Opening Grain Market Comments - two days ahead of big USDA report

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

In the overnight session corn was up 2 on the old crop, new crop corn was down a penny, KC wheat was up 3-5 cents, MPLS wheat was up 1-3 cents, and CBOT wheat was up 5 cents.  At 9:15 outside markets are not providing any support with the equities near unchanged as the DOW is off 11 points, crude oil is down a little over 2.00 a barrel, the US dollar is bouncing up 201 at 79.248 on the cash index, gold is off 12 an ounce, and European Wheat is unchanged.

Another day of consolidating/position squaring or at least anticipating Friday’s report.  Don’t forget that this afternoon we will have our regular weekly MWC Marketing Hour Roundtable in which we will cover some strategies heading into Friday’s report as well as pre-report ideas; plus we will have a couple of guest speakers.  Taylor Smalley a wheat buyer for CHS and Tregg Cronin a Market Analyst for Country Hedging.

Here are the latest estimates for Friday’s report.

Planted Acerage Estimates (in millions of acres)
	Low Guess	Average Guess	High Guess	USDA Outlook	USDA Last Year
Corn	93.6	94.75	95.6	94.0	91.921
Soybeans	74.0	75.45	76.7	75.0	74.976
All Wheat	55.5	57.422	58.2	58.0	54.409
Winter	41.5	41.963	42.6	na	40.646
Spring	12.0	13.30	14.5	na	12.394
Durham	1.4	2.30	2.5	na	1.369

US Quarterly Grain Stocks as of March 1st (in billions of bushels)
	Low Guess	Average Guess	High Guess	USDA 3/1/11	USDA 12/1/11
Corn	5.925	6.150	6.288	6.523	9.642
Soybeans	1.270	1.387	1.585	1.249	2.366
Wheat	1.181	1.223	1.251	1.425	1.656

For the acres  you can see that the market is expecting an overall increase year over year due to less prevent planting and less CRP acres.  Bottom line is market is expecting acres to be a little on the bearish side; but just how bearish or bullish will really depend on weather as that will really make our break our crops.  Also very important will be where we start or our ending carryout this year.  Overall it looks like year over year the market expects corn to be tighter then last year with beans higher then last year.  Wheat is also expected to be less then a year ago. 

Just looking at the above table for estimates versus last year you can see where some risk may lie.  Corn average quarterly stock estimate of 350 million bushels less then last year.  That to me seems like a big risk; the possibility that stocks come in 100-200 million bushels but we sell off anyways because that would be less then the trade estimate.

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

Grain Market Comments 3-24-12 - Trade Estimates for USDA report

Markets are called mixed to better this a.m. behind a supportive overnight session and mixed outside markets.  A choppy couple of sessions is expected heading into the USDA report on Friday.

In the overnight session corn bounced after getting beat up yesterday as it was up 5-6 cents on the old crop, new crop corn was up 2-3 cents, beans were up 3-6 cents, KC wheat was up a penny, MPLS wheat was up a penny, and CBOT wheat was up about 4 cents.

At 9:05 outside markets have European wheat weaker down by almost 1 %, equities are mixed with the DOW off 13 points, crude is up about 40 cents a barrel, gold is up about 7.00 an ounce, and the US dollar is near unchanged with the cash index at 79.074.

There is little lack of new news out this a.m. the big focus remains Friday’s report.

Here are the latest updates for estimates.

Average Trade Guesses

Acreage

                                             

                                          USDA Estimates

                                         February

               Average      Range         2012       2011

Corn           94.658      93.7-95.7       94.0      91.921

Soybeans       75.429    74.495-76.676     75.0      74.976

All Wheat      57.551      56.0-58.3       58.0      54.409

Spring Wheat   13.35     11.895-14.5       n/a       12.394

U.S. Corn, Wheat Reserves Fall, Soybeans Rise, Survey Shows

             U.S. March 1 Inventory Forecasts

2011      Average     Range          Previous USDA

                                March 1, 2011  Dec. 1, 2011

Corn       6.160   5.925-6.400      6.523       9.642

Soybeans   1.371   1.270-1.467      1.249       2.366

Wheat      1.250   1.181-1.400      1.425       1.656

European wheat is off a little bit after making 9 month highs yesterday; but overall very firm on dry weather.  Wheat in the US is being reported as very good but now at high risk of an early frost; I had a producer in SD mention it was almost a foot tall and there have been numerous reports of foot tall wheat in KS.  Wheat feels like it has a little bit of a bull story developing and we have the funds near record short.

Basis is steady to firmer with producer movement very slow.  Demand however isn’t the most robust ever; we really need a little more exports for all of the grains as right now we are mainly a domestic market especially for milling wheat.

