Charts Again- updated - Hopefully Works this time

charts 9-2-13

posted some charts for soybeans, corn, and KC wheat


next few sessions should be very important to direction

Charts posted - KC Wheat, Corn, Soybeans

here are some charts

March Soybean Chart - is the selling over for soybean prices?

Below is a March Soybean chart............

when will the sell off be done?

KC March Wheat Chart mid day 1-3-2013

Here is a KC March Wheat Chart

Catch a falling knife????

US Dollar Cash Index Chart - 6-7-2012

Below are couple of charts on the US Dollar Cash Index.

Today's price action opens the door to the question if the recent pull back was just a correction in a longer term bull market or if we have reversed.  If the pull back is just a natural correction before resuming the bull market it doesn't spell good things for grain prices in the near future.  What becomes scary is the weekly chart; that shows that the US Dollar is close to opening resistance doors perhaps making a run up to the 2010 levels.  Remember what wheat and corn was worth in June of 2010.....Ouch!

Watch and see what happens to the dollar as we go forward as it will have a huge impact on profit levels for farmers.

The bottom line of this should be the fact that we need to practice good risk management in our grain marketing efforts.  Get your self comfortable!

Closing Comments- Wheat Charts 5-29-2012

The grain markets closed mixed today; with beans holding in there while corn and wheat had plenty of downside pressure as money flow continues to hit the exit door.

Old crop corn was 16 cents, new crop corn was off 4 cents, beans where up 5 cents, KC wheat was 22 lower,  MPLS wheat was off 15 cents, CBOT wheat was off 23 cents, equities where firmer with the DOW up 126 points, crude near unchanged, and the US dollar near unchanged.

After our markets closed we did have crop conditions that came out.  They showed a decline in conditions; perhaps a little more then what was expected.  Here is Country Hedging’s link to an the updated crop progress and conditions report. 

http://www.countryhedging.com/media/Research/Archive/2012_05_29Crop Progress5-29-12.pdf

The big highlight was a 5 % decrease in the G/E corn crop conditions; down to 72% in the G/E.  Now it is really early and history has shown us that these conditions don’t always give us the yield we are expecting; but it is something the market will watch.  Bottom line is it could give us a chance that we have seen the biggest crop if conditions continue to go backward.  More important then this afternoon’s report will be the weather as we go forward.  Will the crop get bigger or smaller then the present USDA yield of 166 per bushel?

Corn price outlook really should be that simple; if we get a big yield or see an increasing yield trend we probably see prices trend lower.  If the yield gets smaller and macro’s, outside markets, or some Black Swan event don’t cause demand to curve the price outlook with smaller supply should be firmer. 

I would say that longer term to get bullish one much prefers demand over supply destruction as supply destruction has the ability to curve demand a little too much.  I would reference spring wheat this past year as case in point what can happen when we see smaller supply; as the spring wheat price really didn’t do much of anything as we simply failed to have the demand despite the smaller crop and less bushels.

The millet market has firmed up lately; we have had several buyers looking for offers.  Please give us a call if you would like us to offer some out.  It is almost starting to feel like buyers are realizing that millet might not have much for acres.  Not sure if they are in panic mode or not.  But they are looking for millet so don’t be afraid to have your offers out there.

It also felt like the sunflowers had a little upbeat today.  Perhaps it has something to do with a lack of coverage and the bean oil market stabilizing the past few sessions? 

The sunflower market and the old crop corn market really look like Mexican Standoff’s to me; lots of upside potential should the cards fall one way but lots of downside direction should the cards fall another way.  I guess most of the grain prices are like this; which is why practicing good risk management is simply the correct thing to do. 

You can find hundreds of people that can give you hundreds of reasons for corn price, wheat price, or grain prices in general to go up or to go down.  But not one of them can ever accurately predict on a day to day basis what it will do.  Sure sometimes guys will look like they know what is going to happen and plenty of times analysts or farm advisors get it right; but plenty of times they also get it wrong.  They too are guilty of selling fear and buying greed.  With this known the only thing I can preach is to practice good risk management in your grain marketing in a way that leaves you comfortable whether grain prices are going up, going down, or doing nothing at all.

