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

Grain Market Comments 6-7-2012

Markets closed firmer across the board today.

Old crop corn ended up 8 cents firmer, new crop corn was 17 cents higher, beans where 42 cents better on both old and new crop, KC wheat was 13-14 higher at closing time; but the last trade was trade was only 6-7 higher, MPLS wheat was up 19-23 cents, CBOT wheat was up 18, the US dollar was about unchanged leaving a near Doji on the charts with the cash index at 82.260, gold got hammered down $46 an ounce, and crude was also near unchanged at 84.82.

Overall a good day for the grains; but I didn’t care for the outside markets and how they closed.  The US dollar left a near Doji and equities where well off of their highs with the Nasdaq down nearly a ½ of a percent.  It made me ask the question if the price action on the outside markets the past couple of days was just a correction before they resume their “risk off” type of attitude.  I posted a couple US dollar charts at http://grainmarketingplans.blogspot.com/2012/06/us-dollar-cash-index-chart-6-7-2012.html

Basis remains on the firm side for most of the grains.  I would note that we are seeing product needing to move locally and that could cause some basis weakness before wheat harvest as producers and elevators look to make room for wheat harvest.

The outside market strength helped our markets today but so did the weather.  There is some moisture forecasted for early next week and if it happens we could see a little pull back; but right now everyone is talking about the hit and miss dry weather in many areas with some talking decreased production.

Next week we will have a USDA report that will have updated Supply and Demand numbers for both the old crop grain balance sheets as well as the new crop balance sheets.  Most of the estimates I am seeing are for a bullish report with decreased stocks.  This could open some risk if the USDA doesn’t agree with the estimates and prints bullish numbers.  After all crop conditions for corn and early emergence are not exactly that of a decreasing yield; but that of an increasing yield; yet I don’t see many estimates looking for corn, wheat, or bean carryout increases from last month.

The average trade estimates that I have seen for corn is down 30 million bushels on old crop stocks with new crop carryout estimated nearly 90 million less than the last USDA report.  Beans and wheat have small decreases estimated but nothing major.

Sunflower prices have firmed up the past couple of days with the firm bean market.  Feels like buyers are getting close to scrambling for coverage as producers become less willing sellers. 

It is now past 5:00 p.m. and the markets have opened back up; we presently have July KC wheat off about 7 cents, CBOT wheat off about 7 cents, MPLS off about a penny, beans down about a nickel, and corn off 2-3 cents while crude is off over a dollar a barrel.

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

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670

605-295-3100 (cell)

605-258-2166 (fax)

jeremey.frost@chsinc.com

www.midwestcooperatives.com

http://grainmarketingplans.blogspot.com/

Grain Market Comments for a very strong session - May 17th grains closed higher

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

IN the overnight session CBOT wheat was up 1 cent, MPLS wheat was up a penny, KC wheat was off a penny, new crop corn was up 5 cents, new crop beans where up 7, old crop corn was up 7, and old crop beans where up 4 cents.  At 9:25 outside markets are weaker/mixed European wheat is up about 1 percent, equities are softer with the DOW off 40 points, and crude is off about 60 cents a barrel.

Outside markets with fund liquidation/risk coming off the table versus friendly fundamentals appears to be the story this a.m.  A battle that has been going on for weeks and continues to lead the headlines; weather is supportive to our markets as it simply remains either too dry or too wet in many places.

Winter Wheat conditions dropped yesterday which was a little bit of a surprise, while spring wheat came in at only 36% planted which is near record slow, corn planting was 63%, and beans at 22%. 

It is about 10:40 now and markets are open with the grains holding in there tremendously well despite the rather weak outside markets.  Presently we have the equities under pressure with the DOW down 165 points, the US Dollar is firmer with the cash index up 350 at 75.82, crude is off 2.00 a barrel, while the grains have CBOT wheat up 9 cents, KC wheat up 2, MPLS wheat up 5, beans off a dime, corn up 2 cents on the old crop, and new crop corn up about a nickel.

So far I consider the grain price action great; wheat in particular having gained on the overnight session despite the outsides.  One caution would be that wheat is being lead by CBOT wheat which could be due to the quality concerns starting to hit the SRW wheat area (scab and disease with all of the rain) but it CBOT wheat leading the way for wheat’s strength today could be more risk coming off the table as the funds on Friday where short CBOT wheat and long the other wheat’s.

When everything was said and done the grains all ended up showing some strength and closed very firm across the board; wheat lead the way with CBOT wheat up 28, KC wheat was up 19, and MPLS wheat was up 26, Corn was up 23 on old crop, while NC corn was up 18, beans where up 14, crude bounced back towards unchanged and at 5:30 is up about a dollar in the night session, the US dollar is down 101 points at 75.369 on the cash index, and the equity markets bounce well off of their lows with the DOW closing down 69 points.

Overall a great day; especially considering where the outside markets where for most of the grain market session; many thought we could see the grains close in the red; but we did manage good solid strength as most of our grains close near the highs when all was said and done.

Basis strong, spreads supportive, weather supportive (dry in Europe, dry in the south, Wet in Ohio, ND, Indiana, SRW Areas), and outside markets bouncing all helped the grains today in very impressive action.  Technically it appears we are still in sideway’s markets; but a decent bounce could turn some signals into buy’s in the near future.

Birdseed buyers seem to have more interest the past couple of days as it appears that business has picked up; I would note that business on the books via increased shipments is the main attraction but I have also had some buyers inquire about purchasing product that really seems to be in tight hands.

Watch for more volatile price action as we move forward; there has been rumors lately that Russia and the Black Sea region will be back in the export game rather soon.  That in itself wouldn’t be the most friendly thing for our grain markets.

Also don’t forget tomorrow we will have another session of our MWC Marketing Hour Round Table; in Onida Wednesday at 3:30.  We will be updating charts, going threw strategies and then do some more mock trades.  We hope to see you then.

Thanks