Don’t forget that tomorrow we will have a couple guest speakers for our weekly MWC Marketing Hour Roundtable.  We will be going over some charts as well as strategies ahead of the big USDA report that is out on Friday.

There was a Bloomberg report out this a.m. that said Morgan Stanley is “Realatively Bullish” on the Ag Prices and to buy new crop corn and bean contracts on any weakness from the USDA report.  Making comments that the present USDA yield projections are a little too optimistic.

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

Thanks

Closing Grain Market Comments - Outside Bearish Day on Corn - Corn Chart

Markets closed mixed today in a choppy rather volatile session.

Old crop corn had the worst performance for the grains as it was off 9 cents, new crop corn was down 4 cents, beans where up 7 on the new crop, old crop beans where up 14, KC wheat was up 5, MPLS wheat was up 5, CBOT wheat was up 5, crude oil was up about a quarter, gold up over 20 an ounce, the equities had a big winner with the DOW up 161 points, and the US dollar made 3 week lows with the cash US Dollar Index down 423 at 78.923.

Overall versus the strength we seen this a.m. a very disappointing day for the grain markets; corn had a bearish outside day closing nearly 20 cents off of its mid-session highs.  It was decent to see wheat and beans stay in the green or positive despite corn turning very ugly but that was about the only good thing we seen it what was suppose to be range bound quiet trade ahead of Friday’s USDA Quarterly Stocks and Planting Intentions report.

Export inspections or export shipments came out this a.m. and they did lead to a little of the sell off as wheat came in at only 15.4 million bushels well off of the pace the last couple of weeks and below what is needed on a per week basis to meet current USDA balance sheet projections. 

Corn export shipments where even worse; coming in at only 22.2 million bushels; only a little bit more then ½ where they where just a couple weeks ago and well below the 34 million bushels we need to see on a per week basis to meet the current USDA projections.

Bean shipments remained strong coming in nearly twice as much as we need on a per week basis and in the same range we seen the past couple of weeks; they came in at 24.9 million bushels shipped.

Today’s price action should leave us feeling a little scared on corn; holding last weeks lows which we are just marginally above will be rather key.  Some say a break below could really open up some fund selling and another leg down.

Here is the chart of May corn.  First off you will notice that we have had a series of higher lows; if we look at chart you see that we had a low in Dec and then a nice bounce into Jan then after the January down move (quarterly stocks report) you will notice we held the previous lows, we then did the same thing during the couple corrections in Feb (held the January or previous lows), and so far have done that in the last correction; but we are dangerously close to breaking that area and perhaps moving us down towards the next support zone.

I would think with a firm basis and overall strong spreads it would be tough for us to make another leg lower ahead of the crop report but that is also the nature of futures trading for you.

One good thing I have had happen recently is that I have had end users pulling some deferred corn contracts a little early (a couple different ethanol plants pulling April/ May contracts already).  It is nice because originally they paid a premium for later and now it makes sense for them to take the product now.  I view it as a strong sign of upfront demand or at least a lack of upfront supply.

Don’t forget to get yourself in a comfort zone in regards to marketing ahead of Friday’s report.  Either make some sales to catch up or consider buying a little insurance in the form of purchasing some puts and if you feel you are oversold don’t be afraid to buy some out of the money calls.  Bottom line is one wants to be in the game should the USDA throw us a bullish report; but be PROTECTED should they throw us another bearish curveball.  Keep in mind that might be a little bit of what happened today is the market just took some risk off the table because lately these quarterly stocks reports have been very bearish. 

Here is a run down of the last 4 of these reports.

March 31, 2011 – limit up; traded synthetically much higher;  at the end of 3 sessions we had traded corn over a dollar a bushel higher then where corn closed at on March 30^th

^{June 30th 2011, down 69 cents on the July corn……..OUCH!}

^{Sept 30th 2011, down 40 cents traded synthetically about another 20 cents lower; at low spot we lost 60 cents from the day before the report}

^{Jan 12th 2011, down 40 cents, traded down 65 in 4 sessions}

^{This gives us an average move from the last 4 of these quarterly stocks reports of 73 cents or about $110 an acre.} 

^{I don’t know if this report will be like last years and in a week we will have corn a dollar higher then it is today; I don’t know if we will be like the last three and 60-70 cents weaker.  But I do know that if you are comfortable with your sales and or have protection or re-ownership strategies in place you will probably sleep a little better then the guy that doesn’t do what his gut is probably telling him to do; and that is make a good risk management decision that takes a little risk off of the table.}

^{Don’t forget we with have our weekly meetings this week covering some strategies and our thoughts on what this report will bring.}

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

USDA Report Report - Opening Grain Market Comments week leading up to quarterly stocks report

Markets are called mixed this morning behind a mixed overnight session and supportive outside markets.

