Opening Grain Market Comments 5-31-2013

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

Old crop corn was up a penny in the overnight, new crop corn was down a penny, KC wheat was off 3 cents, MPLS wheat was down 3 cents, CBOT wheat was down 5 cents, July soybeans up 12 cents a bushel, and November soybeans were up 8 cents a bushel.  At 8:15 outside markets have the US dollar up a couple hundred points, gold down 5 bucks an ounce, crude down a buck a barrel, and equity futures pointing to a lower stock market with the DOW futures down about 80 points.

Not tons of news out this a.m.; end of month so maybe some position squaring.   But primarily we are in a weather market; but debates as to which type of weather is bullish and what type of weather is bearish remain.  Bottom line is the story of slow planting leading to loss and shift of acres along with potential yield loss is the bullish headline we have today.

Yesterday we had plenty of talk on the GMO wheat and this a.m. I see another comment that South Korea posted postpones a planned US Wheat tender.  But yesterday by the end of the day we had got to nearly unchanged despite the GMO wheat news.  It does look like it is putting a little pressure on White Wheat basis; but we don’t have much of that in our area; we are mainly hard red winter and dark northern spring wheat growers. 

Producer selling slowed yesterday.  We had seen a small pick up when local corn cash price off of the combine hit 5.00; it did manage to pull a little higher than that; but right now is a few pennies back below that mark.  To me it feels like some more guys would like to make a few more sales around 5.00; but also see a lot more interest at the 5.25 to 5.50 level.   As for the country in general my sources say overall producers are probably only 5% sold for new crop versus 20-25% on average.  So lots more selling to come at some point as guys remain undersold; good or bad.

Old crop movement has been very slow but basis is also hit and miss and a little defensive.  The inverse scares the end users and many sources indicate most ethanol plants have about 0 coverage for August/September corn.  Makes shutting down easy; but the tight ethanol stocks and strong margins should they remain in a couple months give the potential for a big push on the little bit of corn that is left out there.  Bottom line is old crop corn basis and bean basis could still see some major fireworks; there are just too many variables to know for sure or know when and how these fireworks might occur.

Not a lot of other news out this a.m. other then the export numbers.

Old crop corn sales were bad at 3.4 million bushels; but the new crop corn sales showed good demand coming in at 31.1 million bushels.  That is helping 13/14 commitments catch up to last year’s pace but still about 20 million bushels behind new crop sales last year at this point.  Keep in mind the USDA has a big year over year forecast for US corn exports.

Soybeans had another net cancellation for old crop of -4 million bushels. But new crop were also strong at 27.8 million bushels.  Soybean meal sales were very strong and have now once again passed the USDA projection for the marketing year.

Old crop wheat sales came in at 1.3 million bushels; but we are down to 1 week of old crop left so not a surprise.  New crop sales where good at 26.8 million bushels.  We are about 70 million ahead of new crop sales last year at time and the USDA is expecting a decrease year over year.  Keep in mind that most of these new crop sales are SRW; not the milling wheat.

I don’t see much else going on today; I think Sunday night trade could be interesting; but it will be a weather trade.  Problem is I don’t know what type of forecast will be bullish and what type will be bearish.  I know the extreme wet and cool will be bullish; but forecasts in the middle and not super extreme could be view differently depending what the traders think we have in the ground versus what is in the bags yet.

The one thing to keep in mind that as things go is we will see green stuff; some might be super wet; but most will be green; a heck of a lot greener then last year.  So the perception that many see doesn’t have to be acres that need to be replanted; they could just see the green good looking stuff out there and there will be some of that and right now a lot more of the “good looking” stuff then a year ago.  That doesn’t mean that yields will be great; but perception of the crop will be negative in 30 days; unless we just have massing flooding.

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

Thanks

Market Comments - Slow corn planting Continues

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

July corn was off 3 cents, December corn was unchanged, KC wheat was off 2 cents, MPLS wheat was up 2 cents, CBOT wheat was up 2, old crop beans off a penny, and new crop beans up 2 cents.  Outside markets have the US Dollar about unchanged, crude off 30 cents a barrel, gold off 11 bucks, and equity futures pointing towards an unchanged start on the DOW.

The May contracts expire at noon today; hopefully those levels can act as some price targets for the July contracts.  The May corn is about 70 cents higher then July, May soybeans are a 1.10 higher than July, and MPLS May wheat is 43 cents higher than the July MPLS Wheat contract.  Yesterday May corn and May soybeans had incredible strength and were the main headline for the rest of the strength in the grain complex.  This a.m. both of those markets are up 4-7 cents; but very thinly traded.

Yesterday afternoon we had a crop progress update that showed corn only 28% planted.  Yet last night we didn’t mustard much strength in the corn market.  Why?  The funds just don’t seem to care and the end users are not ready to panic and push this thing higher; at least not yet.  We want to be patient in waiting for better prices; yet we also should try to be pro-active.  Not easy to do both at the same time.

