Closing Grain Market Comments - Bottom in or has the free fall just started?

Markets closed mixed today in a tale of two stories. The tight old crop situation for some of the row crops and the weather being the two stories out there. 

When everything was done corn was down 3 cents, KC wheat was down 3 cents, MPLS wheat was lower by 4 cents, August soybeans were up 30 cents, November soybeans were up 15 cents, crude was down a buck, the DOW was about unchanged up 2 points, the Dollar was under some pressure with the cash index at 82.216, and gold was up 42 bucks an ounce.

August soybeans were the bright spot for our markets and they helped pull some of the other markets well off of their lows.  The old crop soybean situation is just extremely tight.  No other way to put it.  Now trading the old crop beans is tough because basis seems to move 20 cents or more a day.  I did talk to an end user at one point today and he mentioned how bids were getting weaker 20 cents a day; yet he also really seemed to want an offer so that the beans I was working on didn’t go to another spot.

The bottom line for old crop grains like soybeans, corn, milo, and even millet is things are thin.  If an end users needed the product they have to pay up.  If they don’t it is tough to move things. No offer is unreasonable; yet at any time all the offers could be way too high.  Just a very high stakes poker game with many components.   The end users need to have enough so they don’t run out; but they also don’t want to have any extra once prices become cheaper.  When will prices be cheaper?  Sometime when they are covered or once new crop supply starting hitting them.  Bottom line is the old crop situation for some of these grains will remain explosive and volatile with lots of head games.  We might see basis bids drop 20-50 cents in a couple days only see it bounce as much or more should the buyers actually need something.

As for the weather it is really debatable.  But the headline that the funds seem to be trading is that we have cool weather during pollination; with many areas also getting moisture to go along with cool weather.  Don’t get me wrong plenty of areas have issues and have missed moisture or maybe even got too much.  But as a whole the headline is a much bigger crop then a year ago for corn.  The question many are asking is our corn crop this year only 33 bushels more than a year ago.  I guess we really won’t know that for some time and as far as I am concerned we are now just enter the phase when we should start guessing the crop size.  The real estimates shouldn’t start until about now or maybe not even until the Aug crop report.

As for the bean crop many are talking the opposite; talking that the bean yield the USDA has is too big.  That the bean production number should come down.  Same thing here I really thing we are jumping the gun even guessing at the bean crop size this early in the game.

Elsewhere we did have export shipments this a.m.; overall ok to good for wheat at 23.1 million bushels; which is more than the 19.7 that we need on a per week basis to hit current USDA estimate.  The corn and beans shipments were light of what we need on a per week basis; beans came in at 2.8 million bushels and corn came in a 8.9 million bushels.

The other big news was this afternoon was crop conditions. 

Here is CHS Hedging link with recap.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress%20072213.pdf

I didn’t see any major surprises; we had corn conditions drop 3% in the G/E slot.  Very much as expected but a drop in conditions nevertheless.  Corn silking came in at 43% versus the average of 56%.

Spring wheat conditions dropped 2% and soybean conditions dropped 1%.  Pod setting was at 8% compared to the average of 19%.

As mentioned I don’t see any major surprises in the condition update.  I think weather will be more important than this afternoons crop condition report; and those forecasts can change with little notice.

The North Dakota Wheat Quality Council tour is this week, with field observations beginning tomorrow. CHS Hedging will be reporting from the tour via Twitter at @hedgeit and @hedgeit_jhof

The thing that our area will want to watch is what type of protein North Dakota will have; not sure if they will have any estimates and really it is probably going to be determined over the next 30 days.  Right now it looks like ND doesn’t have much stress.  So when I guy that has high protein winter wheat or high pro new crop spring wheat asks me if he should bring it in and sell it or take it to his bins and store it my response is typically.  “Probably store it and hope ND doesn’t have any pro; but also realize that your flat price risk probably comes from corn and soybeans as I don’t think we have 8.00 wheat if we happen to have 3.50-4.00 corn.”  I just don’t see that happening.

So the bottom line for wheat and protein is that yes it might make sense to gamble and store some hoping to get paid another 10-50 cents or more for your protein.  But realize that by trying to gain 50 cents for your protein you might be risking a buck or more in flat price.  It doesn’t do any good to store wheat and get paid 50 cents more for protein if you take a buck less in the base price. 

I don’t mean to say that wheat’s going down either; more so I think one needs to realize where the risk lies.  Wheat in my opinion is close to fair value and maybe even fundamentally undervalued.  But I also don’t think that wheat can rally by itself.  It needs corn and beans to be at the very least somewhat stable in price.

As for the price of corn or beans I think we are entering unknown territory.  I believe that the corn crop ends up someplace between 13.5-14.5 billion bushels; based on current weather forecasts.  If that is the case I really struggle to try and determine what they funds might do and what is fair value.  I look at crude oil and think well maybe corn right here is more than fair; heck maybe corn is cheap.

I look at China’s demand and think that maybe all of the grains are cheap at these levels.  But then I look at possible record production coming off of a year that we had to curb demand and I wonder how can prices do anything other than see pressure.

The bottom line for corn and the rest of the crops the likely follow at least a little bit is we are dealing with a situation that we have never had before in history.  We don’t know how short the funds might go; the only thing we can do is look for other clues and practice risk management that helps one stay profitable and comfortable.  By nature it shouldn’t be easy.

One thing that they say we need to make tops or bottoms is everyone leaning on one side of the market.  I don’t know that clue has been met; yes we have the funds record short; but have the farmers sold enough new crop corn for us to put in a bottom?  Have producers really made any new crop fear sales to speak of??? 

I hope that over the next few months and years we can find some sort of medium level that helps us build demand yet is profitable for producers.  I am fearfully that we keep doing what we have always done.  That is overdo market moves; both to the upside and to the downside.

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

Thanks

Opening Comments - Bottom in?