In the overnight session corn was off ½ on old crop, new crop corn was down 2, beans where up 12 cents, KC wheat was down 2, MPLS wheat was off 1, and CBOT wheat was unchanged to up a penny.  At 9:00 outside markets have gold firmer, crude about unchanged, the equities firmer with the DOW up 102 points, European Wheat is firmer by a little over 1 %, and the dollar is weaker with the cash index off 240 at 79.105.

Watch outside markets for direction; but this week’s trading is likely pre-report trading as the USDA will have out their quarterly stocks report and planting intentions report on Friday.  Don’t forget that we will have a couple guest speakers at this week’s MWC Marketing Hour Roundtable on Wed at 2:30 in Onida and they will be covering a little info ahead of Friday’s big report.

Below are the trade estimates for Friday’s report.; the first is planting intentions and the second is quarterly stocks. 

TRADE ESTIMATES FOR USDA MARCH 30 REPORTS

                         Corn    Soybean  All     Winter  Spring  Durum  

                                          Wheat   Wheat   Other            

Average trade estimate  94.720   75.393  57.422  41.963  13.313   2.223  

March 1 stocks:            Wheat      Corn       Soybeans

Average trade              1.223      6.150      1.387          

Source: Reuters       

Overall the market seems to be looking for some choppy trade ahead of this week’s report.  It should include a little position squaring also; keep in mind the funds are now very long beans, long corn, and still massively short CBOT wheat.

With producers in the field basis feels like it is stabilizing; but it also feels like harvest happens in late May or early June; as there is simply a lot of grain to move before we get to wheat harvest.

The sunflower market also feels like it has stabilized; but with the rally beans have had sunflowers stabilizing isn’t exactly a good showing.   The one thing that the beans rally could lead to is an acre war; the returns for beans are quickly becoming better and better and could be shifting some acres that direction.  To me it says that spring wheat is too cheap and perhaps that corn is getting a little cheap as well as the rest of the row crops that are competing with beans.

Keep in mind that this week’s report will give an update to the old crop balance sheet ideas (they won’t actually update the balance sheets until Aprils S & D report); and if we have tight balance sheets for old crop the acres become very important and weather becomes that more important; whereas if we see old crop balance sheets showing a little wiggle room or plenty of supply weather and acres become less important.  Bottom line is a friendly report on Friday gives us a chance for a major bull story and a negative report could leave the funds and producers owning way too much in a crashing market.

For risk management purposes don’t be afraid to take a little risk off the table heading into Friday’s report as I think every knows it is simply the right thing to do; especially when you look at what these reports have done over the past couple of years. 

Please give us a call if there is anything we can do for you and don’t forget about this week’s MWC Marketing Hour Roundtable on Wed at 2:30 in Onida.

Thanks

Opening Grain Market Comments

Markets are called mixed to firmer this a.m. behind a very firm overnight session for the row crops and mixed to supportive outside markets.

In the overnight session corn was up 5, beans where higher by 14, KC wheat was down by a penny, MPLS wheat was up 1, and CBOT wheat was up 3.  At 9:00 outside markets have European wheat up about 1%, equities are mixed with the DOW off 20 points, crude is up 1.25 a barrel, gold is firmer, and the US dollar is weaker with the cash index down to 79.45.

Fear on the bean crop in South American getting smaller helped out our overnight session as beans once again lead the way.  With the type of estimates that are now being throw out in the marketplace there is talk now that the US will need to hit 80 million bean acres.  Most estimates are closer to 75-76 million acres for beans.  Acre war?

Below is an article with some info on the Chinese corn deficit; which seems to hit traders’ minds after we see price breaks.

03/23 02:04a CST  DJ China Official: Corn Deficit To Worsen In Coming Years-Xinhua

  BEIJING (Dow Jones)--China's corn deficit may rise in coming years because
of a swift increase in demand for corn used for processing, state-run Xinhua
news agency reported Thursday, quoting a senior cabinet analyst.

  Cheng Guoqiang, the deputy director of the executive office of the State
Council Development Research Center, the cabinet's think tank, was cited as
saying that the balance of supply and demand of corn in China appeared to be
reaching a tipping point, with demand now outpacing supply.

  Domestic corn-processing demand has risen 40% from 2008 to 45 million-50
million metric tons annually, he said, speaking at a conference.

