Closing Grain Market Comments 6-18-2013

Markets closed mixed to stronger today.

Old crop corn was up 5 cents, December corn was up 12 cents, KC wheat was up 6 cents, MPLS wheat was down a penny, CBOT wheat was up 7 cents, July soybeans closed down 2, November soybean closed up 4 cents, the DOW was up 138 points, the US dollar about unchanged at 80.66 on the cash US Dollar index, crude was up nearly a buck a barrel, and gold was off about 17 bucks an ounce.

Mixed type price action today; actually volatile type price action.  We seen several 5-10 cent moves in July corn in a matter of minutes.  We did have July corn fill the gap left on the charts from the March 28^th USDA report; but didn’t manage to close above it.  Technically we are at some big resistance points; in my opinion it might be tough to break the resistance before we get into delivery or at the least before July options expire on Friday.  Keep in mind that the option sellers will try to pin the price into levels to get the most options to expire worthless as possible.

The winter wheat price action today also looked to be technical in nature; a bounce off of the lows set yesterday; which were the lowest level seen in about a year.  We left reversal type action on some of the charts yesterday and both corn and KC wheat did a good job following that up.  MPLS wheat which has held the 8.00 support level on the July contract for well over a month finally gave threw.  With the funds long there that could add to some selling.  The positive for spring wheat has to be the lack of producer movement; basis is on the firm side so that might help keep MPLS from really tanking.  I do remember last year about this time…..maybe a few weeks earlier………MPLS had held support for a long time; but it eventually broke it and then lost about 75 cents in just a few days.

I did hear some comments today about a possible heat dome forming.  But some in the industry think that would be perfect for some areas.  I am hoping our area just gets the warm and wet forecast.  Bottom line is the weather forecasts are really dependent on what actually got planted which might not be answered for several months.  The forecasts will continue to be a thin line and depend on what view the funds are taking on it.  The actual answers to production won’t be known soon nor will the crop be made or broke via one forecast. 

For prices we will have to consider the demand side as well; the old crop demand story for soybeans was brought back to life yesterday with the NOPA crush numbers.  While the old crop corn demand story has been great for ethanol.  I still think we have some possible fireworks for both of those commodities but I also don’t want to wait for the top with the huge inverses that those markets have. 

Our local corn inverse for old crop corn versus new crop is 1.80 a bushel; that means it is 60 cents a month storage cost if everything is unchanged.  One cannot afford to pay that.  If a grain merchandiser left that inverse on the table they would lose their job.  That doesn’t mean old crop corn needs to be sold today; it just means that one has to have a good exit plan for old crop basis and realize that fireworks one is playing with.  If you have questions on the old crop basis and implications give me a call.  Also give us a call if you want to have some offers out there; as we are very close to the time.

The sunflower interest seems to have died down a little bit the last day or two.  The birdseed business in particular seems to have had orders slow up a little bit.

Wheat basis seems to be firm; I had some spring wheat cars on the spot floor today that seemed to trade ok to good and winter wheat basis has been strong.  A lack of movement and lack of harvest pressure.  I think many might want to look at locking in winter wheat basis if you plan on pricing the board in the next several months.  My reasoning behind that is the fact that winter wheat is just too expensive versus spring wheat.  Plus as it sits right now spring wheat in ND looks to be less stressed and thus potentially lower in protein. 

We have already established that we won’t export much winter wheat; plus we are seeing more quality issues in the little that has been harvested.  If a mill can buy 13 pro spring wheat or for that matter 15 pro spring wheat cheaper then winter wheat why would they use the winter wheat?    There were some spot winter wheat cars yesterday that traded the equivalent of 10 to 60 cents more then what 13 to 15 pro spring wheat is bid for September/October.  That to me sounds like a big enough spread to look at trying to switch grinds to.  Would you rather use 12 pro winter wheat and have to pay 60 cents more than 13 pro spring wheat?

The bottom line reason for looking to long in winter wheat basis on old crop bushels is the demand story.  We don’t have a demand story; we have a supply story that eventually will be solved via replacements.  Replacement of spring wheat instead of winter wheat; replacement of other countries exporting such as Russia instead of us.

If you want more info on looking to lock in winter wheat basis give me a call; as in my opinion it is a good move and probably a right move for wheat that you want to price in the next 1-5 months or so; but maybe not the move for something you are looking to price or hold on to into next year. 

I am really not seeing a lot of other news out there today.  We will have ethanol numbers out tomorrow and export numbers on Thursday.  July options expire on Friday and next week will bring the updated acre and stocks numbers on Friday.

We should be a weather and chart market; but once the story turns to demand which shouldn’t happen until we have a better idea of production.  We need to realize that the job of demand should production be any place close to where it is presently forecasted will be to find additional demand year over year.  That means that the job of the market will be to create demand.  Yes some demand will be created just via having more supply; but the normal way to create demand is via lower prices. 

They say that big bull markets always turn into big bear markets.  The reason behind this logic is usually bull markets take our price up high enough to create more supply (more acres in our case in both the US and the world) and high prices curb demand (guys go without or find replacement).  So once the demand is curbed and supply is increase we historically go from bull market to bear market.  Just a natural ECON 101 reaction; doesn’t mean it has to play out this year as guys have been talking about it for some time.  But eventually that’s how its suppose to play out; it’s just a matter of mother nature deciding when and if that’s our outcome.

But it does tell us for grain marketing purposes to have a plan of action.  So we are not sitting over bulled up on prices should we get the bear market reaction that some have predicted. 

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

Thanks

Jeremey Frost

Closing Grain Market Comments 6-13-2013....did Wheat put in a bottom?

The grain markets closed mixed today in choppy trade.  MPLS wheat helped pull the other wheat markets back into positive territory and we did have corn bounce into the close well off of its lows.

When the grain markets closed we had July corn down 7 cents, September corn down 4 ½, December corn was down 2, KC wheat was up 2 – 3 cents, MPLS wheat was up 5-6 cents, CBOT wheat was up 2-3 cents, July beans down 31 cents, and November soybeans down 14 cents closing just above the 13.00 level.  At 2:45 outside markets have a very weak US dollar down 300 some points at 80.640 on the US Cash Index, gold down 10 bucks an ounce, crude up 70 cents, and the stock markets have a big bounce going on right now with the DOW up 180 points.

The positive today has to be the little mini reversals for the wheat markets in CBOT and KC.  The KC July wheat contract hit its lowest level in about a year before turning around and closing positive.   Some would classify as a key reversal in that it made a new low for the move and closed higher; other technical books would just consider it a reversal because we didn’t close above the previous sessions highs.  Either way it is a positive; it might not last but is really the first positive we have seen on the wheat charts for some. 

MPLS wheat continued to hold support around the 8.00 level on the July board; another positive.  I do question if we see some pressure against that support should we get all the spring wheat in; but the chart looks to be holding up so far.

CBOT wheat flirted with its lows from late in May but also managed a little reversal type action on the charts.  It also looks like we have a little bullish divergence in momentum on the CBOT July Wheat chart.    Meaning when we made our low back in late May STOCH got down to the low teens and now even though we are near that same level STOCH is in the upper twenties. 

I don’t want to read too much into the wheat price action today; but I thought it was overall positive.  We have the funds short plenty of wheat and we have everyone talking about the big world supply and yesterday we had production come in higher than expected on the USDA report.  But despite all of this the CBOT wheat market is a few pennies higher then it was when right before the USDA report came out at 11 a.m.  yesterday the 12^th.

So my hope is that we have finally made a low and got some of this negative information priced in.  The only thing I would say is that hope and greed are not very good emotions to have when it comes to marketing. 

As for news today I did see that SovEcon raised their Russian wheat crop to 52 MMT from the 50 MMT they had.  But is still below the USDA number of 54 MMT that the USDA had yesterday.