Different things get different people comfortable.  Not everyone has the same goals or needs; sometimes making a good profitable sale with get a producer comfortable while other times just having some put protection might be what it is for some.  Bottom line in grain marketing get yourself where you want to be.  If you need help please feel free to give me our one of us in our grain department a call.

Attached are some wheat charts.

Thanks

Wheat Charts........Bull or Bear

Below are a couple of wheat charts.

Maybe they can help you determine if the price break for wheat this past week is just a correction in a major bull market.  Or if the rally wheat seen last week was just the correction in a major bear market.

Please comment with any thoughts!

July Soybean Chart

Below is a July Soybean chart; which shows that the next few session will be important.  Was today's bounce a counter trend rally?  Or was the break we have seen the past week or so just a correction in bull soybean market?

Is it time to panic sell? Are you Comfortable?

With the recent sell off in beans; one has to ask themselves what could we see happen in some of the other grains.  How much downside is left in these commodity and grain markets?

First off there are so many factors that will determine where these markets go from here that one really should NOT try to out guess it.  When marketing grain or doing a grain marketing plan you want to search for Comfort.

One thing you can do is try to evaluate the markets with a plan based on what happens in our markets and on the outlook.  For the outlook I like listing possible outcomes both good and bad; both macro items and specific items.

As example one might list Macro items as

The US Dollar
World Economy direction
China
Europe issues
Politics and Policy
ETC



Crop specific items might include

carryout
supply
demand
weather - drought- relative to supply
price - econ 101........
supply trend, demand trend, and price trend

The reason I like to list some of the above is to help get an idea of some of the possibilities that I feel could happen; especially when looking at extremes

One big extreme could be corn yield this year; if we hit 170 or higher we likely are swimming in corn and have corn starting with a 4.00, more then likely a 3.00 and possibly a 2.00

On the other extreme if we have yields like last year or less; we could easily see new highs for corn.  Perhaps close to the 10.00 or so that corn is presently worth in China

So after i have looked at these possibilities i need to ask my self some hard questions as for outlook and what ifs.  Such as if we see a huge drop have I put my self in a comfortable situation?  Will my crop insurance give me all the coverage i need?  Do i need to have more sold?  Do i want to own put option protection as another form of coverage?

What about to the upside; am i comfortable if we go up from here?  Do i have too much sold?   Do i need to own some cheap out of the money call options?

I could go on and on; asking and answer hundreds if not thousands of questions.   But at the end of the day I want to have one thing
.



Comfort.  I want to be comfortable so that I never have to Panic sell or Fear sell.   I want to be comfortable enough that I don't lose a wink of sleep at night if the markets go up, if the grain markets go down, or if they just don't do much of nothing.

How you get to your Comfort Zone is something that each of you will have to determine.  You might be there and if your not your gut is probably telling you so.  Listen to it.

There is a saying buy fear and sell greed.  Don't be so uncomfortable that you put yourself in that situation.  Put your self in a comfortable situation where you are making sales and using tools that allow you to be comfortable without thinking that you are getting greedy or that you are fear selling.

Be pro-active as it is the first step in getting comfortable.

Beans get smacked! - Neutral Nick update time

Beans got smacked today so it is time for Neutral Nick to look at his positions in an effort to try and manage his risk.

He went threw all of his positions and felt good about all of the months and all of the commodities other then July beans.

For corn he felt that his p & l graphs where at good support areas and didn't feel the need to chase in which might cause a lot of whipsaw action.

Same for wheat.