  Even with a record harvests, China could see a supply deficit because of the
swift rise of processing demand, he said at the Bo'ao Forum for Asia.

  Cheng said China imported about 5 million tons of corn in 2011, and he
projected the figure to rise in 2012. The 2011 figure may include bookings that
have not yet been delivered to China, according to Dow Jones Newswires'
assessment of customs data.

  Other local media reports said Cheng projected that by 2020 China may see a
corn deficit of around 20 million tons annually.

   Technically yesterdays closes did bounce off of some support and make the charts look to be range bound until we see a new catalyst; which is probably next week’s USDA report. 

Basis in general feels a little better as producers focus on farming.  One should have some concern with the amount of grain that probably moves after planting but before wheat harvest as it feels like almost everyone has more grain on hand now then they really ever have had.

The birdseed market seems to have picked up recently as we have many more bids then we did just a few weeks ago.  The market is still tough to sell; but it is quickly getting to the point where there are more buyers than sellers.  Plus the past month or so we did see the crush take out a lot of product reducing the overhead supply a little bit.  But if we are to get a significant rally we will need to see demand and birdseed sales pick up.

There has been talk that the USDA will change the ethanol corn grind rate.  Presently the conversion is 2.7; and some are thinking it is closer to 2.8 or 2.9.  On the surface this adds supply back to the balance sheets as it takes away the ethanol usage; but it might actually help stabilize the up and down feed/residual usage a little bit and add back to the feed usage.  I guess next week’s report could show us something one direction or another.

Don’t forget that during next week’s marketing round table we will have a couple guest’s. Tregg Cronin from Country Hedging and Taylor Smalley from CHS Wheat Marketing.

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

opening comments march 22nd

Markets are called mixed to weaker this a.m. behind a choppy two sided overnight trade; weaker outside markets, and decent export sales.

In the overnight session corn was unchanged, KC wheat was down 2, MPLS wheat was down 3,  CBOT wheat was unchanged, and beans were down 7 cents.  At 9:00 outside markets have the equities down with the DOW off 50 points, the US dollar is stronger with the cash index at 79.883, crude oil is off 2.50 a barrel, and European wheat is unchanged. 

Corn came in above trade range estimates and ahead of what is needed on a per week basis coming in at 33.9 million bushels of old crop corn.  Wheat was also above trade estimates and what is needed on a per week basis to meet present USDA projections as it came in at 19.8 million bushels.  Beans where below the trade estimates but still above what is needed on a per week basis coming in at 13.1 million bushels.

Outside markets presently are not helping the grains at all as we have equities down, crude down, gold down, and the US dollar up.

Next week we will have a USDA crop report out; the quarterly stocks and the planting intentions report.  I don’t think the acres planting intentions part is as import as yield and old crop quarterly stocks probably trumps weather importance for the short term.  For the corn balance sheets if we get a change like we have seen recently on the quarterly stocks report we could go any place from a sub 600 million bushel carryout to something over a billion bushels.  So don’t forget to have some marketing risk management plan in place before next week’s report.

Given that the market does expect us to consolidate a little bit ahead of the report; but our markets also have a nice tendency to do exactly the opposite of what most think they will. 

Basis feels steady and like it has stopped slipping but at the same token most ethanol plants have good to great coverage for the next few months.  The only positive basis really has going for it has been the weak board along with producers getting in the field as the demand side is a little slow for wheat, corn, and the birdseed products like milo.

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

Thanks

Grain Market Comments - Markets Fall Hard- Charts for corn, wheat, soybeans, KC Wheat

Markets closed down hard today behind expected rains in the HRW belt and Russia reaffirming that it will not limit exports on wheat out of the Black Sea.

CBOT wheat lead the pressure today down 20 cents, MPLS wheat was off 16 cents, KC wheat was down by 14, beans were down 8, new crop corn was down 4, old crop corn was off 10, equities where near unchanged with the DOW up 7 points, crude is about 70 cents a barrel higher, and the US dollar is down 340 ish at 79.45 on the cash index.

A rather disappointing day for the grains; perhaps just a natural correction but very disappointing as the grains turned lower after putting in new highs for the recent moves in the overnight session.  Corn and beans left key reversals on the charts as they both made 6 month highs and then closer lower.   Wheat also left key reversals on the charts making 2 week highs before getting hammered.  Bottom line today was a poor technical day for the grains; but as some of the attached charts show perhaps just needed corrections as we had reached resistance areas on some of the charts where we should see increased selling pressure.

Speaking of selling pressure basis feels a little softer for corn due to increased producer selling as well as the fact that ethanol margins remain slim to in the red.  Most of the local ethanol plants I talk to have needs bought up until June.