We did have export sales out this a.m.; nothing super bullish here.  Good for wheat but not off the charts at 15.7 million bushels.  Our commitments for the year are at 272 million bushels versus only 203 last year.  Perhaps why the USDA increased our export forecast yesterday?

The corn and bean export sales were very light.  Not where we need to be to meet current USDA projections for the old corp.  The new crop corn was horrible while the new crop bean sales where so-so.

The support in MPLS wheat today came from forecasts and thoughts of acre loss.  I did see this comment in another market summary today.  “===Central and eastern Kansas wheat fields expected to possibly see 80+bpa wheat cut as evidently the 5 frost events in April and May did less than expected/reported damage”

Maybe that is what the USDA seen when they raised our wheat production yesterday?  The thing that we have to keep in mind in regards to a frost is the fact that sometimes the damage doesn’t show up until the combines roll.  (80 bushel straw with 20 bushel wheat????)  I guess we will find out over the next several weeks.

I did see a comment that Goldman lowered their price forecast for the grains for the next twelve months.  Citing favorable weather conditions and growing supplies.  I don’t care to argue the point; most producers I know would argue it; especially those in Iowa or ND where they can’t get the crop in the ground.

The point I want to take from it is the headline that the funds or “big money” see.  That headline is bigger supplies as noted in yesterdays USDA report.  If we truly want a bull market and higher prices we need to give the funds or “big money” a reason to enter.  That reason can be inflation or some other black swan event not directly tied to our fundamental supply and demand or it could be our carryout levels/production levels.  Right now the USDA reported forecasts for balance sheets are not a headline that say……..BUY…….BUY………..BUY……….if anything they are headlines that say……. SELL………SELL……….SELL.

Bottom line is we need something to change; maybe a policy change that helps increase ethanol usage or ethanol blend?  Maybe inflation talk?  Maybe confirmation of a huge loss of acres and yields?  I don’t know what it needs to be but we need some story that is buyable material for the funds.  It doesn’t have to be accurate and make sense to everyone; we just simply need a story that tells the guys with the money to buy.

Elsewhere we have been trading some sunflower offers the past couple of days.  Mainly for deferred slots like Jan-March of 2014.  If you have some interest now might not be the worst time to have some offers out there. Buyers are concerned about the loss of acres in North Dakota.

I have seen some signs that old crop millet might be finally done going up as I have had several brokers start to indicate offers back to me.  That type of volatile price action tends to come at the end of a move.  I guess in this case it will really depend on when and how harvest shakes out.  Will it be early?  How empty will bins be waiting for it?

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

Thanks

Closing Grain Market Comments - Crop Progress 6-3-2013

Markets closed mixed today in rather choppy volatile price action.

Old crop corn was down 6 cents a bushel, new crop corn was down 7 cents a bushel, KC wheat was up ½ of a cent, MPLS wheat was up 3 cents, CBOT wheat was 3 cents higher, July soybeans were 22 ½ cents higher, November soybeans were up 21 ¼, the US dollar was hammered down 720 points with the cash index back at 82.650, the equity markets bounced with the DOW up 140 points, crude was down 1.40 a barrel, and Gold was up 18 bucks an ounce.

What happened today to cause the major swing in the corn market?  First off when we hit the levels we did on the board we had over 5.00 local cash corn which helped some producer selling.  I believe we got as high as 5.10 cash off the combine corn; and bought some deferred corn for June around 5.50; so producer selling was increase when the board was up.  We also hit resistance on the charts and I just don’t know that we had a reason to go above resistance today.  I know end users seem to be patient and don’t look like they want to push prices higher.  As for the funds I don’t think they know that we need to be higher.

Still plenty of estimates out there have corn acres only down 2-3 million; with carryout numbers closer to 2 billion then 1 billion.  And a carryout of 1.5 to 2.0 billion isn’t going to get the fund managers super bullish on fundamentals.  So the bottom line is we have potential to see new crop corn go higher; but we probably don’t need to do that; at least not yet.  Now should the USDA show a smaller carryout in June (which I think is unlikely) or in July (which is possible but really still to be determined via mother nature and other factors) the funds could easily get on the bandwagon and decide to buy.  But right now today we have plenty of debate on how tight our balance sheet is or isn’t and not enough evidence for the funds to really want to make another leg up.

Should we break the recent highs technically it could open the doors to another quick 20 cents; but first off we have to break resistance at a point that producers are lining up to sell as are some technical traders; and we don’t have the end users in a panic mode to help.  Keep in mind ethanol margins are great nearby; but from what I am told new crop ethanol margins are nothing great.

Bottom line is today’s corn turn around seemed to be technical driven.  Now whether it is just a pause before moving higher or a reversal to lower prices is still to be determined.   Most likely determined by mother nature and future USDA reports.

This afternoon we did have a crop progress update.  It showed corn planting at 91%; which leaves us at about 8 million acres of corn left to plant.  So that means we have roughly 89 million acres planted.  If we leave yield at 158 which some will argue as way too high and others will argue as too low; gives us a production number of about 12.9 billion bushels.   The market feels like it is trading production closer to 13.5 billion or so. 

Fundamentally IF we have production of 12.9 billion bushels we still need to find demand from this last year as we are only projected to use about 11.1 billion bushels.  So the job of the market still seems to be find demand.  Something that isn’t suppose to be done via higher prices but via lower prices.

Now keep in mind that the bulls see production closer to 12 billion; with some of the super bulls indicating production closer to this last year’s 10.78 billion bushel production.  While the bear’s see production of 14 to 14.5 billion.  In my opinion it is really way too early to know; the crop will be made or broke based on mother nature in the months to come. 

As for crop conditions today we had corn come in at 63% Good/Excellent; which was slightly above trade estimates; but well below last year and the past 5 year average. 

Soybean planting came in at 57% which was below the estimate and below the average of 76%.  Now is it strong enough for our markets to continue the $1.25 rally that we have had?  I guess I don’t know the answer.  What I do know is that the market is trying to give a producer an incentive to plant soybeans via the prices.  Demand has been good for new crop soybeans too.  Now would I be aggressive selling beans; maybe not in our area because of how hit and miss our bean crop is.  But if I was in the areas east of us that have good APH yields and I had things planted I would think making some sales or rewarding this rally would just be good business.  Forget whether we go up or down from here; bottom line is it is good business to make profitable sales especially if you can paint a very unprofitable situation should things shake out a certain way.

Spring wheat planting did bounce to 80%;  G/E spring wheat conditions came in at 64%; 10 % below last year’s initial rating.  Even the South Dakota crop is 10% below last year’s which I found interesting.  Last year’s crop if you remember started off big and got smaller and smaller.  Only time will tell if we see this crop get smaller or bigger as we go forward.  The one thing that this year’s crop has going for it is moisture.  Last year by this time a lack of moisture was hurting it just wasn’t realized or acknowledged by the USDA and some of the traders.  I don’t think we will have a lack of moisture issue anytime in the next 30 days; so the crop likely gets bigger if we get some heat and growing days.  Now if we keep getting rain and cool weather like in some of the forecasts perhaps the crop conditions can get take a step back?  But in my opinion it will be tough for our crop conditions to get much worse anytime soon.  It’s not like the crop conditions say good/bad based on this date.

Here is CHS Hedging link for more crop condition info.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress%20first%20conditions060313.pdf

Other news out there today included this morning’s export shipments.  Good for wheat; but slightly below estimates.  Most ideas are that our final wheat export number will be very close to the USDA’s projection.  Both corn and soybeans were on the low end of estimates and both below what we need on a per week basis to meet USDA projections.