Markets are called better as the crop conditions and latest weather forecasts sparked a rally in our markets last night.  Short covering is what most think?  But I guess how the weather actually shakes out probably will determine if the rally is a short covering thus short lived rally or if we have enough traders bearish enough that we have a reversal??

In the overnight session corn was up 11-13 cents, soybeans were 20 cents a bushel higher, KC wheat was up 6 cents, MPLS wheat was up 5-6 cents, and CBOT wheat was higher by 8 cents.  At 8:15 outside markets have a US dollar softer by 200 points, crude up 30 cents a barrel, gold up 5 bucks an ounce, and the stock market looks like it will open near unchanged with the DOW futures up a couple of points.

Two things; first off some were looking for crop conditions to continue the trend they had previously which was improvement.  But that wasn’t the case; as conditions dropped for corn, soybeans, and spring wheat.

Here is CHS Hedging recap of the conditions. 

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress071413.pdf

Secondly and probably just as important is the weather forecasts.  First off remember these will continue to change numerous times. But basically what happened is the forecasts Sunday afternoon were for cool in plenty of areas and then the forecasts yesterday afternoon had turned drier with more heat.  Some areas really need some moisture and no one really wants much heat during pollination.

So the bottom line today is the headline looked to change a little with yesterdays crop condition recap and weather also looks to be a little more supportive to prices at least this second.  Two cautions about the little bounce we have in our markets.  First short covering can be short lived.  Secondly weather markets tend to change tons.

Elsewhere we did see our first load of new crop winter wheat get dumped this a.m.  Very high pro and surprisingly good test weight with the pro it had.

Attached is a crop condition rating index.  Notice that that so far 2013 is tracking 2011 fairly close.  But also take notice where the crop condition index is at versus a year ago.  We are probably a cool and wet forecast away from many talking about yield getting increased. 

The index at this point is very much in line with where it was at in the years we had yields of 145 ish to 165 ish; in 2008-2011.  Plus Indian, Ohio, and Illinois are higher than they have been over the last several years.

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

Thanks

Closing Market Comments - crop progress update 6-24-2013

Markets closed mixed to mainly weaker today. 

July corn was down 8 ½ cents a bushel, September corn was down 13 cents a bushel, December corn was off 10 cents a bushel, KC wheat was down 17-21, MPLS wheat was down 6, CBOT wheat was down 17-19, July soybeans up 19, November soybeans unchanged, the US dollar up a little with the cash index at 82.45, the DOW was off 140 points, crude was up 1.20 a barrel, and gold was down 11 bucks an ounce.

Overall an ugly day; there were times when MPLS wheat and soybeans showed some promises.  But overall spreads where very volatile.  KC spreads seen the nearby KC July wheat contract lose a dime to the 2014 July wheat contract.  From what I heard was a little harvest pressure and some houses in KC getting lower protein.  Something that they might sit on and try to drive spreads wider. 

Old crop new crop corn spreads also had a very choppy volatile day.  Some of the bids for old crop corn have rolled to the September contract; while others remain against the July.  Bottom line is that spread has been choppy and likely stays choppy.  Producer movement for grains has really slowed so you would think that the spreads firm up.  But that wasn’t the case for all of the grains today; as mentioned above in reference to KC wheat. 

Wheat basis also felt a little heavy; plenty moving lately on basis contracts and my contacts indicated that the Gulf HRW basis traded 7-25 cents less than it did last week.  Perhaps another reason that KC wheat spreads moved wider.  The domestic markets don’t seem much weaker but I have locally seen a lot of basis contracts done and some mills have stepped back.  Plus it really only seems like 1 or two mills have supported basis at these type of levels.  Most others are waiting for new crop; not they will get much out of this area.

This a.m. we had export shipments out.  Good for soybeans and poor for wheat and corn.

This afternoon we had a crop progress update.  Not much for surprises the big thing is that the crop condition trend has improve for corn, spring wheat, and soybeans.  Both corn and soybeans improved 1 % in the G/E while spring wheat improved 2%. 

If that trend continues we really have to be concerned about the seasonal pressure that we have seen over the last 20-30 years.  I have a couple seasonal charts in my office for November soybeans and December corn and they look like we go off of a cliff right around the start of July.  (These seasonal charts are older ones and that trend hasn’t been the case the last couple of years)

As each of the last couple of years we have made our highs around the August crop report; but last year at this time our crops had started to feel the stress of the drought.  As it stands out the numbers have improved the past couple of weeks.  The corn crop is now back to its 5 year average; with an uptrend.

Here is CHS Hedging recap

https://media.chshedging.com/Media/Research/Archive/2013_06_24Crop%20Progress062413.pdf

Right now the market seems to be focused on a couple things.  Wheat harvest updates (today seen as bearish via surprisingly good yields noted in central KS), the outside markets (bearish the past few days with economic concerns…..particularly in China), weather (overall has to be a little bearish….at least on the headlines as rain makes grain), and position squaring ahead of the report on Friday (unknown).  Bottom line is the headlines today mainly said sell. 

Now as we get further into the wheat harvest could we see more disappointments start to hit the headlines?  Yes of course; but just by nature producers are conservative when it comes to estimating the yields; now perhaps the market isn’t.  Could we see the outside markets stabilize and maybe see our markets focus on the Chinese demand which has been very strong for wheat as of late; with many talking about a smoking gun in regards to China and wheat.   Yes we could.

We could also debate weather; as I know plenty of agronomists that are more than concerned in some areas.

Could Friday’s report show way less acres then expected?  Could our quarterly stocks be less than expected?  After all basis and the spreads have said for some time that old crop corn and beans are tighter then tight.  Sure could happen that way.

The other way these things could play out is similar to today’s price action and headline.  Our crop could get bigger, the KC wheat harvest might not be as bad as we once thought, we might have under estimated the old crop stocks, and we could continue to see weak outside markets or an overall economic meltdown.

