Opening Comments 4-30-13

Markets are called mixed this a.m. after a choppy mixed overnight session.

When the overnight session ended Corn was unchanged on old crop after being up a dime at one time, Dec corn was up 2, KC wheat was off 6-7, MPLS wheat off 5-6 cents a bushel, CBOT wheat was off 6-7 cents, July beans up 6 ½, and Nov beans up 3-4 cents.  Outside markets have a US dollar about unchanged, equity futures are pointing towards a mixed (unchanged) start, gold is up a couple bucks, and crude is down about 30 cents a barrel.

1.       Markets started firm last night with the crop progress that was a hair further behind then most had estimated; but as the night wore on we gave most of our gains back.  With wheat leading some of the pressure; perhaps some of the wheat pressure is coming from the wheat crop tour which started in good areas.  The couple of comments I seen on twitter were

2.        

3.       “‏@KatieMDTN12m

Our first stop of the day in Riley County, Kansas, got an est. yield of 58.1 bpa. That stuff was short and young. #wheattour13”

1.       “CHS Hedging Inc.‏@hedgeit6m

Field 2. West of Clay Center, KS. 7.5 inch rows. Visually 54 bu yield. 64 heads per foot. pic.twitter.com/m8eQZjoWQP

2.       CHS Hedging Inc.‏@hedgeit57m

Field 1. Approx 5 miles west of Riley, KS. Will head out about May15-20. Should make 60bu pretty easily. pic.twitter.com/QQ7TVAOo1G”

Keep in mind that this is expected in this area; but as they move the tour on we should see more mixed to poor results.

It still looks like Iowa and other parts of the corn belt will get hammered with moisture in the next few days; but some of the 6-10 and 8-14 day maps show normal to below normal perception chances with the exception of the far Eastern corn belt.  So a slight change from yesterday.  As these change the look for our market to potentially move.

Watch weather forecasts and wheat crop tour results for more market direction.  Also keep in mind that some charts have went through some resistance points; but others have moved right up to resistance areas.  In regards to marketing I know that one thing that Ed Usset has always done is write a marketing plan that is pro-active trying to make sales in the time period when we could see weather scares.  I think yesterdays move counts as a weather scare.  Listening to him speak and reading his book lets you know that the reason Ed likes to make sales in this time period is because of the strong seasonal tendencies that corn has; which is to move up towards May/June before falling off a cliff starting around July.  Last year was very different and early sales didn’t work good but this year’s fundamentals and the job of the market appears to be different. 

As it sits today even with a yield of 150 on 90 million acres planted we will have to find demand that we lost this past year.  Very possible; but keep in mind that to only get 90 million acres we need the present fear to be reality.  The yield now that won’t be decided for some time; but the stuff that does get in the ground looks like it will have good subsoil moisture.  Trend line yields are close to 160-170.

Last year as the yields and drought hit the job of the market became to curb demand.  That is not the case today; and for that to be the case for year over year we will have to have a complete train wreck.  The job of the market is still to find demand at least until we can do a better job of pegging what our crop size is.

I think all we are doing now is adding some premium back into the market.  Fundamentally things are more friendly but not nearly friendly enough to sustain much higher prices for a long period of time.  So use what the market gives you wisely.

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

Opening Grain Market Comments

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

In the overnight session corn was down 1-2 cents, soybeans were down a penny to up a penny, KC wheat was off 4 cents, MPLS wheat was down 3, and CBOT wheat was down 3-5 cents.  Outside markets have a firmer US Dollar, Gold is back to about unchanged, crude is down nearly a buck, and equity futures are pointing to a lower start with the DOW futures off 80 points.

Outside market risk off hits the headline this a.m.; hopefully things don’t get carried away once the markets open again.

Oil World did have some highlights out this a.m.  First off they decreased the Chinese soybean imports which isn’t the best demand sign.  On the plus side they have the overall South American soybean crop 5 mmt less than the present USDA forecast and that more than offsets the decrease in the Chinese demand.

Looks like the present weather system could cause more planting delays with much of the heart of the corn belt suppose to get lots of moisture many areas 2-3 inches.  Some cool weather is also forecasted in the next few days for parts of HRW area; but the area seems to be more in the area were we have a bad crop already.  It doesn’t get quiet as cool in the areas that look to have a decent crop.

Corn basis feels better, but most local ethanol plants are plugged and covered for the next couple months.  Also many bids have rolled to the July.

US corn export potential looks bad right now for old crop; with heavy reported Argentine corn sales being reported.

The Chinese bird flu developments are also on some headlines this a.m.  Sounds like a 4 year old boy has been diagnosed as a carrier even though he had no symptoms of the flu and there is unconfirmed talk of human to human transmission.

We will have ethanol numbers out this a.m. and the market might pay attention to those as the last USDA report increased ethanol usage the market might be looking for some confirmation of that.

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

Opening Comments 4-12-2013 - China Demand

Markets are called better this a.m. behind a firmer overnight session.

In the overnight session corn was up 4-5 cents, soybeans were up 6-7 cents, KC wheat was 7 higher, MPLS wheat was 6-7 higher, and CBOT wheat was up 7-8 cents.

Outside markets have a slightly firmer US Dollar, while equity futures are pointing to a lower start of about 40 points in the DOW, gold is getting hit hard down 29 bucks an ounce, and crude is off 1.90.  Overall outside markets look like risk off and that could open the doors to a little profit taking for the grain markets to end the week.

Sounds like the International Energy Agency trimmed its global demand growth estimate.  Keep in that the markets have been talking for several months about an ethanol blend wall; basically that we can’t use much more then we already are.  Bottom line is both should be considered long term demand risk; that could lead to lower prices should we find a big crop or extra supply.

A Reuters article indicated that a well respected climatologist saying the drought is likely to persist and expand; leaving ideas of below trend line yields once again.