I did see a “Reuters poll of 15 analysts is based on conditions as of Monday, June 3” for corn and soybean production and acres.  Not really a bullish game changer

                             Corn                         Soybean             

                             Acres   Yield     Prod       Acres    Yield    Prod

 High                        96.500   165.000  14.437      79.876   44.500  3.467

 Low                         93.500   156.000  13.416      77.100   42.500  3.200

 Average                     95.113   158.231  13.825      78.238   43.668  3.362

 USDA May Estimate           97.300   158.000  14.140      77.100   44.500  3.390

In our office we have a couple seasonal charts up from a presentation that Ed Usset did for us.  Looking at the charts we look to be very close to going over a ledge.  Now who knows how things will work out this year; sales made about a year ago would have been the biggest mistake in the world and done a good job of hitting the lows for some of the markets.  Will this year shake out the same?  Where sales made now look bad in a few months?  If so what could cause that to happen?  Or will this year be the opposite of last year; will sales made in late May early June end up looking like the best sales of the year?

Don’t know the answer; don’t want to promote anything other than doing what makes one comfortable and making good business decisions.  In my opinion when I look at the seasonal tendency for corn over the last 30 years of so I think I probably want to have a game plan to get myself comfortable either via making some sales or using another strategy or strategies to get there.  Maybe buying some puts?  Maybe selling calls?  Maybe a combination?

Basis continues to be very hit and miss.  I did have a local ethanol plant looking for some nearby corn; which was good to see as just last week he indicated he was covered.

The birdseed market also remains rather thin; with rather wide bid – ask spreads.  Tough to buy product but equally tough to sell.

I do have some buyers looking for some new crop confection and con oil acres if anyone has interest looking at them.  Demand seems to be very strong in that market.  It does look like North Dakota may be losing some sunflower acres as they are only 20% planted versus the 5 year average of 55%.

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

Thanks

Closing Grain Market Comments - USDA Crop Progress Update 5-28-13

Markets closed mixed today with the row crops leading the way and wheat lagging behind.

Old crop corn closed up 9 cents, December corn was up 14 ½ cents a bushel, KC wheat was down 2 cents, MPLS wheat was up a penny, CBOT wheat was down 4 cents a bushel, July soybeans were up 33 cents, November soybeans were up 40 cents, the US dollar is up with the June contract at 84.310, gold was off 7 bucks an ounce, crude up about a buck a barrel, and the stock market had a nice bounce with the DOW up 106 points.

Very strong day for the grain markets; new crop soybeans and new crop corn in particular.  July beans also managed a new high close for the year today.  The strength in the new crop row crops comes from weather and a lack of planting progress.  Ideas are that we have lost some corn acres to prevent plant plus we are potentially losing some soybean acres and spring wheat acres to the same thing.   Some soybean acres might also be getting lost from the slow wheat harvest; not allow for as many double crop acres as expected. 

I did see a couple different advisors selling some new crop corn and soybeans today; and one that I listen to mentioned maybe having a recommendation out in the morning on new crop soybeans.  Comments like “reward the rally” being used.  One thing to keep in mind is the fact that if we are losing corn acres some might get to soybeans.    Also seen a comment that mentioned guys maybe taking prevent plant on corn and then going back into the ground with soybeans un-insured.  I don’t know exactly how that process would work but I can see the logic in it.

I seen a couple different comments showing various weather maps asking the question.  “Bearish or bullish?”  It looks like parts of Iowa will continue to get moisture in the days to come.  Basically to me it looks like we have spots that rain would be beneficial and then we have others that it will continue to hurt progress and may damage what is already in the ground.  Bottom line is we have had issues planting basically since the season started; we have been behind and now the market realizes that we MIGHT have a major issue.  I still think it is undetermined and up to mother nature.

One of my wheat buyers today mentioned the fact that some Hard Red Winter Wheat business was going down; but we ranged anywhere from 40 bucks to 70 bucks a ton too expensive.  This really opened my eyes a little bit on the wheat situation.  Don’t get me wrong I still see some friendly things happening and I think our crop gets smaller; but longer term we need demand.  It won’t matter what we don’t have if the other guys (Russia and other wheat producing nations) have more than enough to make up for our lack of supply.  Now that doesn’t’ mean a weather story can’t happen or develop someplace else in the world at some time.  But today we don’t have that story. 

The story we have for wheat is a bad United States wheat crop; which is old news and been talked about since it was planted in the dust last fall.  The other story we have is big rebound in production in almost every wheat producing nation.  That my friends isn’t bullish.  It was nice for us to see some Soft Red Wheat business last week with China; but that is just more feed wheat business.  The area we need demand is milling wheat.  Bottom line don’t fall victim to backyardagains; looking at the lack of wheat in the United States and think we have to go higher.  If that was the case we would have already rallied.  Now if the funds or “big money” decide to start talking about our lack of wheat sure we could rally; but longer term we need to find a way get that missing piece of the puzzle called demand.

As for news today this a.m. we had export shipments out.  They were very good for wheat; while bad or soft for corn and beans.  The corn and bean numbers lately make one wonder if the door isn’t opened to the USDA lowering the export projection.

The other news out today was this afternoons crop progress report. 

Corn planting came in at 86%.  Bottom end of the ranges I had seen; which were 85-90 %.  Fundamentally it says we still have 13-14 million acres of corn left to plant or nearly 2 billion bushels of possible production.  But keep in mind that if we don’t plant any more acres and we yield the 158 that the USDA is presently using while harvesting 92% which is about average.  We still have production of about 12 billion bushels.  This year we are only projected to use about 11.1 billion bushels which means we still need to find demand of nearly a billion bushels year over year.  So tonight’s crop progress numbers are bullish but longer term do they say we need to run up like we did this last year?  In my opinion not yet. 

If this news can give help us keep the rally going personally I think I would consider “rewarding the rally” a little bit.   Perhaps use a rally to catch up on some sales for those that are uncomfortable for what you do or don’t have sold.   For some that might mean some sales for others maybe just using some options to protect your bottom side risk would be a good play?

The one good thing the weather has done is give the funds a reason to look at the grains.  Right or wrong at least we have a possible positive headline to get the funds interested and if they do decide to get interested we could easily over do a move to the upside.  Longer term present prices levels could easily look very good.

Soybean planting came in at 44%; which is below the average and slightly below the estimates that I had seen which were around 50% planted.  I don’t know that we have a major issue here yet and I look for more acres to slide into beans from corn.    But just like corn we have some wet weather forecasts and if the funds decide to get on board who knows where this thing could go; longer term and fundamentally I think risk is to the downside as I think the job of the market is to find demand. 

Spring wheat planting came in at 79% planted below the average of 86%.  But here also weather looks like it could cause some acres to get switched to prevent plant. 

Winter wheat G/E conditions where left unchanged. 

Other things that stand out in the crop progress report; include the fact that the eastern part of the corn belt is now ahead of average for planting progress.    Corn emergence came in at 54% which isn’t as far behind the 67% average as one would have thought a couple weeks ago. 

Here is CHS Hedging Recap of the USDA crop condition/planting progress report.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress052813.pdf

The sunflower market felt a little softer today; with bids down a little from the offers that had got filled/traded last week.  Or maybe a better way to say it is the bid/ask spread just widened out a little again; as I don’t know of anyone that is really a willing seller at a cheaper level then they where last week.

Corn and wheat basis both remain very choppy.  Some guys have interest in buying while other like some local ethanol plants are fairly covered.  Expect things to stay choppy; you have to be bullish corn basis in general with the ethanol numbers; but the inverse is too bid for anyone to want to hold any length through the inverse. 

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

Closing Market Comments - Fastest corn planting pace ever! Old news? 5-20-2013

Markets closed mixed today in choppy trade.

