USDA Report Thoughts - 1-11-2013 - Closing Comments

Grains had a volatile trading session as the USDA gave us another report.  No limit moves for the grains today; but still choppy volatile price action.

As of 2:15 last trades for the markets show corn up 10-11 cents on the nearby with new crop next year off 4, KC wheat up 14, MPLS wheat up 9, CBOT wheat up 13, equities mixed with the DOW up 3 points, the US dollar weaker, gold weaker, and crude down about a quarter.

Report thoughts

Report info is below. 

My thoughts are that the report is very friendly; but I don’t know that it is good enough to say we really need to go higher; I think it gives us fundamental support but I don’t know that it is the headline we need to really get a bull market going.

Highlights are below as mentioned; but things that standout as very positive are the corn carryout.  Down to 602 million bushels despite production higher then estimated and exports being cut.  To me that says we just didn’t get high enough to curb demand for ethanol nor demand for feed usage.  Feed usage was increased for both corn and wheat.  It also says the perhaps the reason exports are horrible and took even softer today is the fact that we just don’t have the corn to export.

Going forward if we could somehow see exports pick up and the feed and ethanol demand stay strong we have the chance for things to get even tighter.

Looking at new crop corn I think that the old crop starting tighter gives a little support; but so does where the wheat acres are at.  SRW acres up over 1.3 million from last year says that the area that grows corn has a little less acres to use.  Off setting that a little bit is the acres for HRW; which were below estimates. 

The winter wheat acres below estimates gives us a chance for even smaller production next year; especially when we look at the areas that lost the acres..  My info tells me plenty of those acres came from Kansas; so you add less acres in areas that are ok to the horrible conditions seen in South Dakota to mention a few and one can find reasons to think supply will be light next year.

Now we have tighter supply going into next year’s balance sheet as well.  Not exactly saying things are greatly bullish but outlook for smaller supply along with smaller starting supply isn’t bearish.  We just still need the demand if we really want to get bullish.  World numbers don’t say that has to happen either; but lately we have found a little bit of demand so if that demand can continue and we can get the funds back buying there is a chance we see some bullish things happen in wheat as we move forward.  The big key in my opinion will be money flow and headlines……don’t look for more great bullish headlines other then demand anytime soon.

The drought situation probably continues to be on the back burner and really shouldn’t be a headline in the heart of winter.

Looking at the bean market; the big negative is the South American production along with the fact that we have seen that market going from a market needing to curb demand to a market needs to keep finding the demand.  135 million bushel carryout is not bearish; but the market is also more then comfortable especially when we look at South American prospects. 

For beans to really rally they either need to follow strength in wheat or corn.  Or we need to see a headline shift with a  weather change in South America; we need to see a production hiccup or the bias remains to the downside despite the very strong demand.  Bottom line is without the funds deciding to push things we don’t seem to have the crunch or squeeze play left in the soybean market.  The crop simply got too big.

The other thing today’s report tells me we need to watch is demand.  For all of the grains but corn in particular; can we keep the ethanol guys using corn and other end users feeding it?  If so could things get even tighter going forward especially if some export demand comes back this way just because there are not many other games in town?

Bottom line today’s report should keep us overall friendly prices over the next couple months.  But it will take more demand and or headlines that get money flowing back into the grains to get super bullish.  So when looking to market don’t be afraid to take some risk off the table if we should happen to get some bounces.  Also realize that until weather headlines really hit much of the market is going to talk about 95-100 million acres of corn with yield potential of 150-180 bushels; I didn’t say that was probable yield but that will be the potential numbers that advisors and the USDA throw out for trend line and thus what the market will trade.   So being pro-active on some prices bounces will only be good risk management; because without that weather scare or headline that gets the funds buying the risk becomes we just slowly fade lower.

2012-13 Final January Production Corn & Soybeans
	Todays #	Previous USDA #	Avg Guess	Range of Guesses
Corn Total Crop	10.789	10.725	10.626	10.100 - 10.800
Corn Yield Avg	123.4	122.3	122.5	121.0 - 125.0
Harvested Acres	87.4	87.721	86.89	84.56 - 87.72
Soybean Crop	3.015	2.971	2.996	2.922 - 3.104
Soy Yield Avg	39.6	39.3	39.6	38.9 - 41.0
Harvested Acres	76.1	75.693	75.56	74.70 - 75.90
2012-13 January Ending Stocks
	Todays #	Previous USDA #	Avg Guess	Range of Guesses
Corn	0.602	0.647	0.647	0.489 - 0.760
Soybeans	0.135	0.130	0.135	0.107 - 0.186
Wheat	0.716	0.745	0.741	0.637 - 0.792
December 1st Quarterly Stocks
	Todays #	Previous USDA #	Avg Guess	Range of Guesses
Corn	8.03	9.647	8.212	8.000 - 8.650
Soybeans	1.966	2.370	1.981	1.800 - 2.100
Wheat	1.660	1.633	1.684	1.553 - 1.750
USDA Winter Wheat Acres
	Todays #	Previous USDA #	Avg Guess	Range of Guesses
Total Winter	41.820	41.324	42.585	41.700 - 44.700
Hard Red	29.1	29.863	30.296	29.900 - 31.000
Soft Red	9.42	8.120	8.898	8.217 - 10.000
White	3.27	3.350	3.474	3.300 - 3.920
South American Production Numbers
	Todays #	Previous USDA #	Avg Guess	Range of Guesses
Brazil Corn	71.0	70.0	70.4	69.0 - 72.7
Argentine Corn	28.0	27.0	25.9	23.0 - 27.5
Brazil Soy	82.5	81.0	81.9	78.9 - 84.0
Argentine Soy	54.0	55.0	54.6	52.5 - 57.0

Don’t forget we are offering free delayed price for both spring wheat and winter wheat.

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

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

USDA Grain Stocks Report and Planting Intentions Report sents commodities higher - Closing Grain Commentary with links for updated balance sheet information