I seen a comment on a wire this a.m. that China’s recent purchase of US wheat may be a reserve building move.  Sounds like many expect China to buy even more for their reserves to fight food inflation.  Bottom line is this leads me to think that perhaps the increase seen in global stocks is an increase that the market won’t see.  Basically it could make it come off as China having to have an increase just to be comfortable.  With the country growing and using more of everything perhaps they no longer feel comfortable with the amount they have always had.  Think about it this way; if you are single living by yourself how much food do you need to have at home?  Now if you have a family of 4 or 5 with a teenage kid or two; how much food do you now keep on hand? 

I did see a headline today that a bi-partisan group of Representatives is introducing legislation to eliminate corn based ethanol from the RFS.  That has to be considered a headline risk for corn; but keep in mind that if ethanol is profitable plants will be running.  Bottom line short term negative as it is a headline for the funds to sell; but longer term it probably doesn’t matter.  What could matter is if they get a 10% cap like they are talking about.

NOPA crush is out on Monday; that will give us a better idea if soybean demand is slowing

Weather remains supportive; with markets still wondering what damage was done to the wheat on the latest freeze and plenty of areas that simply are a few weeks away from getting much field work done.  Keep in mind many of the areas that are behind getting stuff done is because of recent moisture.  Cool weather is one thing; but moisture should remind us of the old saying rain makes grain.

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

Thanks

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

Morning Comments 10-17-12

Another small little bounce is happening Wednesday morning; as of about 9:20 markets have corn up 4, beans up 7, KC wheat up a nickel, MPLS up 8, and CBOT wheat is up 5.  Outside markets have the US dollar once again weaker with the cash index at 79.01, gold up $4 an ounce, crude up 50 cents a barrel, and equities are quiet with the DOW off 10 points.

Another lack luster news day.  One thing out was the press release of the CME group purchasing the KC Board of trade.  Not sure what effect it has other then making spreads a little easier to trade.

Weather has some moisture in the eastern parts of the corn belt; but it remains very dry in the western and many areas such as ours are not seeing much for wheat emergence.  Ending Australia wheat stocks are seen at 7.1 MMT and production numbers continue to come down; most very close to 20 MMT versus the USDA at 23; some chatter is it could slip down to as low as 18 mmt.  But still for this to be super bullish our price we need it to translate into demand.

That is the big story for all of our markets now; demand. Supply is virtual known; perhaps not 100% but it is much more defined than it was before harvest.  Demand should now take the lead to where prices go.  Solid demand with good profitability for guys like ethanol plants and we open the upside.  A lack of demand and profitability struggles don’t add up to higher prices.

Bottom line is huge market potential remains should we end up getting bullish cards like less harvested acres, smaller supplies, or increased demand from the price break.  While at the same time huge risk remains if weather goes perfect in SA, our crops are actually bigger than expected, or the funds just continue to lack a headline reason to get involved.

Basis is firming on spring wheat and spring wheat is leading the markets today; the front month in particular as spreads firm in MPLS.  Also there has been talk of some Chinese buying of Canadian spring wheat.

The sunflower birdseed market remains very quiet; not much for demand there.  Plenty of buying needs to be done; but until prices stabilize or the buyers sense demand picking up look for the buyers to lay in the weeds trying to buy as cheap as possible.  Keep in mind that one of the worst things an end user can do is to be long and wrong or have higher priced product then the next guy on the shelf.  So don’t look for sunflower prices to stabilize until we give end users a reason for them to.  Perhaps that reason could be beans bouncing or stabilizing or orders/demand picking up, or realization that harvest is about over and there coverage is behind the eight ball.

Millet remains firm; but also very thin.

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

Don’t forget this afternoon at 3:30 we will have our weekly MWC Marketing Hour Round Table meeting.  Join us for charts, strategies, and generic grain market talk.

Thanks

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

Market Comments 5-29-12 - Opening Calls?

Presently around 9:00 we have our markets trading mixed.

Old crop corn is trading about unchanged, while new crop corn is 4 weaker, Old crop beans are up 12 cents, new crop beans are up about a dime, KC wheat is off about 7 cents, MPLS wheat is 2 lower, and CBOT wheat is off a dime.  Volume is very light and has been during the non traditional hours; so it will be interesting to see how exactly our markets react once the pit session opens up at 9:30.  Outside markets should be a little supportive but adding to the mixed weaker tone is weather that seen some moisture in areas that needed some and some thoughts of some hedge pressure with wheat harvest starting to roll in some areas down south.  Presently we have European wheat off about 1%, crude is up about 60 cents a barrel, equities are firmer with the DOW up 96 points, Gold up about 10 an ounce, and the US dollar is softer with the Cash Index at 82.241.

It appears that a Japanese company Marubeni is buying Gavilon; not sure if it has any local effects.  But I do know that we have done some corn business with them in the past and I am sure it will be updated credit terms.  It sounds like they will be trying to get more China corn business in one of the stories I seen.

From what I am reading it doesn’t appear all areas that needed it got moisture coverage; but enough got it to pressure the markets a little bit.  At least until the next forecast comes out.  This should really tell us we are now deep into a weather market and mother nature along with money flow and the funds which should be linked to the outside markets control where we go or don’t go from here.

Many of the places down south and to the east still haven’t received needed rain; such as parts of the Delta and parts of the Ohio Valley; but forecasts do some for some.  I have also seen comments that parts of MN and Iowa have went from drought to flash flooding talks.   Bottom line is weather will likely remain volatile and influence our markets potential with big swings.

I did see some new crop Kansas wheat trains out this a.m.  It was a 60.7 # with 12.2 pro.  I asked my buyer on yields and pro versus last year.  He said pro was 2-3 tenths lighter then last year and yields seem to run between 35-55.  Overall that would be slightly disappointing but not a complete train wreck either.

Technically wheat did a good job bouncing off of support like it was suppose to on Friday; but now we need to see it follow threw to the upside.  We don’t want to see the markets give up Friday’s gains and presently it looks like the market is trying to despite the supportive outside markets.