Old crop corn which started firmer in last night’s session ended the day down 3 cents, new crop corn was up a penny, KC wheat was up 8 cents, MPLS wheat was up 8 cents, CBOT wheat was up 2 cents, old crop soybeans were up 16 cents, new crop soybeans were down 3 cents, gold was up 29 bucks an ounce, crude up 65 cents a barrel, and the US dollar showed some weakness with the June futures off 470 at 83.915.

This afternoon we got a little more answers on the Planting Delays/Yield loss versus “rain makes grain” debate via the crop progress/condition update. 

Corn planting came in at 71% planted; up 43% from a week ago; based on planting intentions that is some 41.8 million acres; versus the old record of 34.1 million acres of corn planted in one week.  On the positive note and talk of yield loss note; that means we still have about 28 million acres of corn to plant; after the optimal date.  Which most have as 5-10 to 5-20.  Based on some of the recent moisture and forecasted moisture you can make an argument that some of the last acres won’t get in and if they do get in they will be in very late.  So some of the bulls will still argue that we have a bullish card potential in yield loss and acre loss.  The other card that many will throw out that should have some merit is the fact that with basically ½ of the crop planted in a week pollination might be fairly tight and thus potentially leaves weather more critical during pollination period.

Kevin Van Trump had a good explanation of this in his morning wire today.  “Corn traders will be very interested to see this afternoons USDA "planting progress" numbers. There is no doubt farmers have been burning the midnight oil this past week. In fact several analyst believe Iowa planted over 50% of their crop and as a whole corn planting here in the US will be 60-70% complete vs. just 28% last week. This brings up a very interesting point: With close to 50% of the US crop ALL going in the ground (late) during the same 7-10 day planting window (May 10-20th), I am of the opinion, the price of poker for "pollination" just escalated dramatically. Meaning the mid-to-late-July time period will now be mission-critical for the US corn crop. Any type of extreme heat or dryness could put an abnormally LARGE portion of our crop at risk. Lets also not forget, as our good friend Chip Flory over at Pro Farmer points out, "the corn plant reaches physiological maturity about 56 days after pollination. That means the crop could still be trying to add yield when days are getting too short to gather all the energy needed." Right now I have to believe the market is currently trading a 153-158 type yield number. With over 95 million corn acres almost certain to go in the ground this type of yield does very little to excite the longer-term bulls. However, if we were to see the extend Jun-Jul-Aug forecast show more heat and less moisture, a sub-150 yield could start to become more of a reality and the bulls might once again start to run. Lets also keep in mind I am starting to hear a few more producers talking about switching to shorter varieties (some 82-day varieties even being discussed), the question is how dramatically will the shorter varieties affect overall yields?  With these cards still in the deck, I currently feel that most producers should sit tight with between 40-60% priced or hedged. “

Don’t look at the above comments he makes as super bullish; to me it just means he is comfortable not looking to sell more. But keep in mind that he has done a good job being pro-active and making sales. 

Overall if a guy has 0 sold and you see today’s crop progress report you shouldn’t get bulled up.  You should probably be looking for a spot to lay off some risk and make some sales.  Now our trade area is very tough; because we don’t have that super high APH like areas to the east of us do; we seem to be able to get either one of two things.  A great crop or little to no crop.   So I can more than understand how guys in our area are a little more on the fence for making new crop sales………especially as dry as it had been. 

Plus we are in an area that marketing seems to be a year behind.  Meaning many guys sell what they have in the bins or what they carried over from the previous year.  To the east of us they seem to sell a year out a little more often; with much more confidence.   But if you now have got some moisture and feel more comfortable about our new crop potential don’t be afraid to take some risk off the table should we get another bounce; especially for those bushels that you will have to move. 

Those “have to” bushels are the ones that a guy really needs to be pro-active on.  Having homes or something done in marketing that leaves you comfortable so you don’t get forced into unprofitable or unwanted sales. 

The scary thing for those that have nothing sold for new crop; is the fact that if things shake out negatively it could be sometime before we really get a chance to sell levels at or near today’s new crop bids.  The job of the market will be to find demand should we raise a 13.5-14.5 billion bushel corn crop. That means that we could be waiting for a long time before we see a bounce.  Having said that my hope is that the present carryout projection and crop size is already priced into the market.  I hope that the fact we planted nearly ½ of the crop in a week is already priced into the market.  I also hope that the old crop tightness spills into new crop support.  But as you can see that is a lot of hopes; and hope isn’t exactly the best friend when it comes to marketing or pricing grain.

The one thing that I believe the market does have under estimated is the current situation of most of the “American Farmers”; meaning most don’t have to sell to make payments.  Look at the guys in this area that tend to market a year behind.  Why do they do that? Because they can.

Plenty of producers have plenty of money and plenty of empty bin’s.  So low prices might not happen despite big carryout’s.  Even locally I ask myself what will cause a lot of grain to move?  The first thing I think of is insurance checks; giving guys cash flow.  Check mark one for not having to move grain.  Next is bin room; check mark two for not having to move grain with the lack of winter wheat crop in our area. 

The couple things that I see moving some grain are the comfort level increase via the recent moisture.  I think that will help some move and maybe a little moving before spring wheat harvest.  Maybe some spring wheat moving because many guys put spring wheat into the failed winter wheat and many guys still have most of last year’s (if not the last couple) spring wheat crop.  

The next thing I would see to push grain to move is emptying some bins for fall crop.  So perhaps the excess moves at harvest.  But will much more?  And if a guy ends up getting an ugly price off the combine will that cause him to hold off for even more later?

Bottom line is despite all of the bearish talk on supply and demand realize that one key component to supply has changed the last few years.  That is the success and financial situation of the American Farmer.  Many guys can afford not to move much grain; they simply don’t have to like they used to.

Back to the crop progress report.  Winter wheat condition was dropped 1 % point in the G/E category. I did notice that South Dakota was up 3% points……….that made me scratch my head.  Wondering if they no longer count all of the stuff that was zeroed out in the past week or so? Or maybe they seen the couple of summer fallow fields that did look like they had a small improvement?

Spring wheat planting came in at 67% planted which means it also has caught up to the 76% on average.  Keep in mind those averages are all skewed a little bit from last year’s super fast pace.  North Dakota is at 50% spring wheat planted and 61% corn planted; that is the area that looks like it could be losing some acres.  But based on conversations with contacts I am not so sure that we are losing any spring wheat acres yet.  By the sounds of it we could actually be gaining a few from the corn acres.  I think guys might have preferred to PP it; but much of the ground had got some fertilizer on it thus PP isn’t the best option. 

Soybean planting came in at 24% planted versus 42% on average. In line with estimates.

That is one thing we should take from these numbers this afternoon.  In line with estimates; not new news.  So don’t have to trade them; we could but we don’t have to and if we do we shouldn’t trade them for too long of a period.

Other news out today; include export shipments.  We seen decent wheat and corn numbers.  Both above what we need on a per week basis to meet current USDA estimates.  Beans were light only about ½ of what is needed on a per week basis.

Continue to see comments of bigger Russia wheat crop.  I still think that is early but it needs to be on our radar.  We need to see some sort of bullish news and preferably the demand kind for wheat to really rally.  It takes more than the old news of bad United States crop; otherwise we wouldn’t be under pressure.


Below are a couple of links from CHS Hedging; Crop progress info and CFTC Commitment of Traders.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress052013.pdf

https://www.chshedging.com/UserFiles/Documents/2013/Research/CFTC%20Commitments%20of%20Traders/CFTC051713.pdf

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

Thanks

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

Closing Market Comments- USDA Crop Progress - Supply and Demand Report - CFTC Recap

Markets closed firmer across the board today lead by the expiring May contracts, which go off the board tomorrow as spreads traded very firm leading us higher.