Bottom line is I don’t think many if any are going to be smart enough to take all of the hundreds and maybe thousands of variables and determine exactly how these markets will shake out.  If they did why would they tell anyone?  Not to say that someone won’t get it right as someone will.  But for risk management purposes and grain marketing purposes our job it to treat the above as unknowns and make good business decisions that fit our individual goals in a way that at the end of the day we can say we are comfortable with the decisions that we make.

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

Planting Progress- Opening Comments 6-18-2013

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

In the overnight session KC wheat lead the strength up 6 cents, MPLS wheat was up 4, CBOT wheat was up 4 cents, July soybeans were up 5 cents, November soybeans were up 2 cents, corn was unchanged on old crop and new crop corn was down a penny.  At 8:15 outside markets have the US dollar up slightly with the cash index at 80.95, gold is down 9 bucks an ounce, crude is up 50 cents a barrel, and the equity futures are pointing towards a positive start in the DOW of about 20 points.

Headlines this a.m. include a technical bounce for KC wheat; after putting in 12 month lows yesterday KC wheat reversed took out the previous day’s session and closed higher.  Perhaps it can lead to more short covering?  Keep in mind that the funds are short plenty of wheat and the big headline or focus for wheat hasn’t been our lack of crop.  It has been the world market; while much like the fact that our news of a bad US crop has been built into the price perhaps finally the world crop news has also been built into the price.  Plus keep in mind that the crop forecasted by the USDA in other parts of the world isn’t in the bins yet.

Corn had similar type price action yesterday; good for the charts on the December corn; leaving a key reversal.  But not as strong as of a reversal off in a sideways market versus wheat’s reversal happening at lows for the year.  But bottom line supportive and perhaps a reason for the funds that are short to consider to cover a little bit.  Plus next week we have a USDA report that could (most think should) show a decrease in corn acres planted.  Will it be more then the market expects is the real question?

The other big news out yesterday was the crop conditions and planting update.  Nothing to note that was a big surprise.  Don’t get me wrong you can find some friendly information; but just not new information.

There was no corn total planting numbers; but we did have state breakdowns.  Both IA and MN came in at only 94% planted; so while the big headline comes off as everything is planted that doesn’t seem to be the case.

Corn conditions did jump 1% in the G/E category to 64%.  The big thing here will be the trend over the next few weeks; has our crop improved and thus yield potential improved?  If that is the trend over the next month it is hard to see prices really wanting to take off.  Overall the crop is well behind schedule with emergence and silking behind.

Soybean conditions came out at 64% G/E up from 56% a year ago.  Soybean plantings came in at 85% versus the 91% average.

Spring wheat planting came in at 92% with North Dakota at 86%.

Sunflower planting jumped to 55% with North Dakota at 63% versus 89% on average.

For all of the talk of the late planting the headlines with the averages are not exactly super bullish. They say we are behind and have issues; but how major are the issues?  I guess that’s something that only mother nature will really know.  We will get an update at the end of the month; but as far behind as we are most in the trade expect a resurvey for planting acres.  Which to me means the USDA can give us a bearish number with a built in excuse?

Here is a CHS Hedging Planting recap for more info.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress061713.pdf

Yesterday we also had the NOPA May Crush numbers; they came in bigger then estimates at 122.6 million bushels.  That says that we have a massive year over year cut to happen over the next couple months if we are not going to exceed the USDA forecast.  20% or so; which would be one of the bigger cuts ever.  To cut demand typically you need one of two things; no supply or higher prices.  I think we may struggle with the supply for sale; but it might (hopefully) takes higher prices to get that type of demand curb as well.

I believe the KCBT will start to report more harvest activities today.  So far we haven’t seen many and they have all be all over the place.  The one common comment I have seen is poor quality; light test weight with high shrunken and broken.  That means that yields are probably a little lighter than expected but it also means that it might not be milling quality wheat.

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

Thanks

Closing Grain Market Comments - Crop Progress 6-3-2013

Markets closed mixed today in rather choppy volatile price action.

Old crop corn was down 6 cents a bushel, new crop corn was down 7 cents a bushel, KC wheat was up ½ of a cent, MPLS wheat was up 3 cents, CBOT wheat was 3 cents higher, July soybeans were 22 ½ cents higher, November soybeans were up 21 ¼, the US dollar was hammered down 720 points with the cash index back at 82.650, the equity markets bounced with the DOW up 140 points, crude was down 1.40 a barrel, and Gold was up 18 bucks an ounce.

What happened today to cause the major swing in the corn market?  First off when we hit the levels we did on the board we had over 5.00 local cash corn which helped some producer selling.  I believe we got as high as 5.10 cash off the combine corn; and bought some deferred corn for June around 5.50; so producer selling was increase when the board was up.  We also hit resistance on the charts and I just don’t know that we had a reason to go above resistance today.  I know end users seem to be patient and don’t look like they want to push prices higher.  As for the funds I don’t think they know that we need to be higher.

Still plenty of estimates out there have corn acres only down 2-3 million; with carryout numbers closer to 2 billion then 1 billion.  And a carryout of 1.5 to 2.0 billion isn’t going to get the fund managers super bullish on fundamentals.  So the bottom line is we have potential to see new crop corn go higher; but we probably don’t need to do that; at least not yet.  Now should the USDA show a smaller carryout in June (which I think is unlikely) or in July (which is possible but really still to be determined via mother nature and other factors) the funds could easily get on the bandwagon and decide to buy.  But right now today we have plenty of debate on how tight our balance sheet is or isn’t and not enough evidence for the funds to really want to make another leg up.

Should we break the recent highs technically it could open the doors to another quick 20 cents; but first off we have to break resistance at a point that producers are lining up to sell as are some technical traders; and we don’t have the end users in a panic mode to help.  Keep in mind ethanol margins are great nearby; but from what I am told new crop ethanol margins are nothing great.

Bottom line is today’s corn turn around seemed to be technical driven.  Now whether it is just a pause before moving higher or a reversal to lower prices is still to be determined.   Most likely determined by mother nature and future USDA reports.