Before his soybean adjustments which I will display below he has overall profits in most of the trades he has on and his expiration profits giving him a much more potential.  Those charts have changed since his last update about a week ago.  You can find them at http://grainmarketingplans.blogspot.com/2012/05/neutral-nick-update-nearly-200k-booked.html

Soybeans today broke some major support and could very well see plenty of follow threw weakness; then again if you look at the report a couple days ago you might think beans have plenty more upside.

The corn and wheat markets are at the bottom end of the ranges they have been for some time; if we don't bounce Mr Neutral Nick might have to look to adjust sometime in the near future as he does have put options sold that are now close to or in some cases slightly in the money.  As mentioned before Neutral Nick this time around is using a little bias and his bias for those markets are A we are near a harvest low for wheat and we have year over year month over month decreasing supplies and B the cash corn market has shown no weakness leaving the cheapest spot to buy corn still the board for many so he isn't wanting to adjust at this time and C the new crop corn showing a yield of 166 is a little premature; Nick and myself are in the camp that we should see a weather scare at some point.

Here are Nick's updates and his corresponding bean graphs.

His only trades this week are the sale of 50 July 13.50 puts and 100 of the July 14.50 calls.  With us getting closer to the June expiration of these options this will probably be the last time he sells any July options.  He might buy some; but one thing he has to watch out for is Gamma Risk.

USDA Report Day - Limit up Beans? Limit down corn?

Markets are called mixed and VERY VOLITALE behind a USDA report that was out today.

Calls are all over the board; some saying comments about limit up on beans and limit down on corn; with wheat mostly called steady.  Outside markets are slightly supportive at 8:50 with equities up the DOW firmer by 80 points, crude up 60 cents, Gold up slightly, and the US dollar near unchanged to slightly weaker.

The big headlines are the carryout numbers which have old crop corn carryout at 851 million bushels versus an estimate of 758 and last month at 801.  Another day where the USDA says we will use new crop corn and new crop wheat instead of old crop corn.  This one is getting most off of guard because cash basis has been super strong as have spreads which is telling us that the product isn’t there.  I guess we will see if the market believes the USDA or not; if they do look for some serious weakness; some commented perhaps we see China jump in again?

New crop corn balance sheet came in at 1.88 billion bushels; just a huge number.  The majority of it comes from the fact that the USDA is using a yield of 166 nearly 20 bushels an acre more then this year’s crop of about 147.  Some are saying this is could be the most bearish number we see; I guess only time will tell.  I would think we have a long way to go before we have yields like that; but keep in mind what has happened with the wheat crop down south this year; it seems to have got bigger and bigger and had near perfect weather.  So I guess on perfect weather there is risk that the crop could actually get bigger?   Bottom line if this doesn’t get smaller and the crop doesn’t get smaller things could get rather ugly in the near future.  Add to that the fact that it seems like producers are undersold and under protected things could get interesting and not in a good way. 

World carryout is also bearish for corn; old crop at 127.56 up from last week and new crop at 152.34 which is a huge increase from this year.

World bean carryout 53.24 down from last month’s 55.52 and new crop at 58.07 up slightly from this year but down from last years 69.12.  Overall very tight and leaves the bean bull card on the table.

Wheat world carryout is friendly and maybe rather friendly with it coming in at 197.03 versus 206.27 last month, next years world wheat carryout is pegged at 188.13 another friendly number.

US bean carryout came in very friendly with old crop at 210 which was less then the estimate and less then last months 250.  Increased exports and increased crush.  The new crop is even more friendly at 140 million bushels which beat the estimates by 30 million.  This gets us very tight and perhaps helps save the day for the grains.  I guess time will tell; but overall it says bean prices need to go higher and ration off some demand.

Wheat lately has been a follower and that could be the same today; but overall wheat was friendly at 768 this year less then the estimate and a decrease from last month.  New crop also was better and maybe gets us out of the burdensome area that we have been; the world numbers seem to; new crop came in at 735 million bushels 70 million less then the estimate.

I guess today we will see if corn is still king; if you look at the numbers by them self you should see beans and wheat both very strong and corn very weak. 