May corn was up 30 cents, July corn was up 19 cents, December corn was up 10 cents, KC wheat was up 8, MPLS wheat was up 4, CBOT wheat was up 5, May soybeans closed up 33 cents, July beans up 20 cents, November soybeans up 4 cents, equities had the DOW off 27 points, the US dollar near unchanged, crude off about a buck, and gold was off about 8 bucks an ounce.

Nice day for the grains as old crop corn and old crop soybeans gained all that they lost on Friday and then some.  Wheat however only gained a portion of what it lost on Friday; as did the new crop row crops.

The strength looks like someone wants some old crop; basis is strong and the May futures go off the board tomorrow at noon. 

This a.m. we had export shipments out and they were strong for wheat, poor for soybeans, and ok for corn.  Wheat was above what we need on a per week basis, corn was double last week but still below what need on per week basis, and beans were half of what they were last week and below what we need on a per week basis.

New crop corn and beans followed; as did wheat, but the charts didn’t do anything impressive today.  The 6-10 day forecasts and 8-14 day forecasts were wet this a.m. and last night; but the ones I seen this afternoon are a little dryer.  Not sure if that will be enough to pressure or markets or not. 

This afternoon we had an updated crop progress report.  Corn planting came in at 28% planted; below estimates and well below average.  But I don’t know if it is bullish enough for prices to run up.  Now if the forecasts turn wetter or the system coming later this week gives us more moisture then expected we could see things run up.  The thing to keep in mind is these forecasts are not new news; the fact that we are well behind average isn’t new news; and yet prices are about the same as they were a month and a half ago.  So despite all of the issues with a late slow planted crop we haven’t managed to add much premium.  Is that weather premium still to come?  Or could things be a lot uglier if we had everything going smoothly?

I know plenty of producers are bulled up because of the potential acres getting lost or switched as well as the potential yield reduction from the late planted crop.  But has the market really acted like it cares?  Hopefully it just means the market is slow re-acting like they were to last year’s drought? But for risk management purposes and marketing purposes we need to realize that if the market can’t show strength despite bullish news perhaps the news isn’t that important.  Or at the very least realize that if we were waiting for the weather rally scare that started because of our slow planting; that news is here and now.  It can get worse and we could fall further behind and potentially lose acres and more yield potential; but it is becoming old news.  The market isn’t focusing on that and if it doesn’t soon perhaps it won’t.  Perhaps this is all the higher this news alone can take us? 

Overall I think I would like to give it a little more time to develop; but the market really needs to start reacting sooner than later.  Or the “big money” will start looking for another story. 

The question we might have to start asking our self is what will the market do if we get the balance of the crop planted over the next 2-4 weeks.  With today’s planting pace of 28% what do we need to have happen to see a bullish reaction in the next week?  How low does that number need to be by memorial day to be considered bullish?  I don’t really know the answers to those questions; but I am a little disappointed that we haven’t rallied more then we have.  

Look at it this way on April 14^th planting was a 2%.  That report came out on April 15^th at 3:00; on the 16^th the next trading day after that report we closed December corn at 5.40.  Planting as of yesterday was 28% completed for corn versus 65% on average.  The price today closed at 5.39 on December corn.  26% planted in a month and we lose a penny?  What will it take over the next week to have a strong up move? 

Maybe the grain markets have just lost the interest from the funds?  What will it take to get them back interested?

Spring wheat planting did make a good job up to 43% planted; so still behind but catching up a little.  South Dakota is at 76% planted; up 30% on the week. 

Winter wheat conditions came in unchanged on the week; still a horrible looking crop.  But still not enough reason for the funds to get interested and if the USDA world numbers are correct it might be some time before the funds decide to get on the wheat bandwagon.  One thing that is and should be a little positive wheat is the fact that it seems like the USDA typically starts off aggressive on production.  We know they have done that for the US corn crop the past couple of years; but they also tend to do that in other places; such as our competitors.  The problem is they also tend to overstate demand.

Weather does seem to have some small issues in other areas growing wheat and that is one thing we will have to keep our eye on.  The world wheat production was pegged at 701 MMT for this coming year; which would be well above the 655 MMT raised this year.  Yet the carryout number is fairly flat year over year at 186 for next year versus this present years 182 MMT. 

Below are a couple links from CHS Hedging.  The first is crop progress update.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress51313.pdf

This next is CFTC Commitment of Traders data.

https://www.chshedging.com/UserFiles/Documents/2013/Research/CFTC%20Commitments%20of%20Traders/CFTC51013.pdf

The last one is the video recap of the USDA report from Friday.

http://www.youtube.com/watch?v=xMFC01wZbiI&feature=youtu.be

As we go forward we should remain in a weather market; but once we get this crop planted rain won’t be what will run us up.  If we do manage to get things in the ground the job of the market will be trying to find demand and the easiest way to find demand is via lower prices.  The USDA forecast on Friday was for lower prices for next year; the average farm price for new crop corn 4.30 to 5.10; if that is an average price that means that in their forecast they are saying we will spend some time below the 4.30; which in our area means under 4.00 cash prices.  The average price for soybeans 9.50 to 11.50; which means a forecast below 9.50 at some time.  How low below the low end of the average does the USDA think we will get?  Don’t know.  Does it matter what they think our low price will be.  No; it doesn’t.  But what we need to take from it is the fact that how do they think our demand will improve year over year?  Based on what they have for average farm price; I think they expect that demand increases via lower prices.  If we told the USDA our prices will be at present levels; where does that put your demand projections at?  I would guess the answer would be sharply lower demand?

Bottom line is make sure you get yourself comfortable in your marketing plan.  If you are not comfortable now perhaps have a pro-active plan that gets you comfortable.  And if you are betting on the horse that rain and moisture will keep things from getting planted realize that horse hasn’t been very attractive to the funds so far.

Other news out there will include the NOPA crush numbers out Wednesday this week.  Have we curbed any soybean demand?

The birdseed market has been impressive with orders; but actually buying interest remains very hit and miss.

Spring wheat spot floor basis also remains very defensive.

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

Closing Market Comments - only 12% corn planted - grain prices down hard!

Markets closed down hard today behind weather forecasts that appear to have a planting window open for much of the corn belt.

Nearby corn was off 25 cents a bushel, December corn was down 15 cents, KC wheat was off 21 cents, MPLS wheat was down 13 cent, July beans were off 18 cents, November soybeans were down 14 cents, CBOT wheat was off 18, equity markets had the DOW close of 5 points, crude up 20 cents, gold was up 5 bucks, and the US dollar up a couple hundred at 82.375 on the June contract.

Just a horrible day for the grains; one that started with a gap down when the markets opened up Sunday night.  The selling seem to accelerate once we seen the poor export shipments that were out at 10.  Hard to find much positive as most of the markets closed near the lows of the day; December corn did manage to close 6 cents off of its lows; but nothing impressive.  Hopefully over done; but I guess only time will really tell on that.

This afternoon we did have a crop progress report that came in a little on the light side and perhaps that will give a little support to the market; but it really feels like weather forecast updates will be more important then what we did or didn’t get done last week.  Should they be?  I guess that is debatable; as it is early May and we are very far behind planting in the corn belt.  Some areas are needing the deferred forecasts to be dry or they might end up going to something else or even some prevent planning.  But today that wasn’t the focus; nor was the focus on the yield potential that can be lost with late planted corn.  The focus today was that we will get in the field and that the American Farmer will get things done.

As mentioned this afternoons crop progress should be considered friendly and it might make forecasts that much more important.  Corn planting came in at 12%; which was on the low end of most of the estimates I had seen.  I had seen a range of 10-20%; with most in the 12-15%.  But I don’t know that it is enough by itself to take us higher.  It could and in my opinion should slow down the bleeding and make forecasts that much more important; but it isn’t a game changer.