This afternoon we did have a crop progress update.  It showed corn planting at 91%; which leaves us at about 8 million acres of corn left to plant.  So that means we have roughly 89 million acres planted.  If we leave yield at 158 which some will argue as way too high and others will argue as too low; gives us a production number of about 12.9 billion bushels.   The market feels like it is trading production closer to 13.5 billion or so. 

Fundamentally IF we have production of 12.9 billion bushels we still need to find demand from this last year as we are only projected to use about 11.1 billion bushels.  So the job of the market still seems to be find demand.  Something that isn’t suppose to be done via higher prices but via lower prices.

Now keep in mind that the bulls see production closer to 12 billion; with some of the super bulls indicating production closer to this last year’s 10.78 billion bushel production.  While the bear’s see production of 14 to 14.5 billion.  In my opinion it is really way too early to know; the crop will be made or broke based on mother nature in the months to come. 

As for crop conditions today we had corn come in at 63% Good/Excellent; which was slightly above trade estimates; but well below last year and the past 5 year average. 

Soybean planting came in at 57% which was below the estimate and below the average of 76%.  Now is it strong enough for our markets to continue the $1.25 rally that we have had?  I guess I don’t know the answer.  What I do know is that the market is trying to give a producer an incentive to plant soybeans via the prices.  Demand has been good for new crop soybeans too.  Now would I be aggressive selling beans; maybe not in our area because of how hit and miss our bean crop is.  But if I was in the areas east of us that have good APH yields and I had things planted I would think making some sales or rewarding this rally would just be good business.  Forget whether we go up or down from here; bottom line is it is good business to make profitable sales especially if you can paint a very unprofitable situation should things shake out a certain way.

Spring wheat planting did bounce to 80%;  G/E spring wheat conditions came in at 64%; 10 % below last year’s initial rating.  Even the South Dakota crop is 10% below last year’s which I found interesting.  Last year’s crop if you remember started off big and got smaller and smaller.  Only time will tell if we see this crop get smaller or bigger as we go forward.  The one thing that this year’s crop has going for it is moisture.  Last year by this time a lack of moisture was hurting it just wasn’t realized or acknowledged by the USDA and some of the traders.  I don’t think we will have a lack of moisture issue anytime in the next 30 days; so the crop likely gets bigger if we get some heat and growing days.  Now if we keep getting rain and cool weather like in some of the forecasts perhaps the crop conditions can get take a step back?  But in my opinion it will be tough for our crop conditions to get much worse anytime soon.  It’s not like the crop conditions say good/bad based on this date.

Here is CHS Hedging link for more crop condition info.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress%20first%20conditions060313.pdf

Other news out there today included this morning’s export shipments.  Good for wheat; but slightly below estimates.  Most ideas are that our final wheat export number will be very close to the USDA’s projection.  Both corn and soybeans were on the low end of estimates and both below what we need on a per week basis to meet USDA projections.

I did see a “Reuters poll of 15 analysts is based on conditions as of Monday, June 3” for corn and soybean production and acres.  Not really a bullish game changer

                             Corn                         Soybean             

                             Acres   Yield     Prod       Acres    Yield    Prod

 High                        96.500   165.000  14.437      79.876   44.500  3.467

 Low                         93.500   156.000  13.416      77.100   42.500  3.200

 Average                     95.113   158.231  13.825      78.238   43.668  3.362

 USDA May Estimate           97.300   158.000  14.140      77.100   44.500  3.390

In our office we have a couple seasonal charts up from a presentation that Ed Usset did for us.  Looking at the charts we look to be very close to going over a ledge.  Now who knows how things will work out this year; sales made about a year ago would have been the biggest mistake in the world and done a good job of hitting the lows for some of the markets.  Will this year shake out the same?  Where sales made now look bad in a few months?  If so what could cause that to happen?  Or will this year be the opposite of last year; will sales made in late May early June end up looking like the best sales of the year?

Don’t know the answer; don’t want to promote anything other than doing what makes one comfortable and making good business decisions.  In my opinion when I look at the seasonal tendency for corn over the last 30 years of so I think I probably want to have a game plan to get myself comfortable either via making some sales or using another strategy or strategies to get there.  Maybe buying some puts?  Maybe selling calls?  Maybe a combination?

Basis continues to be very hit and miss.  I did have a local ethanol plant looking for some nearby corn; which was good to see as just last week he indicated he was covered.

The birdseed market also remains rather thin; with rather wide bid – ask spreads.  Tough to buy product but equally tough to sell.

I do have some buyers looking for some new crop confection and con oil acres if anyone has interest looking at them.  Demand seems to be very strong in that market.  It does look like North Dakota may be losing some sunflower acres as they are only 20% planted versus the 5 year average of 55%.

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

Thanks

Closing Grain Market Comments - USDA Crop Progress Update 5-28-13

Markets closed mixed today with the row crops leading the way and wheat lagging behind.

Old crop corn closed up 9 cents, December corn was up 14 ½ cents a bushel, KC wheat was down 2 cents, MPLS wheat was up a penny, CBOT wheat was down 4 cents a bushel, July soybeans were up 33 cents, November soybeans were up 40 cents, the US dollar is up with the June contract at 84.310, gold was off 7 bucks an ounce, crude up about a buck a barrel, and the stock market had a nice bounce with the DOW up 106 points.

Very strong day for the grain markets; new crop soybeans and new crop corn in particular.  July beans also managed a new high close for the year today.  The strength in the new crop row crops comes from weather and a lack of planting progress.  Ideas are that we have lost some corn acres to prevent plant plus we are potentially losing some soybean acres and spring wheat acres to the same thing.   Some soybean acres might also be getting lost from the slow wheat harvest; not allow for as many double crop acres as expected. 

I did see a couple different advisors selling some new crop corn and soybeans today; and one that I listen to mentioned maybe having a recommendation out in the morning on new crop soybeans.  Comments like “reward the rally” being used.  One thing to keep in mind is the fact that if we are losing corn acres some might get to soybeans.    Also seen a comment that mentioned guys maybe taking prevent plant on corn and then going back into the ground with soybeans un-insured.  I don’t know exactly how that process would work but I can see the logic in it.