Basis has been on the defensive and that hasn’t helped the old crop corn story; but cheaper prices don’t hurt demand either.

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

Thanks

Opening Comments Grains for 5-14-2012

Markets are called mixed this a.m. behind continued soybean fund liquidation, a choppy overnight session for wheat and corn, and rather weak outside markets.

In the overnight session corn was unchanged on the July contract, new crop Dec corn was up 2, old crop beans were down 25 cents, new crop beans were down 17 cents, KC wheat was unchanged, MPLS wheat was up ½ of a cent, and CBOT wheat was down 3.  At 9:10 outside markets are showing risk off and liquidation presently the equities are weaker with the DOW off 140 points, crude down a little over 2.00 a barrel, the US dollar up nearly 400 at 80.654 on the cash index, and gold is off about 28 an ounce.

Scary outside markets this a.m. and fund liquidation on beans is the story.  The cash story for grains hasn’t changed much; it is still very hard to buy corn and basis is still very strong.  May contracts go off the board today; but in the overnight May corn was up 16 cents. 

With the latest USDA report out of the way we should really turn into a weather type of market.  Good weather probably causes our prices to continue to erode and weather that stresses our crops maybe gives us a weather scare rally at some point.  

Beans showing weakness really doesn’t have much to do with the fundamentals as the last USDA report was not bearish.  But it shows us how important money flow is and the fact that everyone can’t be bullish and long as eventually we ran out of buyers.  Now longer term a price break that helps demand isn’t the worst thing in the world and it maybe gives us a chance to bounce later. 

Until weather or some other story gives the funds a reason to buy look for grains to have plenty of willing sellers on the bounces; as the mentality has really changed to that of sell the rally.  The outside markets haven’t helped us at all for a while either and memories from 2008 are still fresh and the reality is that with perfect weather and weak outside markets a similar fate could be in store.

Please give us a call if you need any help with your marketing plan.

Thanks

USDA Report Day - Limit up Beans? Limit down corn?

Markets are called mixed and VERY VOLITALE behind a USDA report that was out today.

Calls are all over the board; some saying comments about limit up on beans and limit down on corn; with wheat mostly called steady.  Outside markets are slightly supportive at 8:50 with equities up the DOW firmer by 80 points, crude up 60 cents, Gold up slightly, and the US dollar near unchanged to slightly weaker.

The big headlines are the carryout numbers which have old crop corn carryout at 851 million bushels versus an estimate of 758 and last month at 801.  Another day where the USDA says we will use new crop corn and new crop wheat instead of old crop corn.  This one is getting most off of guard because cash basis has been super strong as have spreads which is telling us that the product isn’t there.  I guess we will see if the market believes the USDA or not; if they do look for some serious weakness; some commented perhaps we see China jump in again?

New crop corn balance sheet came in at 1.88 billion bushels; just a huge number.  The majority of it comes from the fact that the USDA is using a yield of 166 nearly 20 bushels an acre more then this year’s crop of about 147.  Some are saying this is could be the most bearish number we see; I guess only time will tell.  I would think we have a long way to go before we have yields like that; but keep in mind what has happened with the wheat crop down south this year; it seems to have got bigger and bigger and had near perfect weather.  So I guess on perfect weather there is risk that the crop could actually get bigger?   Bottom line if this doesn’t get smaller and the crop doesn’t get smaller things could get rather ugly in the near future.  Add to that the fact that it seems like producers are undersold and under protected things could get interesting and not in a good way. 

World carryout is also bearish for corn; old crop at 127.56 up from last week and new crop at 152.34 which is a huge increase from this year.

World bean carryout 53.24 down from last month’s 55.52 and new crop at 58.07 up slightly from this year but down from last years 69.12.  Overall very tight and leaves the bean bull card on the table.

Wheat world carryout is friendly and maybe rather friendly with it coming in at 197.03 versus 206.27 last month, next years world wheat carryout is pegged at 188.13 another friendly number.

US bean carryout came in very friendly with old crop at 210 which was less then the estimate and less then last months 250.  Increased exports and increased crush.  The new crop is even more friendly at 140 million bushels which beat the estimates by 30 million.  This gets us very tight and perhaps helps save the day for the grains.  I guess time will tell; but overall it says bean prices need to go higher and ration off some demand.

Wheat lately has been a follower and that could be the same today; but overall wheat was friendly at 768 this year less then the estimate and a decrease from last month.  New crop also was better and maybe gets us out of the burdensome area that we have been; the world numbers seem to; new crop came in at 735 million bushels 70 million less then the estimate.

I guess today we will see if corn is still king; if you look at the numbers by them self you should see beans and wheat both very strong and corn very weak. 

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

How do I decide what type of protection?

I was looking today at what gives me the best protection ahead of the USDA crop report.

To answer that question one has to ask more questions; such as how long do I want protection; what type of protection do I need if we move X cents or X dollars up or down......how much do I want to spend.

So after one answers those questions the next thing to do is the what if's; for me I use position book from RJO and run various what if's.

Today I ran the example of if I want to spend $50k in protection using Dec put options what gives me the best bang for my buck.  Do i buy out of the money options?  In the money?  Deep out of the money?  Etc

So I decided to run threw some what if's using Dec corn futures and various strikes.  I believe that I want to have the trigger pulled by July 4th ish; on the cash side; so i ran what if's or theoretically values based on July 6th.

I took 50k and bought as many put options as I could using the following strikes.

5.20 or ATM puts which i figured at 41-42 cents i could buy about 24 of them
5.00 or OTM put which i figured at 31-32 cents i could buy about 32 of them
4.50 or Deep OTM puts which i figured i could buy 77 of them
4.00 or Very Deep OTM (OTM out of the money) which i figured i could buy about 286 of them.

