USDA Supply and Demand Report - Market thoughts 12-11-2012

The USDA report was out this a.m. and it showed the following

US 2012/13 Ending Stock Estimates
	USDA Dec '12	Avg. Trade Guess	Avg. Trade Range	USDA 2011	USDA Nov '12
Corn	.647	0.663	0.493 - 0.752	0.988	0.647
Soybeans	.130	0.130	0.063 - 0.145	0.169	0.140
Wheat	.754	0.712	0.612 - 0.754	0.743	0.704

Global Ending Stock Estimates
	USDA Dec '12	Avg. Trade Guess	Avg. Trade Range	USDA Nov '12
Corn	118	118.006	115.700 - 125.100	117.990
Soybeans	59	59.409	56.700 - 60.700	60.020
Wheat	177	173.435	170.000 - 175.680	174.180

A mixed report; neutral to friendly corn and beans and negative/bearish for wheat. 

For corn the market was looking for an increase in US stocks but they came in un-changed; perhaps adding more volatility to the January report?  For soybeans the market was looking for a decrease in ending stocks but only got exactly what they were looking for as the USDA increased crush; some feel there is room to increase more in the export category; but that wasn’t done.  For wheat the USDA decreased our exports by 50 million bushels; mainly in HRW; so that estimate was much higher than expected by many. 

For the world balance sheets the big negative was also in wheat with an increase of 3-4 mmt from estimates and last month; otherwise corn and bean numbers came in line with estimates.  There were some small adjustments that some didn’t care for; such as an increase in the Australia wheat size and not much for decreases in the SA crops despite the slow planting pace.

As for price action the corn and bean numbers help those markets trade positive right after the report but they have since fallen under the pressure that wheat has spilled over to them.  At 8:00 we have corn off 4 cents, beans off 5, KC wheat down 13, CBOT wheat off 16, and MPLS off 8 cents.

Outside markets are supportive to grains with the US Dollar weaker, equity futures firmer, and crude up slightly.

I think we are probably already done trading this report.  The biggest negative I see out of the report is it has took some of the wheat contracts below the range that we have held for months.  I think our biggest risk is more technical selling.  Keep in mind that the dry HRW talk isn’t getting us demand nor does the price we have today have much correlation to where prices could be in several months depending on what happens to supply, demand, and money flow.   Money flow is still very nervous with the increase capital gains taxes, fiscal cliff, and Europe situation.  Today’s report should remind us that we don’t have much for demand yet and odd’s of increase supply down; but that really won’t be known for several months.

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

Thanks

A couple of announcements don’t forget we will have our weekly MWC Marketing Hour Round Table meeting in Onida on Wednesday’s at 3:30. 

Grain Marketing Seminar 2012

We would like to invite you to our

free grain marketing seminars:

Dec. 19^th, 2012 – 1:00 pm MST at the

Ambulance Building in Philip, Tregg Cronin Speaker

Dec. 20, 2012 – 10:00 am CST at the Ramkota in

Pierre, Kevin Van Trump and Tregg Cronin will be speaking on the grain markets.  Lunch will be served

Please RSVP for either location by calling

800-658-3670 or 605-258-2686

Morning Market Thoughts

Markets are bouncing to start the month.

At 8:20 we have a little bounce happening in the grain markets this a.m.; corn is up 9, beans are up 17, KC wheat is up 8, MPLS wheat is up 9, and CBOT wheat is up 11.  Outside markets have DOW futures firmer by 50, US Dollar is weaker with the cash index at 79.972, crude is up about a dollar a barrel, and Gold is also up 4.50 an ounce.

Markets firmer on a combination of things this a.m., including some wet weather preventing planting in parts of Argentina, a Egypt tender that saw the US get a big piece of business, strong demand for soybeans and products, and perhaps a little fresh month buying that is supporting our markets as well as outside markets.

Egypt bought 165tmt US soft white and 115tmt US soft red wheat for January-February shipment. They also bought 60tmt Romanian and 60tmt French. Prices were $20 to $40 per tonne cheaper than Black Sea.  This is good news; but keep in mind we need to have some of this just to meet present expectations; so by no means is this totally bullish; it is news that could easily be buy rumor sell fact.  We need to have this happen more often than not; and it appears we are sitting in a good spot to get more; but more than what the USDA has already penciled in?  What about more then what the market has penciled in?

HRW area remains very dry; but we won’t have a crop condition update for several months; some individual states will do updates but nothing for the US in whole.

We need to watch the fiscal cliff headlines and developments as we don’t need or want to see the funds having another reason to hit the exit door.  Despite the huge sell off’s they still own plenty of grain; not so much soybeans but they are still long beans and long plenty of corn.  Last week they added to corn and wheat positions while they were sellers of beans.

The CME Group did complete the acquisition of the KCBT.

Wheat deliveries remain strong which isn’t the best demand sign.

Not sure what to think of basis this a.m. I did notice lots of rail cars around which probably keeps some pressure on things as bids roll from the Dec to the March; I guess it will really come down to demand.  Right now that seems to be hit and miss; ethanol margins are not the best and you will notice the US got some wheat business to Egypt but none of it was HRW or DNS; but rather SRW and White wheat.

A couple of announcements don’t forget we will have our weekly MWC Marketing Hour Round Table meeting in Onida on Wed at 3:30.  Also make sure to mark your calendars for Dec 19^th and Dec 20^th for our marketing meetings in Philip and Pierre where we will have Tregg Cronin and Kevin Van Trump speaking.

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

Thanks

Jeremey Frost