I seen a couple different comments showing various weather maps asking the question.  “Bearish or bullish?”  It looks like parts of Iowa will continue to get moisture in the days to come.  Basically to me it looks like we have spots that rain would be beneficial and then we have others that it will continue to hurt progress and may damage what is already in the ground.  Bottom line is we have had issues planting basically since the season started; we have been behind and now the market realizes that we MIGHT have a major issue.  I still think it is undetermined and up to mother nature.

One of my wheat buyers today mentioned the fact that some Hard Red Winter Wheat business was going down; but we ranged anywhere from 40 bucks to 70 bucks a ton too expensive.  This really opened my eyes a little bit on the wheat situation.  Don’t get me wrong I still see some friendly things happening and I think our crop gets smaller; but longer term we need demand.  It won’t matter what we don’t have if the other guys (Russia and other wheat producing nations) have more than enough to make up for our lack of supply.  Now that doesn’t’ mean a weather story can’t happen or develop someplace else in the world at some time.  But today we don’t have that story. 

The story we have for wheat is a bad United States wheat crop; which is old news and been talked about since it was planted in the dust last fall.  The other story we have is big rebound in production in almost every wheat producing nation.  That my friends isn’t bullish.  It was nice for us to see some Soft Red Wheat business last week with China; but that is just more feed wheat business.  The area we need demand is milling wheat.  Bottom line don’t fall victim to backyardagains; looking at the lack of wheat in the United States and think we have to go higher.  If that was the case we would have already rallied.  Now if the funds or “big money” decide to start talking about our lack of wheat sure we could rally; but longer term we need to find a way get that missing piece of the puzzle called demand.

As for news today this a.m. we had export shipments out.  They were very good for wheat; while bad or soft for corn and beans.  The corn and bean numbers lately make one wonder if the door isn’t opened to the USDA lowering the export projection.

The other news out today was this afternoons crop progress report. 

Corn planting came in at 86%.  Bottom end of the ranges I had seen; which were 85-90 %.  Fundamentally it says we still have 13-14 million acres of corn left to plant or nearly 2 billion bushels of possible production.  But keep in mind that if we don’t plant any more acres and we yield the 158 that the USDA is presently using while harvesting 92% which is about average.  We still have production of about 12 billion bushels.  This year we are only projected to use about 11.1 billion bushels which means we still need to find demand of nearly a billion bushels year over year.  So tonight’s crop progress numbers are bullish but longer term do they say we need to run up like we did this last year?  In my opinion not yet. 

If this news can give help us keep the rally going personally I think I would consider “rewarding the rally” a little bit.   Perhaps use a rally to catch up on some sales for those that are uncomfortable for what you do or don’t have sold.   For some that might mean some sales for others maybe just using some options to protect your bottom side risk would be a good play?

The one good thing the weather has done is give the funds a reason to look at the grains.  Right or wrong at least we have a possible positive headline to get the funds interested and if they do decide to get interested we could easily over do a move to the upside.  Longer term present prices levels could easily look very good.

Soybean planting came in at 44%; which is below the average and slightly below the estimates that I had seen which were around 50% planted.  I don’t know that we have a major issue here yet and I look for more acres to slide into beans from corn.    But just like corn we have some wet weather forecasts and if the funds decide to get on board who knows where this thing could go; longer term and fundamentally I think risk is to the downside as I think the job of the market is to find demand. 

Spring wheat planting came in at 79% planted below the average of 86%.  But here also weather looks like it could cause some acres to get switched to prevent plant. 

Winter wheat G/E conditions where left unchanged. 

Other things that stand out in the crop progress report; include the fact that the eastern part of the corn belt is now ahead of average for planting progress.    Corn emergence came in at 54% which isn’t as far behind the 67% average as one would have thought a couple weeks ago. 

Here is CHS Hedging Recap of the USDA crop condition/planting progress report.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress052813.pdf

The sunflower market felt a little softer today; with bids down a little from the offers that had got filled/traded last week.  Or maybe a better way to say it is the bid/ask spread just widened out a little again; as I don’t know of anyone that is really a willing seller at a cheaper level then they where last week.

Corn and wheat basis both remain very choppy.  Some guys have interest in buying while other like some local ethanol plants are fairly covered.  Expect things to stay choppy; you have to be bullish corn basis in general with the ethanol numbers; but the inverse is too bid for anyone to want to hold any length through the inverse. 

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

opening grain market comments - record planting?

Markets are called mixed this a.m. behind a mixed overnight session.

When the overnight session ended old crop corn was up 2 cents a bushel, new crop corn was down 2 cents, KC wheat was down a penny, MPLS wheat was up a penny, CBOT wheat was down 2 cents, old crop soybeans up a penny, and new crop soybeans down 8 cents.  At 8:15 outside markets have crude off about 50 cents, the US dollar off a couple under points with the cash index at 84.039, gold off 11.50 an ounce, and stock futures pointing to about a 15 point lower start for the DOW.

Old crop firmness still being seen as producers are not really interested in selling much old crop grain.  Weakness in the new crop seems to come from the idea’s that we will show a record planting progress in this afternoons crop progress report.  I have seen just a huge range of estimates; most seem to line up that the market is looking for 60-65% corn planted and 20-25% soybean planting.  The one comment that I have seen is the fact that these reports usually lag.

Weather has halted planting in our area and other areas in the Western Corn Belt; but it looks like the eastern corn belt continues to make progress.  Our area the moisture helped greatly and I would think it leads to some more producer interest in marketing some grain.  ND did see good moisture too and that might curb some acres in both spring wheat and corn. 

Overall I think weather is still a wild card.  Today’s crop progress report will tell us if we are in a “rain makes grain” state or if we are still concerned about the lack of progress and possible yield losses along with acre losses.  Usually the Monday afternoon reports are old news fast; but today’s might be a little more important than normal. 