I didn't take into account the more commissions with the more quantity; but here is what i found that gains or losses to be (theoretically based on no volatility changes) at these various futures levels on the Dec Futures

6.00 Dec Futures - all four of the trades are big losers; with the ATM losing the least at 38k loss; followed by the 5.00 puts which lose about 41k, then the 4.50 puts which loss 45k, and lastly the 4.00 puts have lost about all value down about 48k.  Now if we are a producer this is the best option if you don't have 100 % protection because it means we have rallied 80 cents and should have more then paid for the 50k paid in protection


5.00 Dec Futures...give the Higher the strike the more profit. The 5.20 would be up aprox 2500, the 5.00 strikes about 1200, the 4.50 would be losing about 4500 and the 4.00 strikes would have lost you about 14k



4.50 Dec Futures....Here is where you see them all start to make money; this time however the more puts you have the more they make; so the best performance at 4.50 on July 6th ish would be the 4.00 puts which should be up about 75k, followed by the 4.50 puts which should be up about 60k, then followed by the 5.00 up about 48k, and lastly the at the money 5.20 puts are now up only 42k



4.00 Dec Futures....this levels and below is where you really see how well leverage can work for one.....the pattern is the same you are better off having bought more out of the money puts then you are at the money puts even though we are not yet in the money on the 4.00 puts they lead by far; you would now have turned your 50k investment into about 306k profit, your 4.50 would be 176k, your 5.00 would be 111k, and your 5.20 puts would be up about 94k profit



3.50 Dec Futures.....This is where you hit the home run so to speak; turning your 4.00 puts that are worth less then 4 cents when you buy them into about 55 cents each; having bought 286 of them you are now up nearly 750,000 in profits, the others also do good; but not even close versus having the many more 4.00 puts; the 4.50 puts would have about 335k in profit; the 5.00 puts would be up about 111k, and the 5.20 puts up about 94k

Bottom line when deciding what type of coverage you are looking for don't forget to look at the what if's; also keep in mind that the what if's i am looking at are based on 60 days from now; not expiration; as at expiration 4.00 dec futures don't make you any money at 4.00 puts; but in the shorter term they could make you a lot of money

Overall it seems to make sense to buy more OTM if you plan on only holding a short term; they don't perform as well in a sideways market nor an up market; but they are in another league as for performance in a down market

Please give me a call if you have questions

and as always make sure you understand that futures and options are very risky

Here is a screen shot of the what if's that i used in the above example

Opening Comments - Morning Comments - Day ahead of USDA report

Below is a forward from our main Country Hedging contract.  It has some of his thoughts on the crop report that will be out in the a.m.

As for markets today we should see some consolidation ahead of the report in the a.m. perhaps a little position squaring.  However we do have weak outside markets and overnight markets that where weaker.

In the overnight session beans lead the way down off about 15 cents on the old crop, KC wheat was down 4, MPLS 2-3, CBOT wheat down 4, and corn was off 3-4 cents.  At 9:00 outside markets are weak; but slightly off of their lows; presently gold is off a little over 21 an ounce, the equities are weaker with the DOW off about 100 points, crude down about 1.20 a barrel, and the US dollar stronger up nearly 400 at 80.134.

With the risk off type of environment you see beans leading the way probably because of the huge fund length and the fact that now the charts look like a top is in; which happens a lot after the fact in our business.  Keep in mind that longer term if you look at some of the projections below new crop beans probably have some potential.

I think that the numbers below show some huge possible risk; hopefully it isn’t realized; but the risk has to be considered huge if we look at corn carryout projections for next year.  The average estimate is for 2012/13 to double this year’s carryout and when I went back and looked at the last time we had a 2 billion bushel carryout or so we had prices get under 2.00 on the futures.  Obvisouly a lot has changed since then; but that is simple scary.

Now my personal opinion is that we a long way to go before we have a crop made; plus the USDA has a tendency to adjust demand with supply and vice versa and the fact that they already have said some of this coming years crop will be used to help off set the tight old crop balance sheet.

Basis for corn has been hot; but feels very top heavy.   I have seen 3 local ethanol plants start to inquire about replacements to corn; such as milo and wheat.  Keep in mind the old saying that high prices cure high prices; just as low prices cure low prices. 

For wheat the above sentence is really about the only good thing we seem to have going; and uncertainy to our spring wheat crop.  Demand seems to have picked up a little bit with the lower prices and the outlook for acres in the coming year is rather poor.  There is a little talk of some dry weather in parts of Europe and Russia area; but nothing super major yet.

With the report out in the morning don’t be afraid to get some sort of protection or comfort level incase we see the train wreck that seems to be possible for new crop corn.

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/

This communication may contain privileged and/or confidential information and is intended only for the use of the individual or entity to which it is addressed.  If the reader of this message is not the intended recipient, you are hereby notified that any unauthorized dissemination, distribution, and/or use of this communication is strictly prohibited.   This communication makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.  Nothing herein shall be construed as a recommendation to buy or sell any commodity contract.  There is a risk of loss when trading commodity futures or options.

From: Fitch, Joseph
Sent: Wednesday, May 09, 2012 8:31 AM
Subject: Morning Note

Good Morning,

Overnights are showing continuing uncertainty because of Europe and the liquidation of the fund long in soybeans and meal.  Germany is talking about a graceful exit for Greece from the Euro and Spanish yields on debt are making new highs above 6% interest. 

Rumored corn deliveries didn’t happen.  South American bean and meal basis was said to be up strongly on yesterday’s futures decline.  Brazil is thought to have connected on two June/July cargoes, which reinforces the idea that Brazil is taking advantage of the inverse now – leaving more room for the US to fill late summer bean exports and meal exports.  New crop is still all about US beans, with no export competition. 

Tomorrow morning we will see the May S&D from the USDA.  Below I’ve included my thoughts about the report. 

Here are the full rundown of estimates according to Reuters.