Last year when did the drought start?  But when did the market finally start to trade it?  The drought was going on the whole time that planting was well ahead of schedule but the market didn’t trade it until June 18^th; that Sunday night the market opened up strong and by the close on Monday we had a positive 28 cents on December corn. 

When did the USDA acknowledge the dry situation?  Not until the July crop report.  Last June they didn’t decrease the yield despite the early dryness that was seen.  Their May number was actual an increase from their outlook numbers that came out in February. 

So when will the USDA or the funds acknowledge or trade the present slow planting situation?  Well first off the USDA did drop yield from the outlook form; so in a sense they have acknowledged it.  But to what extent should be the question and maybe that won’t be known until we actually have a better idea of when the crop get’s planted.

Perhaps the market is trading this current situation and not the fear of how bad it could get?  Bottom line is we have plenty of question marks and still don’t know the answers, and we don’t exactly have a history telling us we will trade worst case right away.  The funds might be late to the game or then the outcome of the game might just not be known.  I think that is the case; we really don’t know how production will shake out and we probably don’t have a reason to run things up today.  IF things change and we end up with a big production number the market will need to do its job of finding demand.  If we stay on the present path the market might just be slow to re-acting.  Bottom line with all of this is to realize what is bearish out there and what is bullish out there.  Thus in your grain marketing plan realize that the market doesn’t have to trade what you or I think it bullish it and the funds will have a mind of their own; so be pro-active or find a way to get yourself comfortable.

As for other news out there; we really don’t have much other then weather and crop progress/conditions.  Crops are extremely behind average and the wheat crop remains very poor.

I did see some updates from CNGOIC on the Chinese crops; they pegged corn at 214 MMT versus the USDA at 212 on Friday.  They pegged the soybean crop at 4% less than a year ago at 12.3 MMT.  Wheat at 121.9 MMT versus 121 that the USDA had on Friday.  These are all for the 2013/14 crop size.

Forecasts still see dry weather the next couple of days but a system later this week.  I know I am praying for us to get some of the moisture and I seen a couple forecasts that have us with up to a 60% chance on Saturday.

South Korea did buy some optional origin feed wheat as well as optional origin corn.

I did see a comment that as much as 30% of the corn could get planted this week; so some of the estimates for next week are 50-60% planted.  What number would be bullish enough for our markets to have a leg up?  What number would be bearish enough for the funds to try and sell this thing down?

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

Morning Comments 10-17-12

Another small little bounce is happening Wednesday morning; as of about 9:20 markets have corn up 4, beans up 7, KC wheat up a nickel, MPLS up 8, and CBOT wheat is up 5.  Outside markets have the US dollar once again weaker with the cash index at 79.01, gold up $4 an ounce, crude up 50 cents a barrel, and equities are quiet with the DOW off 10 points.

Another lack luster news day.  One thing out was the press release of the CME group purchasing the KC Board of trade.  Not sure what effect it has other then making spreads a little easier to trade.

Weather has some moisture in the eastern parts of the corn belt; but it remains very dry in the western and many areas such as ours are not seeing much for wheat emergence.  Ending Australia wheat stocks are seen at 7.1 MMT and production numbers continue to come down; most very close to 20 MMT versus the USDA at 23; some chatter is it could slip down to as low as 18 mmt.  But still for this to be super bullish our price we need it to translate into demand.

That is the big story for all of our markets now; demand. Supply is virtual known; perhaps not 100% but it is much more defined than it was before harvest.  Demand should now take the lead to where prices go.  Solid demand with good profitability for guys like ethanol plants and we open the upside.  A lack of demand and profitability struggles don’t add up to higher prices.

Bottom line is huge market potential remains should we end up getting bullish cards like less harvested acres, smaller supplies, or increased demand from the price break.  While at the same time huge risk remains if weather goes perfect in SA, our crops are actually bigger than expected, or the funds just continue to lack a headline reason to get involved.

Basis is firming on spring wheat and spring wheat is leading the markets today; the front month in particular as spreads firm in MPLS.  Also there has been talk of some Chinese buying of Canadian spring wheat.

The sunflower birdseed market remains very quiet; not much for demand there.  Plenty of buying needs to be done; but until prices stabilize or the buyers sense demand picking up look for the buyers to lay in the weeds trying to buy as cheap as possible.  Keep in mind that one of the worst things an end user can do is to be long and wrong or have higher priced product then the next guy on the shelf.  So don’t look for sunflower prices to stabilize until we give end users a reason for them to.  Perhaps that reason could be beans bouncing or stabilizing or orders/demand picking up, or realization that harvest is about over and there coverage is behind the eight ball.

Millet remains firm; but also very thin.

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

Don’t forget this afternoon at 3:30 we will have our weekly MWC Marketing Hour Round Table meeting.  Join us for charts, strategies, and generic grain market talk.