Last year planting was a 69% and the 5 year average was 47%; so coming in at only 12% really tells us this crop is behind and that there is a potential train wreck but that wreck won’t happen until the future and right now the future forecasts look to be open.

Soybean planting came in at 2% and spring wheat planting came in at 23% which is about ½ of the average and well behind last year’s 82%.  Winter wheat conditions also seen another point drop in the Good/Excellent slot. 

The winter wheat condition and soybean/spring wheat planting are not really a surprise and likely not a market mover either.

I did see a comment this afternoon that ideas are planting progress will be 35-40% by next week Monday and they also commented that the potential is still there to have 75% of the corn planted by May 20^th.  I don’t think that I agree with that; but it doesn’t matter what I think nor what others that might agree with me think.  It is trade and “big money” opinions that matter as they are what move our markets. 

On Friday we will have USDA report out; as mentioned in comments this a.m. small changes are expected on the old crop balance sheets.  While the trade is looking for a year over year decrease for wheat carryout; while they are looking for both the corn and soybean carryout numbers to nearly double.  They are expecting major increases in the world carryout numbers for all three of the major grains.

The question that we really need to know as we go forward is what has this market already priced in?  What will it take to get a rally?  Perhaps we need to consider the fact that some late planting and loss of corn acres might be needed to hold present price levels?

I don’t know the answer to those questions; but I do know that the nearly 2 billion bushel carryout was a possibility about a year ago before the drought hit and we managed to hold the 5.00 level on Dec futures.  I do know that we have talked about a 2 billion bushel carryout for the 2013/14 year for some time now and we have still held the 5.00 Dec corn futures level.  But I don’t know that we can still hold it if that is how things actually shake out.  I don’t know if money flow will start coming in to our markets if we get too cheap or if money flow might decide to get short our markets and try to find panic selling. 

For us to get a rally we need to get the funds interesting in commodities again; they haven’t had the best experience the past couple years.  But if we want to have bull markets we need to have money flowing in; we need “Big Money” on our side; that means we probably need a headline.  Can too much rain and moisture be that headline?  Maybe for a short time; but I don’t know that many are going to bet that the farmer who as advanced 10 fold in technology over the past few years won’t be able to get the crop planted.  We need to realize that we might not rally until after the fact; when the market realizes that we didn’t in fact get it all in?  So what else could help us rally?  Perhaps dry and hot weather sometime this summer can help?

But what do we really need for a rally to last?  Demand; we need to find more demand.  Be it demand that we gain from others misfortunes, (perhaps like some countries gained from our misfortunes last year)demand that comes from policy change, demand that comes from better economics of the end users, or demand that comes from some other black swan event.  This year if we do happen to get all of the corn in the ground and we end up with anything close to trend line yield.  We will need to find more demand year over year than ever in history.  That shouldn’t be easy and that is one reason why the pro’s, funds, spec’s, and even producers should be considering sell some of the bounces when we have them.

What is hard is the fact that the market doesn’t exactly tell you what it is going to do. 

I seen one well know advisors that had clients pull their short hedges last week Monday; which was the limit up day.  Now depending on when you got his advice you potentially lifted your short hedges in the 5.40-5.70 range; I don’t know exactly when he put his advice out nor know how quick guys could have followed it.  I did notice today that via a stop he has an order in to re-hedge December corn at 5.32 if I remember correctly. 

So two things; that means that potentially he is taking as much as a 38 cent hickey off of his sales.  That should for one show guys that this marketing thing isn’t easy.  Secondly it shows that perhaps using the right tool is important.  Third it seems to be re-active; not pro-active.  Last it shows how quickly things have changed in just a few days.

It doesn’t tell us how quickly things could change again the other way in a few more days should mother nature not cooperate with everyone.  Heck myself personally I am praying for some rain in our area; we could use it.

Bottom line whether you are now wishing you would have sold some last week or are contempt waiting out the storm; have a plan in place that makes you comfortable.  Don’t be super re-active but rather pro-active.  If you want some help with a marketing plan please feel free to give us a call.

As we go forward watch weather forecasts, demand news (haven’t heard a lot about it lately but the bird flu in China hasn’t helped out the bean demand and has some traders on edge), and money flow.

As for locally I keep hearing more talk of winter wheat acres not going to make it.  If you have had your wheat zeroed out and have a contract with us for new crop; please give us a call sooner than later and we can give you options.  I do worry a little bit about local basis because it doesn’t look like we will have much; but we also need to get some demand and that we really don’t have.

The bird food market remains slow.  Orders are very good but otherwise things are slow.  Some are thinking that acres are increasing via the failed winter wheat and the delayed planting.  I don’t know that it is a material change in my opinion; at least not yet.  It seems like most guys in our area are looking to go in with spring wheat into the failed winter wheat because of rotation.


here is link to CHS Hedging Crop Progress Update

http://chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progressfirst%20050613.pdff

closing grain market comments - wheat tour results

Markets closed firmer today as spreads firmed up and old crop tightness was back in the headlines.

Corn lead the charge up with old crop corn up 15 cents a bushel, new crop follow up 8-9 cents, KC wheat was 9 cents higher, MPLS wheat was a dime higher, old crop soybeans were off a penny, new crop beans were down a nickel, CBOT wheat was up 8, equities bounced with the DOW up 131 points, the US dollar was very strong up 755 at 82.239 on the cash index, gold was up about 20 bucks an ounce, and crude was up 3 bucks a barrel. 

Not a bad day for the grains; one that actually seen the May corn contract fill the gap it had left after the March stocks report that had sent our markets into shock.  Hopefully that means that the 7.00 area will be a target for the July futures once the May goes off of the board.  I haven’t personally had much for calls for corn; but I am hearing of some basis levels firming up in other areas.  I think that leads us to a firmer basis; but maybe not today because most of the ethanol plants in South Dakota have very good May/June coverage.  They need to buy some of the summer months; but they can’t sell ethanol and make it work out there either.  So most plants are in a catch 22; they are full nearby; but need to buy nearly all of their July/August/September corn yet; but can’t because they can’t sell ethanol any place close to today’s ethanol numbers.

The ethanol futures market today closed at 2.71 on the May; which I believe expired today.  The June Contract was at 2.52, the July at 2.43, August 2.34, September 2.20, October 2.06, November 2.00, and December 1.97.  I am no expert when it comes to ethanol; but I can understand why an ethanol plant would be hesitant owning some of the deferred slot corn as on a percentage basis the ethanol inverse is basically as much as our corn inverse.  The May-Dec corn inverse is out to nearly a buck and a half a bushel.

Bottom line is basis should be very supportive; but some ethanol plants will have a hard time paying the same price or a premium for August/September corn over today’s values when the product they sell is a major discount.  Hopefully what happens is that the deferred markets come up to meet where the nearby is at; for both the ethanol and corn market.  Keep in mind that if that happens basis might struggle out in the summer months; or not get to the big over numbers like it did last year.

At the end of the day one has to be very friendly basis and as each day that goes by without much corn in the ground the chances of ethanol plants needing corn for late September and early October grows.  Keep in mind last year basis was hot; but the local ethanol plants were saved via an early corn harvest.  A late corn harvest this year won’t save the day for them.  Plus nearby margins have improved enough that some plants might be able to afford to lose some in the later months; versus shutting the doors and waiting for the new crop.

This a.m. we did have export sales out; good for new crop for all three of the grains.  But old crop was so-so with the only positive highlight being we continue to sell bean meal despite the fact that we are already over what the USDA has us pegged at. That should be considered friendly and lend support to our crush market.  Perhaps we have stopped exporting the beans because we simply don’t have them? 