Corn –

1.       Old crop

a.       Exports have picked up, but shipments are still behind the pace needed to get to the USDA’s numbers.  It seems likely that the USDA will leave any changes to exports until later S&Ds.  One issue to consider is the unshipped bushels to China.  For now we can assume that these bushels will get shipped, but every week where there aren’t shipments is a little bit more unnerving.

b.      Ethanol is could be raised slightly if at all.  Current USDA estimates are for 5000 mb.  Although the pace has slowed it hasn’t slowed enough to get to 5000.  We will need to see more signs of downtime and slower production, otherwise the market’s guess of 5025 and 5050 is more accurate. 

c.       Feed is expected to be steady on this report.  Waiting for new stocks data, I’d assume.  There is still a lot of wheat feeding that is going on. 

d.      Ending stocks steady to down 25 mb.  Although that sure doesn’t feel like it is small enough with the basis levels.

2.       New crop

a.       Yield estimates will likely increase from the USDA’s outlook of 164 to something like 165-167 based upon the quick planting progress, although we are a long way from guaranteeing trend or greater yields.  This hasn’t worked in the last number of years so maybe they shouldn’t raise the yield early for once. 

b.      Acreage historically doesn’t change for now.

c.       Feed/residual should bounce higher on a bigger corn crop, but estimates of winter wheat production could limit any major increase.  I see guesses of 5.2 bb and smaller.  Current year is 4.6 bb.  This one has a lot of factors, but guess 5.0 bb.

d.      Exports should rebound on cheaper prices and the expectation of expanding Chinese demand so 1.9 bb.  This number could jump over time if the Black Sea wheat production declines come to fruition.

e.      Ethanol will likely be raised because of cheaper corn prices and everything, but I think that we might only be taking a smallish jump in usage given the heavy stocks situation and my guess that US gasoline consumption isn’t going to ramp up.  So guess 5.1 bb.

f.        Ending stocks should be around 1.8 billion.

Soybeans –

1.       Old crop

a.        Exports should be revised higher by 25-50 mb. due to South America and Chinese demand recently.

b.      Crush should be steady.

c.       So ending stocks should 200-225.  So right in line with the market guess.  There are some reputable guesses that are closer to 150 mb by the end of the year. 

2.       New Crop – one word of caution here: the USDA is going to have to show some pretty small usage numbers to start with because of the acreage being unable to change on this report.  They usually don’t want to go below 4.5% stocks/use.  So maybe these demand guesses are too early for the USDA to really show.

a.       Exports are all guesses on what happens in China.  Thoughts range between 58-62 mmt.  I am naturally suspicious and I think that the global economy plus rationing type prices puts us in the lower half of expectations.  US exports are going to be good because of the lack of competition and should jump to 1.5 bb or so.

b.      Crush might have some upside next year because of the smaller South American crops and the spat between Argentina and Spain.  My guess 1.75 bb.

c.       Ending stocks without any increase in acres (like you see on the May report) is going to show somewhat tight at 160-170mb.

Wheat -

                Changes in the wheat balance sheet are likely to be an expansion in export estimates for SRW, HRS, and for White wheat.  Ending stocks should be down 25 mb or so. 

               

                New crop wheat is going to see a above average yield and some bump in domestic usage as feeding should be incorporated.  This is unlikely to be a major wheat report.  As you notice above the average carryout estimate for 12/13 is almost exactly the same as the guess for 11/12.  So the additional production from the larger HRW crop is thought to be absorbed.  World wheat is likely to be tighter than it has been recently with production declines thought likely in EU, Russia, Ukraine, Kazakhstan, and Australia.  India had a better crop and could be upgraded.

I still think that spring wheat acreage is tight a little tight here and in Canada given a lower protein character to HRW.  SRW acreage could be smaller as acreage is said to have been plowed up.

opening grain market thoughts 4-30-12

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

In the overnight session new crop corn was off a penny, old crop corn was up 1-2 cents, KC wheat was off 8 cents, MPLS was off 9 cents, and CBOT was off 8 cents.  At 9:10 outside markets have European wheat about unchanged, equities are down slightly with the DOW off 15 points, crude is down about 80 cents a barrel, gold is off about 10 dollars an ounce, and the US dollar is bouncing slightly up to 78.822 on the cash index.

We are in delivery period for the grains and that did throw a little surprise as we got some delivers for beans and that pressure some of the spreads.  KC and CBOT wheat also had some deliveries but that was expected.  Corn didn’t and isn’t expected to see any with the strong cash markets and hot basis.

The USDA reported that more new crop beans where sold to China this a.m. in the tune of 220 tmt.  China did help our corn market out big time on Friday with huge announcements of sales.

This afternoon we will have a crop progress report and expectations are for corn to be over 40% planted; some estimates are as high as 50%.  Wheat conditions are expected to be mixed and the majority of spring wheat is also expected to be planted.

This a.m. we will have export inspections.

The possible freeze in wheat area doesn’t appear to be as bad as thought it would have been; with many areas not getting quiet as cold as forecasted.

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

Opening Grain Market Comments 4-25-12 15.00 beans? China buys corn!

Markets are called mixed to better this a.m. behind the firmer outside markets and firmer overnight session.  We also received some confirmation of the corn in the last day or two.

In the overnight session corn was up 5-6 on old crop, new crop corn was up 3, beans where very strong with the old crop up 28-29 cents a bushel, new crop beans were 17 cents better, KC wheat was up 6-9 cents, MPLS was down a penny to unchanged, and CBOT wheat was up 5-6 cents.  At 8:50 outside markets have equities firmer with the DOW up 88 points, Nasdaq up over 2.5 %, the dollar is slightly weaker with the cash index at 79.081, crude is up about 30 cents a barrel, and gold is down about 5 an ounce.

The USDA did announce some corn sales to Unknown as well as China this a.m.  This along with the announcements yesterday are now well over 1 mmt since Friday in the daily reporting system.  Most has been to unknown which typically ends up being China or at least the market will guess it is China.  This a.m. announcement finally had quite a bit of new crop which makes more sense given the huge inverse between old crop and new crop.