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

How do I decide what type of protection?

I was looking today at what gives me the best protection ahead of the USDA crop report.

To answer that question one has to ask more questions; such as how long do I want protection; what type of protection do I need if we move X cents or X dollars up or down......how much do I want to spend.

So after one answers those questions the next thing to do is the what if's; for me I use position book from RJO and run various what if's.

Today I ran the example of if I want to spend $50k in protection using Dec put options what gives me the best bang for my buck.  Do i buy out of the money options?  In the money?  Deep out of the money?  Etc

So I decided to run threw some what if's using Dec corn futures and various strikes.  I believe that I want to have the trigger pulled by July 4th ish; on the cash side; so i ran what if's or theoretically values based on July 6th.

I took 50k and bought as many put options as I could using the following strikes.

5.20 or ATM puts which i figured at 41-42 cents i could buy about 24 of them
5.00 or OTM put which i figured at 31-32 cents i could buy about 32 of them
4.50 or Deep OTM puts which i figured i could buy 77 of them
4.00 or Very Deep OTM (OTM out of the money) which i figured i could buy about 286 of them.

I didn't take into account the more commissions with the more quantity; but here is what i found that gains or losses to be (theoretically based on no volatility changes) at these various futures levels on the Dec Futures

6.00 Dec Futures - all four of the trades are big losers; with the ATM losing the least at 38k loss; followed by the 5.00 puts which lose about 41k, then the 4.50 puts which loss 45k, and lastly the 4.00 puts have lost about all value down about 48k.  Now if we are a producer this is the best option if you don't have 100 % protection because it means we have rallied 80 cents and should have more then paid for the 50k paid in protection


5.00 Dec Futures...give the Higher the strike the more profit. The 5.20 would be up aprox 2500, the 5.00 strikes about 1200, the 4.50 would be losing about 4500 and the 4.00 strikes would have lost you about 14k



4.50 Dec Futures....Here is where you see them all start to make money; this time however the more puts you have the more they make; so the best performance at 4.50 on July 6th ish would be the 4.00 puts which should be up about 75k, followed by the 4.50 puts which should be up about 60k, then followed by the 5.00 up about 48k, and lastly the at the money 5.20 puts are now up only 42k



4.00 Dec Futures....this levels and below is where you really see how well leverage can work for one.....the pattern is the same you are better off having bought more out of the money puts then you are at the money puts even though we are not yet in the money on the 4.00 puts they lead by far; you would now have turned your 50k investment into about 306k profit, your 4.50 would be 176k, your 5.00 would be 111k, and your 5.20 puts would be up about 94k profit



3.50 Dec Futures.....This is where you hit the home run so to speak; turning your 4.00 puts that are worth less then 4 cents when you buy them into about 55 cents each; having bought 286 of them you are now up nearly 750,000 in profits, the others also do good; but not even close versus having the many more 4.00 puts; the 4.50 puts would have about 335k in profit; the 5.00 puts would be up about 111k, and the 5.20 puts up about 94k

Bottom line when deciding what type of coverage you are looking for don't forget to look at the what if's; also keep in mind that the what if's i am looking at are based on 60 days from now; not expiration; as at expiration 4.00 dec futures don't make you any money at 4.00 puts; but in the shorter term they could make you a lot of money

Overall it seems to make sense to buy more OTM if you plan on only holding a short term; they don't perform as well in a sideways market nor an up market; but they are in another league as for performance in a down market

Please give me a call if you have questions

and as always make sure you understand that futures and options are very risky

Here is a screen shot of the what if's that i used in the above example

Opening Comments - Morning Comments - Day ahead of USDA report

Below is a forward from our main Country Hedging contract.  It has some of his thoughts on the crop report that will be out in the a.m.

As for markets today we should see some consolidation ahead of the report in the a.m. perhaps a little position squaring.  However we do have weak outside markets and overnight markets that where weaker.