This morning we will have export shipments out at 10:00. 

I did see a estimate that increased Russia wheat crop this a.m.  We to keep in mind that we are not the only wheat exporter in the world and we typically only export a little under half of our crop size.  So if we don’t have a crop to export and other countries do we might not have a major change in our ending stocks.  Our domestic use for wheat is about 1.3 billion bushels this last year and about a similar forecast for this coming year.  If we have a carry in of 731 million bushels; we only need about ¼ to 1/3 of a crop to satisfy our domestic needs and that’s assume that wheat for corn stays strong.  We have some issues in HRW; but the SRW wheat crop looks to be plenty big and spring wheat is still up in the air; but I know guys that have it planted are sitting well.  Bottom line is that for wheat to really rally we probably need an issue someplace else in the world.  The issue in hard red winter wheat country is known; but it isn’t enough by itself to cause a major rally like we would like.  It could be if the funds decide to run it with a headline; but at the end of the day we will need some demand.  It will be hard for us to see demand if our competitors are swimming in grain.

One possibility that this afternoon’s report has is acting like a sell the rumor event.  Meaning everyone is expecting a huge corn crop progress number.  If we get it what reason will they now have to sell us off?  Could the market start looking at the fact that many areas to the east of us may have lost some yield potential?  It just seems to me that old crop stocks are so tight and basis is so strong that it should have some spillover effect to new crop.  I don’t know that it is enough to take new crop prices higher but could it stall off the pressure until later? 

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

Closing Market Comments- USDA Crop Progress - Supply and Demand Report - CFTC Recap

Markets closed firmer across the board today lead by the expiring May contracts, which go off the board tomorrow as spreads traded very firm leading us higher.

May corn was up 30 cents, July corn was up 19 cents, December corn was up 10 cents, KC wheat was up 8, MPLS wheat was up 4, CBOT wheat was up 5, May soybeans closed up 33 cents, July beans up 20 cents, November soybeans up 4 cents, equities had the DOW off 27 points, the US dollar near unchanged, crude off about a buck, and gold was off about 8 bucks an ounce.

Nice day for the grains as old crop corn and old crop soybeans gained all that they lost on Friday and then some.  Wheat however only gained a portion of what it lost on Friday; as did the new crop row crops.

The strength looks like someone wants some old crop; basis is strong and the May futures go off the board tomorrow at noon. 

This a.m. we had export shipments out and they were strong for wheat, poor for soybeans, and ok for corn.  Wheat was above what we need on a per week basis, corn was double last week but still below what need on per week basis, and beans were half of what they were last week and below what we need on a per week basis.

New crop corn and beans followed; as did wheat, but the charts didn’t do anything impressive today.  The 6-10 day forecasts and 8-14 day forecasts were wet this a.m. and last night; but the ones I seen this afternoon are a little dryer.  Not sure if that will be enough to pressure or markets or not. 

This afternoon we had an updated crop progress report.  Corn planting came in at 28% planted; below estimates and well below average.  But I don’t know if it is bullish enough for prices to run up.  Now if the forecasts turn wetter or the system coming later this week gives us more moisture then expected we could see things run up.  The thing to keep in mind is these forecasts are not new news; the fact that we are well behind average isn’t new news; and yet prices are about the same as they were a month and a half ago.  So despite all of the issues with a late slow planted crop we haven’t managed to add much premium.  Is that weather premium still to come?  Or could things be a lot uglier if we had everything going smoothly?

I know plenty of producers are bulled up because of the potential acres getting lost or switched as well as the potential yield reduction from the late planted crop.  But has the market really acted like it cares?  Hopefully it just means the market is slow re-acting like they were to last year’s drought? But for risk management purposes and marketing purposes we need to realize that if the market can’t show strength despite bullish news perhaps the news isn’t that important.  Or at the very least realize that if we were waiting for the weather rally scare that started because of our slow planting; that news is here and now.  It can get worse and we could fall further behind and potentially lose acres and more yield potential; but it is becoming old news.  The market isn’t focusing on that and if it doesn’t soon perhaps it won’t.  Perhaps this is all the higher this news alone can take us? 

Overall I think I would like to give it a little more time to develop; but the market really needs to start reacting sooner than later.  Or the “big money” will start looking for another story. 

The question we might have to start asking our self is what will the market do if we get the balance of the crop planted over the next 2-4 weeks.  With today’s planting pace of 28% what do we need to have happen to see a bullish reaction in the next week?  How low does that number need to be by memorial day to be considered bullish?  I don’t really know the answers to those questions; but I am a little disappointed that we haven’t rallied more then we have.  

Look at it this way on April 14^th planting was a 2%.  That report came out on April 15^th at 3:00; on the 16^th the next trading day after that report we closed December corn at 5.40.  Planting as of yesterday was 28% completed for corn versus 65% on average.  The price today closed at 5.39 on December corn.  26% planted in a month and we lose a penny?  What will it take over the next week to have a strong up move? 

Maybe the grain markets have just lost the interest from the funds?  What will it take to get them back interested?

Spring wheat planting did make a good job up to 43% planted; so still behind but catching up a little.  South Dakota is at 76% planted; up 30% on the week. 

Winter wheat conditions came in unchanged on the week; still a horrible looking crop.  But still not enough reason for the funds to get interested and if the USDA world numbers are correct it might be some time before the funds decide to get on the wheat bandwagon.  One thing that is and should be a little positive wheat is the fact that it seems like the USDA typically starts off aggressive on production.  We know they have done that for the US corn crop the past couple of years; but they also tend to do that in other places; such as our competitors.  The problem is they also tend to overstate demand.

Weather does seem to have some small issues in other areas growing wheat and that is one thing we will have to keep our eye on.  The world wheat production was pegged at 701 MMT for this coming year; which would be well above the 655 MMT raised this year.  Yet the carryout number is fairly flat year over year at 186 for next year versus this present years 182 MMT. 