Yesterday the USDA confirmed the 4^th case of mad cow or BSE after the grain markets closed.  Despite this the markets rallied very strong last night with beans leading the way.  I read something this a.m. that had a projection for the South American/US bean balance sheet to be tighter then it was in 2009 and that our March 13 stocks could be the tightest ever.  There is now some weather talk of possible freezes in Argentina damaging late maturing beans.

Yesterday we had Stats Canada come out and they report wheat acres  at 24.324 million versus last year at 21.464.  Canola was 20.372 versus 18.862.  The estimates were in line with expectations for the most part; the market does appear to think we could add a little more Canola and take off a little wheat as we go forward or get more updates.  The big difference from a year ago is the acres that didn’t get planted last year and look to get planted this year.  This is also the big difference in the US; a lot less prevent plant acres.  The report I seen for the Canadian acres showed an increase for every single crop listed.

The stock market strength is on the heels of Apple who reported better than expected earnings after the close yesterday.  On the early going it is up over 9% or $50 plus a share which has the Nasdaq up over 2.5%.

After cattle being limit down yesterday from the mad cow announcement they are bouncing today.  Keep in mind that softer livestock prices don’t exactly support higher feed costs for feed grains. 

Basis for corn and beans remains very firm; with more demand then available supply or supply that is for sale at these levels.  It still feels to me that producers own plenty of grain but they are also doing a great job in not having to market it.  At the end of the day the discipline they have is helping out our prices; but it is also the big risk that is out there.  What happens if everyone has to run to the exit door at the same time to make sales?  Nothing good for basis or the board.  So don’t forget to have a solid good risk management approach in your grain marketing one that might include a little risk diversification and making sales during the seasonal times that one is really suppose to.

Don’t forget that we will have our weekly MWC Marketing Hour Round Table this afternoon in Onida where we will be going through some charts as well as overall discussion on our markets and possible strategies to use.

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

Open Grain Market Comments 4-23-12

Markets are called mixed this a.m. behind a choppy mixed overnight session and rather weak outside markets.

In the overnight session old crop corn was up 2 cents, new crop corn was unchanged, beans were down 3-6 cents, KC wheat was up 2, MPLS was up 1-4 cents, and CBOT wheat was up 1-2 cents a bushel.  At 8:55 outside markets have European wheat off about ½ of a percent, the US dollar is firmer up 300 at 79.495 on the cash index, equities are in the red with the DOW off 160 points, crude is off about 1.80 a barrel, and gold is off about 12 an ounce.

We still have yet to see confirmation of any Chinese corn purchase which was rumored late last week and we now have some rather ugly outside markets.  Not exactly a great receipt for higher prices; but we do have a market in beans that seems to just want to run and we are at the bottom end of the ranges we have had for a long time for corn and wheat.  So I don’t think I want to get overly bearish this a.m.

The volatile outside markets along with the prospects for big crops should keep us rather defensive in our grain marketing approach.  Remember 2008 anyone?  The funds are now record longs in the bean market, near record shorts in the wheat market, and they have trimmed their shorts big time in the corn market.

We will have export inspections out this a.m. and this afternoon we will have crop progress and crop conditions.  The market is expecting that a good amount of corn got planted last week.  Enough that one of the articles I read this a.m. mentioned 1 billion bushels of corn available by September; more then 3 times normal.

I don’t think now should be panic time for corn and wheat, but the bottom line is the wheat crop looks great and has got bigger the past several months and the prospects for corn look good too.  So if we continue to get ideal weather and were to see the outside markets under some extended pressure the downside risk for the grains is rather large(even at these levels).  I think we should find good values at or near the present levels but if money flow decides to leave or weather is simply ideal there is plenty of downside risk that should tell us to be pro-active and don’t be afraid to make sales on the bounces and perhaps don’t be afraid to get protection at or near these levels.

For a scary thought one of the regulars that I follow who is simply a technical trader has a target for corn at 3.50 on the board.  That would be under 3.00 cash price (ouch).  One thing I do know is that bottoms are usually made when everyone becomes bearish and things look the worse.  While tops typically happen when everyone is bullish and thinks things can only go up.  I keep both of those in mind but I also think in grain marketing one needs to simply practice good risk management in a way that takes out those extremes and allows comfort whether the markets go up or down.  Don’t be afraid to give us a call if you need some help with your grain marketing plan.

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

Grain Market Comments 4-20-12 Did China buy US corn or not?

Markets are called mixed this a.m. behind supportive outside markets but a mixed overnight session.

In the overnight session old crop corn was up a nickel, new crop corn was up a penny, beans were up 6 cents, KC wheat was unchanged, MPLS wheat was also unchanged, and CBOT wheat was off a penny.  At 9:10 outside markets have European wheat near unchanged, crude is up about 1.80 a barrel, gold is up a couple dollars an ounce, the dollar is softer down 370 on the cash index at 79.195, and equities are firmer with the DOW up 80 points.

Not much for new news out there this a.m.  The market is still waiting on confirmation of the Chinese corn purchased that is rumored to be 400,000 to 750,000 metric tons. 

Weather is on the cool side with some very small spots called to get rather cold this weekend.  Suppose to see weather warm up a little for most of the US next week; with scattered showers.  The once drought card has took a back seat; at least for now.

Basis is a little firmer all around but we still lack competition between the domestic mill market and the export market for wheat.  If we really want to get bullish wheat we will need to start seeing some export demand at some point. 

The corn market appears to have good coverage threw May; but there also appears to be quiet a bit of June/July demand.  More demand then what the market is presently supplying thus leaving basis feeling on the firmer side.  Even new crop corn basis feels a little firmer as there is just a little more demand or there are more buyers at these flat price levels then there are sellers.

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

The birdseed market is on the quiet side.  Hard to buy product but also hard to sell.  It feels like it has found a bottom provided the other grains don’t take another leg down; but upside also appears to be limited until we see birdseed sales pick up.