Thanks

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

Overnight Highlights from County Hedging's Tregg Cronin 6-11-12

Below are Overnight Highlights from Country Hedging's Tregg Cronin.

Outside Markets: Dollar Index down 0.322 at 82.178; NYMEX-WTI up $0.87 at $84.98; Brent Crude up $0.86 at $100.33; Heating Oil up $0.0235 at $2.6956; Gold up $0.30 at $1590.40; Copper up $0.0625 at $3.3460; All major currencies are firmer; Softs are all higher; S&P’s are up 6.00 at 1334.75, Dow futures are up 61.00 at 12,636.00 and Treasuries are slightly weaker.  Worth noting, Dow futures were up as high as 91, and most everything is hitting their lows as I write at 6:30.

The big news of the weekend, and what helped most financial markets to gap higher last night, was the news Spain had agreed to seek EU bailout aid to the tune of 125 billion euros to help its ailing banking sector.  In exchange, the EU finance ministers agreed to not attach any new conditions on Madrid other than its current commitments.  This morning’s trade seems to say we realize the bailout will help, but Europe still isn’t fixed.  A story in the WSJ this morning said 100 billion is the size of the bailout, but 368 billion is the size needed to fund itself for the rest of the year.  The data calendar is empty in the US today, so watch breaking news headlines for short-term direction in the outsides.

Rains in the last 24 hours fell in IA/MN/ND with the heaviest amounts around Omaha and W-IA as well as north of the Twin Cities in MN.  Localized areas of 1.0”+ seem to be the heaviest.  The 3-day weekend totals also saw SD and MT receive nice rains, although some damaging hail did fall in NC-SD on Saturday evening causing some localized damage to corn and wheat.  This morning, there is a system tracking across N-MO/E-IA/S-WI/N-IL.  The system is breaking apart somewhat as it moves across IL.  5-day forecasted precip turns fairly dry in the central belt after today’s storm with the most notable precip falling in the eastern Dakotas and most of MN with around 0.50-1.50” expected.  TX-FL should also see a sizable rain event.  Things will be mostly dry the balance of the week in the central corn belt.  Temps will be in the 70’s this week and 80’s and low 90’s by the weekend.  Some riding is expected to produce below average precip in most of the Plains and Midwest with temps around average to below in the east.

After a decent jump at the open last evening, corn prices are falling under modest pressure as new crop corn leads the way lower on the rain event in IA.  While this rain doesn’t say a lot for conditions in IL/IN/OH, “as goes IA so goes the corn belt.”  It should be noted conditions turn much drier the next 10-days following today’s blip, and given corn is beginning to tassel and even silk in S-IL/S-IN, moisture will be critical the next 15-20 days.  Obviously the outside market conditions are playing a role with investor confidence still in shambles.  It is worth noting, however, Friday’s COT report showed large specs net short the corn market (-6,400 caks) for the first time since June of 2010.  Additional length was also pared in Soybeans and meal, and funds are record short soy oil at -53,300 contracts.

Import data from China was released overnight, showing Jan-May soybean imports were 23.43MMT, up 20.7% from a year earlier.  May imports were 5.28MMT, up 16% from a year ago and 8% from April.  Russian wheat prices have been trending higher over the past week, up 3.0-3.5% as the Black Sea Region looks to be dry for the next week with quite warm temps as well.  FC Stone said they estimate the Russian wheat crop at 50MMT.  Otherwise, markets will probably trade a bit cautiously ahead of tomorrow’s June WASDE report.  Corn estimates for old crop averaged 821mbu on corn, 189mbu on soybeans and 753mbu on wheat.  These would all be modest cuts.  There don’t seem to be a lot of people thinking the USDA does anything to corn yield for 12/13 just yet.

Open interest changes during Friday’s session included a drop of 8,515 wheat, 5,484 corn, 74 beans and 750 oil.  Soy meal was up 2,209.  The almost unchanged open interest in soybeans would suggest a decent shift in ownership.  Spreads and basis were mostly firmer on Friday which might suggest specs sold to commercials.  Chinese markets were firmer overnight with soybeans up 16.25c, meal up $8.20, oil up 93c/lb and corn up 3.50c.  Corn basis on Friday was firmer across almost every demand sector, which should keep July well bid at/around $6.00.  Farmers won’t move corn until they can receive prices similar to what they got the last time they sold: $6.30-6.50.  Soybean basis is also firmer, remaining well above delivery equivalence.  Spreads should find support.

Call things a bit mixed to begin with as the rains across S-MN and IA and progressing into the central corn belt are enough to keep the new crop contracts in check, but old crop will find a bid until physical starts moving.  While the crops look good in areas, it is by no means uniform across the belt, and we still have to get to August before we see any new crop bushels.  Wheat feeding is a pipe dream now, and the USDA’s 166bpa yield is also looking a bit lofty.  Crop conditions tonight at 3:00 CDT.

Trade as of 7:05

Corn steady/ 3 lower

Soybeans up 1-5

Wheat up 4-8

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
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