One thing to keep in mind on beans is there is a lot of talk of imported beans coming over here and new crop ideas are that we are increasing the acres.   So some advisors are talking about the possibility of sub 10.00 new crop beans.  I am not in that camp; but we do have to realize that high prices cure high prices.  South America has done a great job of increasing their supply and we have the POTENTIAL to have a record crop in the US; plus questions have shown up on the China demand because of economic data as well as the bird flu.  I don’t want to jump in the bear camp; but I am not afraid to practice a little risk management either.  If you are uncomfortable on the present volatile ride perhaps use some options to help mellow the ride out a little bit.

The other news out this afternoon was the wheat tour results.  The crop sizes in NE and OK down from last year; but the yield in Kansas wasn’t down nearly as much as some had thought.  Yield was pegged at 41.1 in Kansas versus 42.3 on the 5 year average and production was pegged at 313 million bushels versus 382 last year.  Smaller but not really what the bull’s were looking for.  One thing that many on the tour mentioned was the yields they gave were potential; meaning mother nature could change things a little bit.  Plus much of the crop is early so their measuring method likely lead to overstated yields.  Many areas failed to quantify how much frost damage was done.  In my opinion I think we see a smaller crop once the combines roll; but for marketing and risk management we need to realize that we will have a huge carry over going into this crop.  We will need solid demand or a wreck in one or two of the other countries that we compete with for exports.  Our crop failure by itself likely isn’t enough to warrant long term prices substanitly higher then we presently are.  We will need money flow or the funds to get interested and we will need some demand. 

The birdseed market was a little quieter today then the past couple.  Many buyers seem to have nearby needs covered; but I have also heard that orders and business has really picked up lately.

Winter wheat and spring wheat basis is a little defensive as mills just don’t need anything nearby and we are not exporting much.  Producers focusing on planting or trying to plant is keep basis supportive for wheat and the birdseed markets but not enough for us to see tons of strength either.

Don’t forget we are still offering free delayed price for most old crop grain.

Also hearing many are replanting some of the failed winter wheat to spring wheat.  Keep in mind that at times spring wheat buyers can get rather picky on WOCL; more than the winter wheat buyers.

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

Thanks

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

Closing Grain Market Comments 4-4-2013 - Grain Prices

The grain markets got beat up today in a choppy rather news lacking day.

Corn was down 12 on old crop, new crop corn was unchanged, soybeans seen new crop unchanged, while old crop beans were down 8 cents a bushel, kC wheat was down 14, MPLS wheat was down 5, CBOT wheat was off 3, equities bounced with the DOW up 56 points, the US dollar is back to about unchanged which is a big reversal from earlier trading, and crude ended the day down about a buck a barrel also about a dollar off of the lows.

Ugly day for the markets in general; but a couple of decent things did happen.  First off the US dollar got to its highest level since last July and managed to leave a Doji on most of the charts while trading above yesterday’s highs and yesterdays lows leaving a reversal on the charts.  Some would refer to it as a key bearish reversal as we had made a new high for the move and closed lower; other text book technical wouldn’t say it is a key reversal because we didn’t close below yesterdays lows.  Either way it is a sign that perhaps the dollar strength is due for a breather and that wouldn’t be bad for the grains. 

We need something to get some money flowing back into the grain markets to help stop the bleeding from the USDA report and a pull back or weakness in the US dollar which in turn helps makes our commodities that were are trying to export cheaper and leads to a risk on type attitude by the funds can be a start.

The other positive today that I seen was beans able to bounce well off of their lows and CBOT wheat hanging around despite all the other weakness around.  Perhaps CBOT wheat hanging around there was simply spread unwinding but CBOT wheat has always lead our bull market rallies. 

News out is that China bout 14-16 cargo’s of Soft Red Wheat; which could have also gave support to CBOT wheat; but at least that is demand support.  Nothing wrong at all with wheat bouncing from end user demand.

Exports sales were out this a.m. and they were nothing special for any of the grains.  Wheat came in at 5.2 million bushels of old crop sold; which is about ½ of what it needed to be on a per week basis to meet current USDA projections.  Beans came in at 14.4 on old crop which is about 3 times what they need to be and the best in 3 weeks.  Corn had its best week in 5-6 weeks at 13.9 million bushels which is very close to what it needs to be on a per week basis to meet present USDA projections.

We have started to see more estimates out for next week’s USDA report.  It seems like most are looking for a 200-400 million bushel increase in our present 632 million bushel carryout.  Not sure what the market is trading right now; but a dollar plus break in the board to me seems like they might be trading nearly all 400 million bushels.  (Hopefully that’s not sure wishful thinking.)

Here is a link to the CHS Hedging estimates.

https://www.chshedging.com/UserFiles/Documents/2013/Pre%20USDA%20Report%20Comments/040413.pdf

You will notice they have corn carryout at 857 versus USDA at 632.  Beans unchanged at 125 and wheat at 706 versus 716.  The report will be released Wednesday the 10^th at 11 am central time. 

I haven’t see all the estimates to know were exactly the average trade estimate is at; but I would guess based on the April stocks report that most estimates will be for rather decent increases for all three of the grains.  The good news is that hopefully any increases will already be priced into the markets and as the USDA shown us last week they can always throw curveballs that are not expected.

The most realistic or possible curveball for next week’s report looks to be a friendly curveball because the market has priced in bearish news.  Last week everyone was looking for a bullish report and the USDA has that ability to do what most think it won’t.  Maybe that is a stretch but it is possible that next week’s report does exactly what the last one did; catch as many off guard as possible.  We mentioned before last’s weeks report that a huge amount were bullish  (……… “that also left me feeling a little cautious.  First off the strong close by corn seemed to come from the funds and idea’s that this week’s report will be bullish.  The only bearish forecasts I have seen for the report are those worried about the fact that everyone seems to be bullish on it and I land in that camp”………) now as producers the only thing we can really hope for is that the funds lean a little too hard too much to the selling side and then the USDA throws another wild card our way; but this time hopefully bullish or just not as bearish as everyone is looking for.  Realistically it will not be bullish versus last month; but it could be bullish versus historical and it wouldn’t take much for it to not be as bearish as the crowd is looking for.

Having said that I don’t think I would be recommending to guys to go out and buy things back on the board right now.  If you want to play that game the right way is probably just via cheap call options as volatility is fairly cheap right now due to the skew that happens in grain market weakness.  Along those same lines just owning some puts in case the USDA was right and decides to take the whole 400 million bushel increase in carryout at once might not be a bad investment or at least a move that allows one to be comfortable.

The other thing we really need to keep in mind is that if our old crop carryout’s have increased as much as some are talking weather becomes less important for new crop prices via the fact we have a more comfortable starting spot.  That doesn’t mean we can’t or won’t have weather scares; we could have plenty and hopefully do have some power filled ones.  But supply and demand rules in the end and carryout’s of the 2.00-3.00 billion bushels like some are talking about for new crop are not bullish. 

On the flip side of things one might ask how much demand does a dollar a bushel break add back in? 

Elsewhere basis for wheat feels softer.  Spring wheat spot floor was rather weak today as it seems like some railroads are really catching up in a hurry.  Winter wheat basis is also a little defensive but the positive should be that some flour pricing has occurred and should continue to occur should the board continue to break.  Corn basis is choppy.  Still hard to find nearby homes; but I have also sold more the feed industry in the past few days then I had for a couple months combined so there is some end user pricing happening.

Sunflower market and birdseed in general feels like demand is decent but bids and offers are still wide and buyers simply don’t need much yet.  Supportive is the fact that the crush is competitive with the birdseed market.  Also new crop should be supportive as the acres came in a little light and more acres went to confections.

We are still offering free delayed price storage on wheat, corn, milo, sunflowers, millet, and soybeans at our locations.  Call for more details.

