The grain markets closed mixed to weaker today.
Old crop corn was about unchanged, but new crop corn was off
16 cents behind some moisture in some of the recent forecasts, soybeans where
up 8-10 cents, KC wheat was off 17-20 cents, MPLS wheat was 12-14 cents lower,
CBOT wheat was off 14-16 cents, equities where mixed to slightly firmer with
the DOW up 26 points, crude was near unchanged, and the dollar was firmer with
the cash index at 82.77.
Some better yield reports in KS for wheat harvest and better
moisture forecasts helped the grains come under some pressure.
Technically the Dec corn had a rather bad session; putting
in an outside bearish day this helped pressure the July corn to close near
unchanged after being stronger for much of the session. Yesterday’s crop conditions that came in
unchanged for corn didn’t help either as the market was expecting a decrease in
conditions behind the weather we have had lately.
Helping keep the July contract firm is basis; which is very
strong for old crop corn. Buyers lack
summer coverage still and the weakness in the board the past couple of weeks
has slowed producer selling to about zero.
I would note that the spreads widening is a good sign of up front demand
out pacing the up front supply but it is also a great risk that many have. Sitting on product threw an inverse is more
then costly. Cash bids have around a
dollar spread between old crop and new crop corn price; so if nothing else don’t
forget to look at locking in the basis on the old crop corn at some point in
the near future. We do allow you to lock
in the basis versus September or December contract also. One other possibility is a min price
contract. Bottom line is that with old
crop corn so tight; there is great potential; but with that great potential you
have just huge risk. If you need help
managing it please give us a call; you don’t want to give up that big inverse.
Wheat basis remains steady and actually feels a little
firmer as selling isn’t happening off the combine down south. I wouldn’t say demand is robust by any
means. The fact that basis is holding in
there despite it being gut slot harvest is a good sign; but not a great enough
sign to get too bullish wheat. Weather
in Russia and the conditions across the world leave me slightly friendly the
wheat market.
The outside markets have been on the stable side the past
couple of days; yet our grains really haven’t done anything. We blamed the outside markets for the fall
apart the past couple of weeks as funds have been aggressive sellers; but
despite the fact that the equities and US dollar really haven’t done anything
the grains still struggled the past couple of days. That in itself is not good and the fact that the
corn crop conditions didn’t show a decline really caught people off guard today
and unchanged crop conditions when rated very high isn’t what you would expect
with all the dry and hot weather talk.
Watch for weather and the funds to continue to dictate price
direction as we move forward. With wheat
harvest very near look for some local basis pressure as producers look to move
product to empty bins. This probably makes
basis rallies hard to happen until we get threw wheat harvest. This probably effects all of the grains as
there just doesn’t seem to be enough demand to offset the supply that wants to
move before wheat harvest. Sunflowers
are a great example; every day I get a couple producers calling to move product
just to help get bins empty short term.
Depending on how much grain gets moved here in the short
term things could be much different when producers get out of the have to move
or have to sell mode. But the fact that
short term we are likely to struggle and the fact that outside markets are (should)
be reminding us of 2008 price collapse tells me that proper risk management is
still needed as we are still at rather profitable levels; so don’t get yourself
in a have to sell situation.
Please give us a call if there is anything we can do for
you.
Thanks