In the overnight session beans lead the way down off about 15 cents on the old crop, KC wheat was down 4, MPLS 2-3, CBOT wheat down 4, and corn was off 3-4 cents.  At 9:00 outside markets are weak; but slightly off of their lows; presently gold is off a little over 21 an ounce, the equities are weaker with the DOW off about 100 points, crude down about 1.20 a barrel, and the US dollar stronger up nearly 400 at 80.134.

With the risk off type of environment you see beans leading the way probably because of the huge fund length and the fact that now the charts look like a top is in; which happens a lot after the fact in our business.  Keep in mind that longer term if you look at some of the projections below new crop beans probably have some potential.

I think that the numbers below show some huge possible risk; hopefully it isn’t realized; but the risk has to be considered huge if we look at corn carryout projections for next year.  The average estimate is for 2012/13 to double this year’s carryout and when I went back and looked at the last time we had a 2 billion bushel carryout or so we had prices get under 2.00 on the futures.  Obvisouly a lot has changed since then; but that is simple scary.

Now my personal opinion is that we a long way to go before we have a crop made; plus the USDA has a tendency to adjust demand with supply and vice versa and the fact that they already have said some of this coming years crop will be used to help off set the tight old crop balance sheet.

Basis for corn has been hot; but feels very top heavy.   I have seen 3 local ethanol plants start to inquire about replacements to corn; such as milo and wheat.  Keep in mind the old saying that high prices cure high prices; just as low prices cure low prices. 

For wheat the above sentence is really about the only good thing we seem to have going; and uncertainy to our spring wheat crop.  Demand seems to have picked up a little bit with the lower prices and the outlook for acres in the coming year is rather poor.  There is a little talk of some dry weather in parts of Europe and Russia area; but nothing super major yet.

With the report out in the morning don’t be afraid to get some sort of protection or comfort level incase we see the train wreck that seems to be possible for new crop corn.

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

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/

This communication may contain privileged and/or confidential information and is intended only for the use of the individual or entity to which it is addressed.  If the reader of this message is not the intended recipient, you are hereby notified that any unauthorized dissemination, distribution, and/or use of this communication is strictly prohibited.   This communication makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.  Nothing herein shall be construed as a recommendation to buy or sell any commodity contract.  There is a risk of loss when trading commodity futures or options.

From: Fitch, Joseph
Sent: Wednesday, May 09, 2012 8:31 AM
Subject: Morning Note

Good Morning,

Overnights are showing continuing uncertainty because of Europe and the liquidation of the fund long in soybeans and meal.  Germany is talking about a graceful exit for Greece from the Euro and Spanish yields on debt are making new highs above 6% interest. 

Rumored corn deliveries didn’t happen.  South American bean and meal basis was said to be up strongly on yesterday’s futures decline.  Brazil is thought to have connected on two June/July cargoes, which reinforces the idea that Brazil is taking advantage of the inverse now – leaving more room for the US to fill late summer bean exports and meal exports.  New crop is still all about US beans, with no export competition. 

Tomorrow morning we will see the May S&D from the USDA.  Below I’ve included my thoughts about the report. 

Here are the full rundown of estimates according to Reuters.

Corn –

1.       Old crop

a.       Exports have picked up, but shipments are still behind the pace needed to get to the USDA’s numbers.  It seems likely that the USDA will leave any changes to exports until later S&Ds.  One issue to consider is the unshipped bushels to China.  For now we can assume that these bushels will get shipped, but every week where there aren’t shipments is a little bit more unnerving.

b.      Ethanol is could be raised slightly if at all.  Current USDA estimates are for 5000 mb.  Although the pace has slowed it hasn’t slowed enough to get to 5000.  We will need to see more signs of downtime and slower production, otherwise the market’s guess of 5025 and 5050 is more accurate. 

c.       Feed is expected to be steady on this report.  Waiting for new stocks data, I’d assume.  There is still a lot of wheat feeding that is going on. 

d.      Ending stocks steady to down 25 mb.  Although that sure doesn’t feel like it is small enough with the basis levels.