As guys get ready to get busy don’t forget to give us indications on the levels you would like us to call you about.  Many grain marketing plans make sales over the next couple of months because typically we add some weather premium into the seasonal price tendencies.

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

Closing Grain Market Comments 2-12-2013

The grain markets had a mixed day; mainly an ugly weaker day behind technical selling and some moisture.

Old crop corn was down 6 cents a bushel, new crop corn was up 4 cents, old crop beans were down 11, new crop beans closed up 8 cents a bushel, KC wheat was off 10-11 cents, MPLS wheat was off 9 -10 cents, CBOT wheat was off a dime, equities were mixed with the DOW up 48 points closing above 14,000 for the first time since 2007, and the US dollar was weaker.

Today was the 8^th losing day in a row for the nearby corn contract; I believe that is the most losing days in a row since 2010.  Bottom line is our markets are over done to the downside.  The bad thing is that there is nothing saying that

They can’t continue to be overdone as emotions in marketing and prices have the ability to really over do market moves; be it to the upside or down side.

Part of the pressure for the grains today came from the fact that most of the wheat contracts made new lows on the charts.  Lowest most of the contracts have been since June; so that means that anyone long the market anytime recently is underwater; thus we see guys saying enough is and enough and stops get hit adding further selling. 

The only real good thing the grains have going for them right now is the fact that the market is over done; also the fact that wheat has a history of making head fakes.  We still are not getting the business we need for wheat or corn.   Exports and demand is strong for beans; but China is also on holiday this week so we are not seeing the export headlines.

One other thing perhaps leading to some of the pressure has been some headlines of Barclays getting out of hedge fund activity in Ag Commodities.  Here is a link to article

http://www.reuters.com/article/2013/02/12/us-barclays-review-commodities-idUSBRE91B14U20130212

Parts of Texas and Oklahoma are getting some moisture; not enough to break the drought; but another reason to sell wheat if you are fund who is long and wrong.

We really need to see the US get some wheat export business and from what I hear/read is we don’t look to get much; still not the cheapest wheat; especially for Hard Red Winter Wheat.  Keep in mind that we export roughly half of our wheat; so if we don’t export much we have room to have a small crop.

Basis is firm for the grains in general; but only due to a lack of producer selling; not new export demand or great ethanol margins. 

It was nice to see new crop corn and beans bounce a little bit today; but one typically doesn’t see a bull market lead by new crop.  Bull markets are suppose to be lead by nearby demand.  We have nearby demand for beans; but we also have a record South America crop coming off.  It should be tough for soybeans to really catch fire when South America is harvesting a record crop.  We don’t have a great demand story for wheat or corn.  Yes the ethanol plants in South Dakota are still running and yes we could hit the present projections; but despite the 40 some cent dip that corn has had I for one haven’t heard of great and improved ethanol margins or livestock demand for corn.    And we really need that demand story; be it exports for wheat, or a combination of exports, ethanol, feed demand for corn. 

As we look forward I think we need to realize the potential risk we have going for new crop corn values and the spill over effect that could have for soybeans and wheat.  Yesterday’s 10 year projection showed a carryout over 2 billion bushels; that uses a big yield number; but what it also does is use a big demand number.  Can we really only use 11 billion bushels or so of corn this year; and think that next year just because we have a bigger crop that we will use closer to 13 billion bushels???  That is what I struggle with the most; will demand bounce back as fast as we curbed it?

Another way to think about it might be; will producers take a cheaper price for their product just because they have a little more?  Or will producers still have plenty of money with good balance sheets, and bin storage that they hold off supplying the market quiet as much as they would need for that demand to actually bounce back?  I think that is how spring wheat happened just a year or two ago; we had guys wanting to buy; but neither producers or elevators had much interest and before we knew it the demand was no longer there.

The other big concern has to be history.  The past few years anyone that made new crop corn sales early; ended up missing the highs that came after we had the weather issues the past couple of summers.  So will that add fuel to the fire this year; a lack of producer coverage?  Guys that waited to make sales last year got rewarded big time. 

I realize that marketing in our area it is extremely tough; because we could see anything from 0 corn to 150 bushels or so; the crop insurance levels and cost isn’t as good as it is in the heart of the corn belt.  But our risk is still very high.

I guess the bottom line is to realize what our risk potentially is; and then try to develop a marketing plan that leaves one comfortable.  I prefer to see a bounce before making many sales; but perhaps a pro-active marketing plan is just getting some coverage on as time goes by; thus using exit dates?    The scary thing is the type of range we could be talking about; as many in the industry could give one valid arguments for corn to start with a  $3 or start with an $8; but reality is mother nature, the funds, and other unknown events will decide where our grain prices go or don’t go from here.  The only thing we can really do is try to be comfortable going on the ride before it takes off.

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

Thanks

closing comments 11-12-12

Markets got hit hard today.

Corn was off 20-21 cents, beans where off 46, KC wheat off 32, MPLS off 26, CBOT wheat off 29, crude, the US dollar, and equities where all near unchanged.

Bad risk off day for the grains; a spill over from Friday’s report with technical selling lead by the bean market.  The weakness for beans is also coming from South America weather and Friday’s report that showed a big increase in production.  Beans are now at their lowest level since late June; basically gave back nearly the whole drought rally.   

One positive we have is that if ECON 101 still works lower prices cure lower prices; so demand for our grains probably hasn’t been hurt by the lower prices.  But one question you have to ask is; can end users buy the product easier today than they could last week?  You did have ethanol go down a little today along with corn; and with a softer board it probably takes a better basis to see corn come out.  I have seen many say over the past couple months the lower we go on price breaks the higher we go later and I am not sure if that is the case if the product actually won’t trade lower.  As example with our recent price break producer selling has really slowed down; so lower prices might not be completely helping the end users if they can’t get the product.

As for news today; we really didn’t have any new highlights to cause the markets to get beat up so bad; just a combination of Friday’s report, South America weather, and Technical selling.   One thing that could have lead to more technical selling today and fund liquidation in general was the holiday.  Many banks where closed so wire transfers didn’t happen and if one was long out of Friday’s report and had a margin call there might not have been many options depending on how firm the margin calls where.  

Export shipments and crop progress was delayed due to holiday.  Look for the same theme however of very good bean shipments with wheat and corn not so good; part of that is just the fact that the whole infrastructure isn’t able to handle all three commodities at once.  Take a look locally at the elevators; we don’t ship much if any wheat during fall harvest and we never ship any row crops during wheat harvest.  So I don’t view the lack of shipments too important for corn and wheat right now; we are not at the historical time when we see heavy shipments.  Sales however really need to pick up sooner than later and this weeks bean sales will be important as well; because last week they were not very impressive.

Basis didn’t feel any better today despite the weak board; I would say it was firmer either just undefined for most markets(corn, winter wheat, spring wheat, milo).  The MPLS spot floor didn’t even have a single car for sale.  Seasonally we are nearing the time when wheat basis heats up into Holiday Baking season; so perhaps now isn’t the worst time to have some basis offers out there.  But to really see basis get wild we need to see some export business happen; the same thing we need to happen if we want to see the wheat board run.  Until it does wheat is starting to look a little over priced when you consider how far off the summer highs beans are it makes wheat sales look good.  Don’t get me wrong there remains plenty of upside potential for wheat; but without the funds backing it along with a  headline story and solid demand wheat is more than fair priced.    Keep in mind that early September KC wheat was a 8.35 discount to Soybeans on the board; now that discount is only 5.18; so reality is that even though there is some potential upside for wheat there is also plenty of downside risk should corn and beans continue to see pressure.

The birdseed market is also very soft; demand is light and the soybean complex isn’t helping out at all.  End users lack coverage but also are showing very little interest.

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