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

open grain market comments - China buying US Corn again?

Markets are called better this a.m. behind a strong overnight session and talk of China buying corn.

In the overnight session corn showed good strength up 13 cents, beans were up 15, KC wheat was a dime higher, MPLS wheat was up 5 cents, and CBOT wheat was up 9 cents.  At 9:15 outside markets have equities a little weaker with the DOW off 54 points, crude is down about 50 cents a barrel, a US dollar that is near unchanged with the cash index at 79.53, and European wheat up about ½ of a percent.

We seen heavy volume last night as it appears that China is looking to buy 500,000 to 750,000 metric tons of corn.  No confirmation has been seen; but it appears that the run up last night was from Chinese interest.  Some mentioned that the Chinese Gov has standing bid that was very close to our level we were trading at.

This a.m. we did have export sales out and they were very disappointing for old crop corn, very good for beans, and ok for wheat.  The corn number failed to hit what is needed on a per week basis while wheat and beans were well above what is needed.

Overall basis feels firm as supply isn’t exactly coming out of the woodwork as producers in general are not selling or fear selling at least not yet.  Demand is overall good at these levels; but for commodities such as wheat it doesn’t feel like there is much improved demand no matter the price.  Overall I think wheat should be supported by corn and beans; but keep in mind we are just a few months away from new crop wheat harvest while there is a long time before fall harvest.  So it is possible that those grains continue to diverge.  Bottom line we really need to find some solid export demand for wheat if we want to get really bullish longer term. 

Watch the outside markets and look for confirmation on Chinese business for direction today.  Hopefully the markets have found a bottom; so with that keep in mind how we close today will be much more important than where we open up at.  The theme has been to sell the rallies and until we prove otherwise most thing that is still the way to go.

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

Opening Grain Market Comments 4-17-12 - Turnaround Tuesday in store for the commodities?

Markets are called mixed to better behind a mixed but mainly firmer overnight session and supportive outside markets.

Nearby corn was off a penny while deferred corn markets where unchanged, beans were up 5-7 cents, KC wheat was up a couple, MPLS wheat was up 2, and CBOT wheat was up 2-3 cents.  At 8:55 outside markets have equities firmer with the DOW up 94 points, crude is up about 1.50, gold off about 10.00 an ounce, the dollar is about unchanged, and European wheat is up about 1 %.

The USDA had electronically issues (fire I believe) that delayed crop progress and conditions; they are now expected to be out this afternoon at the normal 3:00 time. 

Export inspections or shipments were delayed yesterday but did come out after the markets closed.  Wheat came in at 25.7 million bushels which is about 10 million bushels more then we need on a per week basis to meet current USDA projections.  Corn also came in very strong at 42.9 million bushels well above the 33 million bushels we need on a per week basis to meet current projections.  Beans came in at their lowest level since late Sept/Early Oct; but at 18.1 million bushels they are still well ahead of the 11.5 that they need on a per week basis to meet projections.  All in all rather good export performance for our grains with the corn and wheat numbers sticking out a little bit on the bar charts while beans show a clear slow down trend over the past several months.

Ideas for this afternoon’s crop report are around 15-20 % corn planted. 

Look to see if our markets can have a turnaround Tuesday; cash markets remain strong for corn and beans while weather has been more ideal.  If we continue to see ideal weather there could be more room to the downside; but I have to personally think we could and should see some sort of weather scares as we move forward.

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

Opening Grain Market Comments 4-11-12

Markets are called mixed to better this a.m. after we seen a bounce in the overnight session and a bounce in the outside markets.

In the overnight session corn was up 2-3 cents, beans where up 1-3 cents, KC wheat was up a nickel, MPLS wheat was up 4, and CBOT wheat was up 5-6 cents.  At 9:10 outside markets have European wheat up about 1 %, the dollar is weaker with the cash index at 79.601 down about 300, equities are bouncing with the DOW up over a 100 points, crude is up about 50 cents a barrel, and Gold is near unchanged.

Not much for new news out this a.m.; the main talk is still of yesterday’s report.  Heard many comments from the bulls that go to argue the USDA carryout for old crop corn.  Robbing Peter to pay Paul; in regards to the comments that the USDA had for the early corn crop going to be used instead of old crop corn.   I think that their comments tell us that the pipeline is very tight and if we see the crop start developing slow (which isn’t the case today) things could get very tight towards the end of our marketing year.  They also have it penciled in that demand will really come down going forward and more wheat will be used instead of corn.  All of these might happen; but if we stay low we won’t exactly be rationing demand and that might cause none of them to happen. 

The last time corn was down towards these areas China came in and bought; hopefully that will happen again and was certainly talked about a lot yesterday. 

As you can tell by the above comments I am a little friendly old crop corn; but still proper risk management is needed and recommended.  If we do make it to next years crop and it get’s as big as some thing there is no telling how low corn could get behind a huge crop.  One of the advisors I follow yesterday had a target of 3.50 on the board.    Personally I think that there is plenty of work needed and things need to shake out perfectly for us to see that type of pressure; but the reality is that is a risk wether I choose to think it can happen or not there is a risk that our corn carryout becomes massive because of huge acres and good yield.

Wheat is also on a danger spot on the charts; some of them are very close to breaking the bottom end of the ranges we have had the past couple of years. 

For more on the charts and possible strategies don’t forget we have our weekly meeting today in Onida at 3:30.

Thanks

USDA Supply and Demand Report - Mixed calls; where do we end?

Markets are called mixed today behind a mixed USDA Supply and Demand Report.

Most of the calls I have seen are for wheat and beans unchanged to up 10 ish and corn unchanged to down 10 or so.