2.       New crop

a.       Yield estimates will likely increase from the USDA’s outlook of 164 to something like 165-167 based upon the quick planting progress, although we are a long way from guaranteeing trend or greater yields.  This hasn’t worked in the last number of years so maybe they shouldn’t raise the yield early for once. 

b.      Acreage historically doesn’t change for now.

c.       Feed/residual should bounce higher on a bigger corn crop, but estimates of winter wheat production could limit any major increase.  I see guesses of 5.2 bb and smaller.  Current year is 4.6 bb.  This one has a lot of factors, but guess 5.0 bb.

d.      Exports should rebound on cheaper prices and the expectation of expanding Chinese demand so 1.9 bb.  This number could jump over time if the Black Sea wheat production declines come to fruition.

e.      Ethanol will likely be raised because of cheaper corn prices and everything, but I think that we might only be taking a smallish jump in usage given the heavy stocks situation and my guess that US gasoline consumption isn’t going to ramp up.  So guess 5.1 bb.

f.        Ending stocks should be around 1.8 billion.

Soybeans –

1.       Old crop

a.        Exports should be revised higher by 25-50 mb. due to South America and Chinese demand recently.

b.      Crush should be steady.

c.       So ending stocks should 200-225.  So right in line with the market guess.  There are some reputable guesses that are closer to 150 mb by the end of the year. 

2.       New Crop – one word of caution here: the USDA is going to have to show some pretty small usage numbers to start with because of the acreage being unable to change on this report.  They usually don’t want to go below 4.5% stocks/use.  So maybe these demand guesses are too early for the USDA to really show.

a.       Exports are all guesses on what happens in China.  Thoughts range between 58-62 mmt.  I am naturally suspicious and I think that the global economy plus rationing type prices puts us in the lower half of expectations.  US exports are going to be good because of the lack of competition and should jump to 1.5 bb or so.

b.      Crush might have some upside next year because of the smaller South American crops and the spat between Argentina and Spain.  My guess 1.75 bb.

c.       Ending stocks without any increase in acres (like you see on the May report) is going to show somewhat tight at 160-170mb.

Wheat -

                Changes in the wheat balance sheet are likely to be an expansion in export estimates for SRW, HRS, and for White wheat.  Ending stocks should be down 25 mb or so. 

               

                New crop wheat is going to see a above average yield and some bump in domestic usage as feeding should be incorporated.  This is unlikely to be a major wheat report.  As you notice above the average carryout estimate for 12/13 is almost exactly the same as the guess for 11/12.  So the additional production from the larger HRW crop is thought to be absorbed.  World wheat is likely to be tighter than it has been recently with production declines thought likely in EU, Russia, Ukraine, Kazakhstan, and Australia.  India had a better crop and could be upgraded.

I still think that spring wheat acreage is tight a little tight here and in Canada given a lower protein character to HRW.  SRW acreage could be smaller as acreage is said to have been plowed up.

Neutral Nick Update - Nearly 200k booked profits

It's been a while since we heard from our mock trading character Neutral Nick.  That is both good and bad; good in that he hasn't been over trading and bad that he hasn't done a good job following up and monitoring his positions as much as he should be.

He recently had his May options expire; in which he left most expire worthless; both the ones he owned and had sold.  But he did have some soybean options that left him long; he chose to get out of them on the close on Friday.

Net with all of his May options expiring and his now turned futures positions Nick booked $193,437.50 profit before his costs and commissions.

Under normal full service brokers he would have paid about 10,800 in commissions; discounted online brokers could have been much less.

For his new trades or updates he has plenty of them with it being some time since he has followed up.