Below are a couple links from CHS Hedging.  The first is crop progress update.

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress51313.pdf

This next is CFTC Commitment of Traders data.

https://www.chshedging.com/UserFiles/Documents/2013/Research/CFTC%20Commitments%20of%20Traders/CFTC51013.pdf

The last one is the video recap of the USDA report from Friday.

http://www.youtube.com/watch?v=xMFC01wZbiI&feature=youtu.be

As we go forward we should remain in a weather market; but once we get this crop planted rain won’t be what will run us up.  If we do manage to get things in the ground the job of the market will be trying to find demand and the easiest way to find demand is via lower prices.  The USDA forecast on Friday was for lower prices for next year; the average farm price for new crop corn 4.30 to 5.10; if that is an average price that means that in their forecast they are saying we will spend some time below the 4.30; which in our area means under 4.00 cash prices.  The average price for soybeans 9.50 to 11.50; which means a forecast below 9.50 at some time.  How low below the low end of the average does the USDA think we will get?  Don’t know.  Does it matter what they think our low price will be.  No; it doesn’t.  But what we need to take from it is the fact that how do they think our demand will improve year over year?  Based on what they have for average farm price; I think they expect that demand increases via lower prices.  If we told the USDA our prices will be at present levels; where does that put your demand projections at?  I would guess the answer would be sharply lower demand?

Bottom line is make sure you get yourself comfortable in your marketing plan.  If you are not comfortable now perhaps have a pro-active plan that gets you comfortable.  And if you are betting on the horse that rain and moisture will keep things from getting planted realize that horse hasn’t been very attractive to the funds so far.

Other news out there will include the NOPA crush numbers out Wednesday this week.  Have we curbed any soybean demand?

The birdseed market has been impressive with orders; but actually buying interest remains very hit and miss.

Spring wheat spot floor basis also remains very defensive.

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

Closing Comments - Corn up the limit - best day in 10 months

Markets closed firmer across the board today on weather and short covering.

Corn lead the strength up the limit of 40 cents on the nearby contract, while new crop December corn was up 35 ½, KC wheat was up 25, MPLS wheat was up 15, CBOT wheat was up 24, July soybeans were up 28, Nov soybeans were up 19, the DOW was up 106 points, gold was up 22 bucks an ounce, crude was up a 1.50 a barrel, and the US dollar is about unchanged with the cash index at 82.12.

Weather got the markets moving; then some technical buying and short covering gave corn it’s best up day in months.  Weather has cool and wet in the deferred forecasts and parts of the corn belt forecasted to get 1-3 inches this week; some of which could be snow in Iowa.  This leads to idea’s that the yield and acres could shrink.  Typically we see a yield reduction when corn gets planted too late and that is what the market focused on today.

Adding some fuel to the fire this afternoon was the crop progress; that showed corn at only 5% planted versus the 31% on average and last year’s 49% planted. 

Here is a good recap of the crop conditions from CHS Hedging

https://www.chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progress42913.pdf

Some strength in the corn market also came from the fact that the funds had moved to their shortest position since April of 2010.  So perhaps many had already sold our market down because of the known fundamentals and now we add talk that perhaps those fundamentals are changing.  Perhaps we are losing both acres and yield via the slow planting.

Here is link to Friday’s CFTC recap from CHS Hedging.

https://www.chshedging.com/UserFiles/Documents/2013/Research/CFTC%20Commitments%20of%20Traders/CFTC042613.pdf

So today we had the picture change; but today’s picture changing is a weather market change.  One thing that helped our markets out is the fact that when everyone left on Friday the forecasts had some warm and dry in them; just a few days later come Sunday night they had changed.  Weather markets can change in a hurry so by no means is there a guarantee that we will follow up today’s strength.  It could happen but the market could easily be selling off later in the week saying “rain makes grain”. 

Plus fundamentally how high do we need to go?  Think about the fact that we have to increase demand year over year unless we grow a crop something like 11 billion.  If we grow 12 billion we need to find about a billion bushels demand increase over what we are projected to use.  If we dropped our corn acres down to 90 million and yield of 150; and harvested 90.6% we would still grow a crop of about 12.3 billion bushels.  That would be a decrease in the yield of 5-15 bushels versus most of the estimates out there.  Some of the guys I talk to have thought for a while that we are trading 155-160 on yield; the USDA in their outlook for had a 163-164 yield.  As for the acres the March planting intentions were 97 million acres; have we already lost 7 million acres?  In our area we have probably actually gained some acres via the failed wheat; not enough to make a difference but a small increase none the less. 

Bottom line is if this is a rally that is simply driven by fear; fear that we won’t get the corn in it is probably a rally that at some point should be sold.  I wouldn’t bet against the American Farmer; and if we can continue a rally and guys don’t take some risk off the table via getting protection or making some sales that is what you will be doing.  Betting against yourself.

That being said if the funds decide to jump on board things could get crazy over the next several days, weeks, and months ahead.  If that happens it should make marketing difficult; as when our markets go up it feels like they just don’t want to stop.  Bottom line is using some risk management or having a game plan is recommended; because when this thing falls it could get very ugly.

The other thing that we really need to keep in mind in regards to marketing is the fact that the average producer is very undersold for new crop corn.  The market likes to do what it can to hurt the most.

I don’t want to come off as all bearish; as I am not.  I think the charts perhaps have turned and we could see a bounce as we go forward; but I do think that guys need to realize that this might be a second or last chance.  We don’t have the demand to really have a huge run up (sustained) on new crop prices; at least not today.

Moving on; other news today included export shipments.  Corn came in line with estimates but well below what we need on a per week basis, wheat shipments were very strong and well above estimates and the needed per week to meet current USDA supply and demand balance sheet projections, and beans came in very close to estimates as well as what we need on a per week basis.   Bottom line no real market mover here.