Below are the numbers; first with the estimates, then last month’

S and with the actual highlighted in green

US corn carryout at 720 million bushels versus 801 last month – Actual  801 million bushels

Soybean carryout in the US at 245 versus 275 last month – Actual  250 million bushels

Wheat carryout in US at 790 versus 845 last month – actual 793 million bushels

World corn carryout at 122.45 million metric tons versus 124.53 last month – actual 122.70 million metric tons

Bean carryout in the world at 55.42 versus 57.3 last month – actual 55.52 million metric tons

Wheat  carryout in the world at 208.62 versus 209.58 last month – actual 206.27 million metric tons

Calls for corn tend to be weaker because of the fact that the market was expected a decrease in our ending stocks; but instead the USDA did the same thing it did last year and left the balance sheet unchanged despite the friendly USDA March stocks report.  The bulls will say that the USDA just simply isn’t willing to print a tighter balance sheet and mention the fact that spreads are extremely firm and basis is over delivery values in many areas; which is a sign of a lack of supply. 

Keep in mind that it is much more important how we close then how we open.

For the beans the numbers are friendly but not exactly a lot above estimates so I think it leaves the door open for a sell off because of the huge length that the funds have.  But as I mentioned yesterday I thought beans where over priced a dollar or two ago.  So if that freight train to keeps going one shouldn’t be surprised.

Wheat even though we cut carryout a little in the US and the world; I don’t expect a major move from this report.  With the funds short perhaps we could see a spike at any time; but we still have plenty of wheat despite the fact that ending stocks where cut in both the US and in the world.  Maybe sometime later wheat will have a story; but right now it is still a follower.  Possible freezes in our area as well as other parts of the US could help support the market at any time and provide a bullish tune for corn as well; plus it still is very dry in Europe and that could allow for wheat to slowly trim it’s burden some balance sheet at some point giving it a bull story.

Outside markets are acting a little poor since the grain markets paused their session this a.m.

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

Pre-USDA S D Report thoughts - Closing Grain Market Comments 4-9-12

Markets closed mixed to weaker today despite the rather firm start to last night’s session and the US dollar reversing midsession.

Old crop May corn was off 9 cents, July corn was down 11 cents, new crop corn was unchanged, new crop beans were unchanged, old crop beans were off 3 cents, KC wheat was off 2 cents, MPLS wheat was up a penny, CBOT wheat was up 5, the equity markets where weaker with the DOW off 130 points, crude was about a dollar weaker, and the US dollar is presently in the red by about 100 at 79.785 on the cash index.

A rather disappointing day for the grains leading up to the Supply and Demand report that will be out in the a.m.; especially disappointing considering our highs last night. 

The corn price action in spreads was a little weird today; we seen the front month May gain on the July but both of the old crop months lost plenty of ground to the new crop.  Perhaps the new crop was a little firmer on cold weather scares for some of the emerging crop; also noted was freeze scare in parts of SRW or CBOT wheat areas.  It doesn’t appear that any known damage was really done but it does help the bears remember that we probably won’t have a perfect growing season.

Perhaps part of the price action in the front month spread was due to more rolling from the May to the July; I have seen quite a few exporters roll already and even some local elevators have rolled.

We did have export inspections out this a.m. and they came in mixed; with wheat and beans in line with expectations and  corn below.  Wheat came in at 17.6 million bushels which was in line with what is needed on a per week basis, corn came in at 23.4 which is about 10 million bushel shy of what is needed on a per week basis to meet present USDA projections, and beans came in at 26.4 which is more than double what is needed on a per week basis.

The corn number has to be disappointing and leaves a little risk open for tomorrow’s USDA report.  This is 4 weeks in a row of not hitting the needed per week number to meet present projections and we have some in the market looking for an increase in exports.  I have to be a little cautious thinking that happens tomorrow.

A recap of trade estimates for tomorrow is.

US corn carryout at 720 million bushels versus 801 last month

Soybean carryout in the US at 245 versus 275 last month

Wheat carryout in US at 790 versus 845 last month

World corn carryout at 122.45 million metric tons versus 124.53 last month

Bean carryout in the world at 55.42 versus 57.3 last month

Wheat  carryout in the world at 208.62 versus 209.58 last month

One can see that the market is looking for a cut in carryout for all three of the major crops in both the US and in the world; therein lies our biggest risk.  That we see a neutral or maybe slightly friendly number but sell off because it isn’t as big as the market has penciled in.

The biggest number and most likely to move the market big time will probably be the corn number for the US ending carryout.  The other numbers will be important but corn is still king and if there isn’t a corn story we are swimming in wheat.

There is a chance that a corn carryout at expectations or estimates moves the market rather strongly because of what happened last year.  In that our April S & D didn’t change from the March despite the bullish March stocks report.  Enough have made comments about that and we have a large enough range in the estimates that a number of 720 on the corn carryout could get the bulls fired up.

I think the real risk is probably to the downside on beans; but heck I have thought that for some time now.  But at these levels and with the ownership that the funds have the risk is becoming more real.  Keep in mind beans are within last year’s highs; while corn and wheat are not even close.  Plus the bean story hasn’t exactly turned out to be a bunch of old crop demand.  It has been some; but more so the bean story is a small South American crop that should lead to more demand for us come new crop time.  So a break to me just makes sense and probably provides the charts with a little heath.  After all markets that go straight up usually go straight down; I would much rather see a slow steady uptrend versus a straight up market. 

I read some place on twitter recently to buy fear and sell greed.  To me it feels like the beans are near the greed stage of the marketing cycle.  I would say that winter wheat feels like it close the fear cycle as there has been a lot of talk lately in regards to a big crop down south and the big balance sheets that it has in the US as well as the world.  Now corn………….that one feels like new crop is at the fear stage because everyone has penciled in a huge crop on huge acres; which could happen; but really is a long ways from………….and old crop corn…………..well let’s say that I just hope that we are fortunate enough to see a greed stage as if we do that will mean we have finally busted out of the 6-7 month trading range we have been in.

Report is out at 7:30 in the a.m.

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

Thanks