.3%	-3.7%
copper	3.6525	3.2305	3.3965	5.1%	-7.0%
soybeans	1418 3/4	1336 1/2	1312 1/2	-1.8%	-7.5%
platinum	1538.7	1368.8	1371.1	0.2%	-10.9%
sugar	1951	1715	1641	-4.3%	-15.9%
soyoil	49.16	40.22	38.82	-3.5%	-21.0%
wheat	778	655	605 1/4	-7.6%	-22.2%
kc wheat	831	713 1/4	640 1/2	-10.2%	-22.9%
coffee	143.8	110.25	110.7	0.4%	-23.0%
mn wheat	865 1/2	686 3/4	635 1/4	-7.5%	-26.6%
gold	1675.8	1250.6	1202.3	-3.9%	-28.3%
silver	30.227	19.965	19.37	-3.0%	-35.9%
corn	698 1/4	415 1/4	422	1.6%	-39.6%
31/December/12 - 31/December/13 % Change in China:
Soybeans:	Down 6.5%.
Soymeal:	Up 1.6%.
Soyoil:	Down 21%.
Corn:	Down 3.8%.
Cotton:	Up 1.5%.

You will notice corn is at the bottom as far as year over year change.  Down nearly 40% in the US versus only down 3.8% in China?  What we really need is for the “money” to look at the investments like corn and wheat; and think enough is enough.  Tell themselves “Let’s take some money out of the winners like the stock market and let’ put some money into the underperforming investments like corn and wheat.”  But we need some spark or catalyst to get this started.  Right now we simply don’t have a bullish story out there for the grains.

The thing to keep in mind about markets is their ability to really over do moves.  That means a couple things; first off we probably have more downside risk even at these price levels then we would like to admit.  Secondly when the tide does turn we could really bounce much more then what one things might be possible.  It is just the nature of the game we play today.  Over doing price moves doesn’t mean that one can’t practice good risk management.  Just because eventually we will get a bounce doesn’t tell us when. 

It is kind of like spring wheat and protein.  The past several years many have held high protein wheat despite rather good prices.   Now we are finally starting to see interest in high protein but enough to offset the decrease in overall net price?  No not really.

Speaking of spring wheat we do have buyers looking; basis has been all over the board.  Moving 50 cents to more than a dollar in just a few days.  The firmness is coming from the rail performance.  The board going up is helping basis firm for wheat too; but it is more of a logistic issue.  Some spot wheat can trade 50 cents to maybe a buck or more then posted bids; while some of the deferred to arrive bids remain thin.  Buyers have passed at basis levels 50 cents less then what they have paid for spot stuff.  The other problem for an elevator like ours is knowing when the cars will show.  Right now I have to ask myself can I sell more January or even February wheat?  If I sell it at a 50 cents discount or more to the spot market and then the railroad performance continues to struggle what could happen if I am late on shipment?  From what I have heard some are late on shipment and having to pay 50 cents to a buck or more.  So it makes merchandising very difficult.  The only thing I can recommend is for producers to have basis offers out on wheat. 

In an ideal world one locks in a basis of say option the board to maybe a buck over the board or better?  And then the because of the strong basis eventually maybe the board can rally?  If one asks me how can they get 7.00, 7.50, 8.00, or 8.50 for their 14 to 15 pro spring wheat I would say the path would be via getting basis locked in at a good level and then hope for a bounce on the board.  If the board does rally look for plenty of wheat to be sold.  If the railroads catch up at the same time look for basis to possible nosedive.  And as mentioned above the only real way to play this market is to have offers out; because it is so volatile and has so many factors that will determine a price on a given day.  Mainly shipment when and quality. 

I haven’t seen a rail situation like this since I have been merchandising!  Many think it will continue for several months.  So I do urge those that need to move grain before wheat harvest to have a plan.  As it sits now it looks like we have a harvest before a wheat harvest.  Just based on the likely struggles we have over the next several months. 

On the rail road line; this afternoon I did see an announcement that part of our rail line; part of the old DME line has been sold.  The headline reads CP to sell west end of its DME line to Genesse & Wyoming.

No idea how that will effect things like rail rates and freight spreads; but the new owners seem very committed to both safety and service.  So we do look forward to working with them.

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