For corn his updates are buying back all of his cheap call options sold for nice profits and selling other options to pay for them as well as some more deferred options that fit his market ideas so he did the following basis Friday's close

Bought 70 CN 700 calls
Bought 120 CN 750 calls
Sold 50 CN 600 puts
Sold 50 CU 600 calls
Sold 50 CZ 600 calls

For soybeans he sold 100 of each of the following

July 1500 calls, 1450 puts
Nov 1600 calls, 1200 puts

For wheat he bought back 40 of the July 8.00 calls that he had sold and then sold 50 of each of the following

Sept 7.00 calls
Sept 6.00 puts
Dec 6.00 puts
Dec 7.50 calls

Overall the one thing you notice is he tried to take away some gamma risk and tried to sell more deferred options; his preference is out of the money with about 5 months left.  He also bought back and placed trades that follow his bias


Below are his P L Graphs; this doesn't include the nearly 200k winner he booked above; also keep in mind that he has risk between commodities and between different months.

Following that are each commodity broke down per contract month as he is looking to book consistent winners every time an option expires via continuing to sell time and volatility and that is what the above trades are trying to accomplish.


Keep in mind that he does have plenty of risk in in strategy

opening grain market thoughts 4-30-12

Markets are called mixed to softer this a.m. behind a weaker overnight session and weaker outside markets.

In the overnight session new crop corn was off a penny, old crop corn was up 1-2 cents, KC wheat was off 8 cents, MPLS was off 9 cents, and CBOT was off 8 cents.  At 9:10 outside markets have European wheat about unchanged, equities are down slightly with the DOW off 15 points, crude is down about 80 cents a barrel, gold is off about 10 dollars an ounce, and the US dollar is bouncing slightly up to 78.822 on the cash index.

We are in delivery period for the grains and that did throw a little surprise as we got some delivers for beans and that pressure some of the spreads.  KC and CBOT wheat also had some deliveries but that was expected.  Corn didn’t and isn’t expected to see any with the strong cash markets and hot basis.

The USDA reported that more new crop beans where sold to China this a.m. in the tune of 220 tmt.  China did help our corn market out big time on Friday with huge announcements of sales.

This afternoon we will have a crop progress report and expectations are for corn to be over 40% planted; some estimates are as high as 50%.  Wheat conditions are expected to be mixed and the majority of spring wheat is also expected to be planted.

This a.m. we will have export inspections.

The possible freeze in wheat area doesn’t appear to be as bad as thought it would have been; with many areas not getting quiet as cold as forecasted.

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

Opening Grain Market Comments 4-25-12 15.00 beans? China buys corn!

Markets are called mixed to better this a.m. behind the firmer outside markets and firmer overnight session.  We also received some confirmation of the corn in the last day or two.

In the overnight session corn was up 5-6 on old crop, new crop corn was up 3, beans where very strong with the old crop up 28-29 cents a bushel, new crop beans were 17 cents better, KC wheat was up 6-9 cents, MPLS was down a penny to unchanged, and CBOT wheat was up 5-6 cents.  At 8:50 outside markets have equities firmer with the DOW up 88 points, Nasdaq up over 2.5 %, the dollar is slightly weaker with the cash index at 79.081, crude is up about 30 cents a barrel, and gold is down about 5 an ounce.

The USDA did announce some corn sales to Unknown as well as China this a.m.  This along with the announcements yesterday are now well over 1 mmt since Friday in the daily reporting system.  Most has been to unknown which typically ends up being China or at least the market will guess it is China.  This a.m. announcement finally had quite a bit of new crop which makes more sense given the huge inverse between old crop and new crop.

Yesterday the USDA confirmed the 4^th case of mad cow or BSE after the grain markets closed.  Despite this the markets rallied very strong last night with beans leading the way.  I read something this a.m. that had a projection for the South American/US bean balance sheet to be tighter then it was in 2009 and that our March 13 stocks could be the tightest ever.  There is now some weather talk of possible freezes in Argentina damaging late maturing beans.