Winter wheat conditions did drop 2% in the G/E category, and spring wheat planted jumped to 12% which is still well below the 37% on average.  Neither this nor the lack of corn planting is probably new news; the wheat crop tour will be new news as we see those updates over the next couple of days and the latest forecasts will also be important.  If the rain fall for the corn belt doesn’t materialize and the latest forecasts start calling for warm and dry we could easily give back some of today’s rally.

For the wheat crop tour you can follow some of the info on twitter using hash tag #wheattour13.

Here is link for the map of the tour that some will be following.  By the looks of it tour is probably starting in good area’s but as it moves on it appears to be moving in to more stressed areas.  I find it hard to believe that this tour will be bearish; but we do have to ask our self how bullish can it be and how much of it is already built into the market.

http://www.dtn.com/ag/assets/Kansas-Wheat-Tour.gif

Also looks like parts of KS could get down below 30 on Wednesday night after being close to 90 today.  That could make things interesting with the possible freeze happening during the tour.

Tomorrow is first notice day for May futures.  No limits and with the lock limit move for July and September corn limits will be expanded starting tonight to 60 cents a bushel.

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

Thanks

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/

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Grain Market Comments Day ahead of USDA Report

Grain Markets closed mixed to weaker the day before the monthly USDA Supply and Demand report.

Old crop corn was off 6 cents, new crop was off a dime but traded another 3 cents lower at the 2:00 time, KC wheat was off 3 cents, MPLS wheat had nearby up 10 cents, Sept MPLS was up 2, CBOT wheat was unchanged, equities and outside markets reversed and closed down very hard from last night’s highs; the DOW was off 143 points, crude off 2.50 which is over 5.00 a barrel off of it’s highs, and the US dollar near unchanged at 82.60 on the cash index well off of the 81.72 lows it had.

Very disappointing is how I would describe today’s price action; starting with the outside markets as it looks like the market finally got a bail out that it didn’t like.  Doesn’t happen very often; but probably due in my opinion as bail outs with fake money might not be the answer.  Bottom line we saw the US dollar make a new low for the past couple of weeks; but turn around and close positive leaving a bullish key reversal on the charts.  July beans left a near doji; but also made a new high for the recent move and closed lower another technical key reversal on the charts.  Crude over 5.00 was good for the charts either; not a key reversal; but not anything good for the technical picture.

Now perhaps we get a bullish report in the a.m. and our outside markets recover behind the latest bail out overseas; but I think today’s price action should really remind US to practice good risk management when making our grain marketing decisions.  December corn didn’t trade positive at all today or last night and I seen yesterday afternoon where some called it 10-15 firmer for Sunday night’s session just because of the hot and dry weather that many are having.  Yet a little system that left a little coverage for parts of Iowa had new crop corn under pressure all day.

So keep in mind that even if everyone you know or everything you read says that the market should or will go up; the market is the market and it doesn’t have and seldom does listen.  Some say it is the markets job to do as much damage to as many as possible.  Now this might not be true; but our grain market prices really do seem to move in an unpredictable pattern.

This afternoon we had crop conditions out and we seen a big decrease with G/E conditions falling to 66% down from last week’s 72%.  Perhaps a little bit more then expected; maybe it helps open the possibility that we see a decrease in yield on the USDA supply and demand report that is out in the a.m. 

Spring wheat conditions decreased by 3% in the G/E and soybean conditions decreased by 5%. 

Below are the estimate for tomorrow’s USDA report. 

The big numbers will be corn carryout; I think the others are still followers; but the USDA could also throw out a curve ball at any time.

Overall you can see that for present marketing year the trade is looking for stock decreases for wheat, corn, and beans.  When they are looking for a bullish report and we get a neutral report it could open the doors for negative price action.

The same can be said for next year’s ending stocks; once again the trade estimates are looking for decreases in carryout versus the May numbers; over 100 million bushels for corn.  Which could happen and based on some comments production and yield could be a lot lower then what is forecasted as many are very dry.  But before this afternoon’s crop conditions report one might have mentioned the fact that the USDA could have left corn yield unchanged or even took the yield number bigger on the same ideas they had in the May crop report.  That we have a crop in nice and early with good emergence and good crop conditions as reported weekly. 

2011/12 Ending Stocks Estimate (billions of bushels)
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	?	0.821	0.688 - 0.901	0.851
Soybeans	?	0.189	0.130 - 0.218	0.210
Wheat	?	0.753	0.727 - 0.775	0.768

2012/13 Ending Stocks Estimate (billions of bushels)
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	?	1.750	1.223 - 1.950	1.881
Soybeans	?	0.143	0.052 - 0.220	0.145
Wheat	?	0.714	0.647 - 0.772	0.735

2011/2012 Global Ending Stock Numbers
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	?	127.630	126.000 - 128.800	127.560
Soybeans	?	52.090	51.000 - 53.000	53.240
Wheat	?	197.124	196.000 - 198.835	197.030

2012-2013 Global Ending Stock Numbers
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	?	149.745	145.000 - 154.000	152.340
Soybeans	?	58.140	55.700 - 62.000	58.070
Wheat	?	184.791	180.800 - 190.674	188.830

I think that we can all find plenty of reasons for the numbers to be much more bullish the then average trade estimate; but we need to realize that there is also the chance that the numbers come in more bearish or simply come in not as bullish as the market is expecting; plus I don’t know how anyone can be super bullish the overall economic picture; 2008 has to be in the back of one’s mind.  One thing that should be at the top of the bearish list has to be old crop corn export shipments; they have been poor well below what is needed on a per week basis to meet present USDA projections.  Today’s corn shipments where 17 million bushels which is nearly 20 million below what is needed on a per week basis.

It might be a little late to protect one from the crop report in the a.m. but it isn’t too late to stay aggressive or pro-active and put yourself in a good comfortable spot for your grain marketing.  If you need help writing a grain marketing plan please give us a call.

Don’t forget that the markets will be open tomorrow when the report comes out; this could make things a little more volatile than in the past?

Thanks