Yesterday we had Stats Canada come out and they report wheat acres  at 24.324 million versus last year at 21.464.  Canola was 20.372 versus 18.862.  The estimates were in line with expectations for the most part; the market does appear to think we could add a little more Canola and take off a little wheat as we go forward or get more updates.  The big difference from a year ago is the acres that didn’t get planted last year and look to get planted this year.  This is also the big difference in the US; a lot less prevent plant acres.  The report I seen for the Canadian acres showed an increase for every single crop listed.

The stock market strength is on the heels of Apple who reported better than expected earnings after the close yesterday.  On the early going it is up over 9% or $50 plus a share which has the Nasdaq up over 2.5%.

After cattle being limit down yesterday from the mad cow announcement they are bouncing today.  Keep in mind that softer livestock prices don’t exactly support higher feed costs for feed grains. 

Basis for corn and beans remains very firm; with more demand then available supply or supply that is for sale at these levels.  It still feels to me that producers own plenty of grain but they are also doing a great job in not having to market it.  At the end of the day the discipline they have is helping out our prices; but it is also the big risk that is out there.  What happens if everyone has to run to the exit door at the same time to make sales?  Nothing good for basis or the board.  So don’t forget to have a solid good risk management approach in your grain marketing one that might include a little risk diversification and making sales during the seasonal times that one is really suppose to.

Don’t forget that we will have our weekly MWC Marketing Hour Round Table this afternoon in Onida where we will be going through some charts as well as overall discussion on our markets and possible strategies to use.

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

Open Grain Market Comments 4-23-12

Markets are called mixed this a.m. behind a choppy mixed overnight session and rather weak outside markets.

In the overnight session old crop corn was up 2 cents, new crop corn was unchanged, beans were down 3-6 cents, KC wheat was up 2, MPLS was up 1-4 cents, and CBOT wheat was up 1-2 cents a bushel.  At 8:55 outside markets have European wheat off about ½ of a percent, the US dollar is firmer up 300 at 79.495 on the cash index, equities are in the red with the DOW off 160 points, crude is off about 1.80 a barrel, and gold is off about 12 an ounce.

We still have yet to see confirmation of any Chinese corn purchase which was rumored late last week and we now have some rather ugly outside markets.  Not exactly a great receipt for higher prices; but we do have a market in beans that seems to just want to run and we are at the bottom end of the ranges we have had for a long time for corn and wheat.  So I don’t think I want to get overly bearish this a.m.

The volatile outside markets along with the prospects for big crops should keep us rather defensive in our grain marketing approach.  Remember 2008 anyone?  The funds are now record longs in the bean market, near record shorts in the wheat market, and they have trimmed their shorts big time in the corn market.

We will have export inspections out this a.m. and this afternoon we will have crop progress and crop conditions.  The market is expecting that a good amount of corn got planted last week.  Enough that one of the articles I read this a.m. mentioned 1 billion bushels of corn available by September; more then 3 times normal.

I don’t think now should be panic time for corn and wheat, but the bottom line is the wheat crop looks great and has got bigger the past several months and the prospects for corn look good too.  So if we continue to get ideal weather and were to see the outside markets under some extended pressure the downside risk for the grains is rather large(even at these levels).  I think we should find good values at or near the present levels but if money flow decides to leave or weather is simply ideal there is plenty of downside risk that should tell us to be pro-active and don’t be afraid to make sales on the bounces and perhaps don’t be afraid to get protection at or near these levels.

For a scary thought one of the regulars that I follow who is simply a technical trader has a target for corn at 3.50 on the board.  That would be under 3.00 cash price (ouch).  One thing I do know is that bottoms are usually made when everyone becomes bearish and things look the worse.  While tops typically happen when everyone is bullish and thinks things can only go up.  I keep both of those in mind but I also think in grain marketing one needs to simply practice good risk management in a way that takes out those extremes and allows comfort whether the markets go up or down.  Don’t be afraid to give us a call if you need some help with your grain marketing plan.

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