One thing that should help out basis a little bit is the fact that many producers in many areas are shifting their focus to the fields plus many areas have road limits on; offsetting that a little bit is the fact that it seems like the railroads have more cars than ever.

Now whether today’s price action is a reversal or just a natural needed correction in over bought markets is still to be determined; but it probably comes down to demand and weather.  This latest bounce started over a rumor of China buying corn; but we still have yet to see confirmation of the tonnage that was rumored.  Weather presently isn’t doing anything other than allowing for the market to take risk premium out; as it appears early planting probably leads to more corn acres.  Some analyst today threw out 95 million acres with a yield of 162 per bushel; now that is a lot of corn.

Personally I think it is too early to know if we have a big crop or a small crop coming on; but I do think there is a big risk out there or big potential.  I think a small crop or big crop potential cuts our prices in half or doubles them in value.  I don’t think that I want to bet against the American Farmer doing everything he can to produce as much as possible so I think it makes good risk management sense to be very pro-active in making profitable sales while they are there.   So if we do get some weather scares and get bulled up thinking prices are going to shoot higher than at that time don’t be afraid to be a contrarian and make small scatted profitable sales that your gut will probably be telling you to do.

If you need help with a marketing plan please give us a call.

Market Comments China buying corn?

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

IN the overnight session old crop corn was unchanged on the front month, July corn was off 2 cents, New Crop Dec corn was off 3, beans where off 1-2 cents, KC wheat was up ½, MPLS was 2 lower, and CBOT was down 2.

At 9:15 outside markets have crude down about 1.50, equities are firmer with the DOW up about 20 points, the Cash dollar index is trading about unchanged at 80.025.

As for new news out there it is very little.  There still remain rumors of Chinese interest in US corn and this is what helped the markets out on Friday despite the rather non-event USDA report.

One thing the markets do have going for them is uncertainty as producers start to focus on the field it is become unknown where end users can source product.  The has the corn market inverted with the March leading the May and the May leading the July contract.  It is a sign of more demand then supply; now perhaps the supply is there and just not for sale?  But perhaps it is a way the market tells us that producer simply are not having to sell.  Bottom line is there are debates as to why the market is inverting; is it the producer situations that are much improved and not being forced to sell or is it simply strong demand?  Will we see a massive movement sometime in the near future from the farm to the market place or is the USDA overstating our supply and or understating our demand?

The March 31^st report should give us a good idea of what the case is; as it will be our quarterly stocks report.  Market mover?  Typically a big market mover plus this report will have planting intentions.  Don’t be afraid to take a little risk off the table as we head into this report as it is probably simply the correct move.

Today’s market did open along the same ideas as where the overnight session left off; but we quickly moved into positive territory on more talk of China buying old crop corn.  It appears that the cheapest spot to buy corn is the board in many places.  The market has really took out the incentive to store corn which is a strong demand sign.

At the end of the day corn was up 15 on the May; July corn was up 10, new crop corn was up 6, beans where down 3-6 cents, KC wheat was up 12 cents, MPLS wheat was up 15, and CBOT wheat was down 8.  Outside markets where mixed with crude off about a dollar, the US dollar was softer down to 79.85, and equities where slightly firmer with the DOW up 38 points.

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

May Soybeans leave a Doji on the Chart

Here is a May Soybean chart; it shows that we left a doji on the charts on Friday.  Is this a sell signal that things are about over for the very overbought beans?  Stoch is over done and shows it is signalling down.  If you look back towards Sept you see that Friday we also filled the small 3/4 cent of gap left back then.

Is this doji any different then the ones we have seen the past couple of months in the remarkable rally?

I guess only time will tell; my 2 cents is there is a lot of risk on this chart just because of the length we have obtained lately by the funds and fundamentally the news is getting a little tired.

Neutral Nick Update 3-11-12

Neutral Nick updated today; first time in nearly a month.

I hope to post more screen shots of his present positions later in the week; one thing he is trying to do is not trade as much as last year and watch his gamma exposure a little closer. He also isn't getting caught up in selling just one certain month of options.  I.E. last year he was mainly selling July options and didn't sell any later then that; towards the end of his run his gamma exposure was just too much; that is part of the reason you see him in options that are near term all the way to some that are out in Dec.

USDA crop report - Rumors of China buying corn

Markets are called mixed this a.m. after a crop report that many are calling a non-event.

In the overnight session grains traded mainly higher with corn up 2, beans up about a dime, KC wheat up 2, MPLS up 4, and CBOT wheat up 4.  At 9:20 outside markets are mixed European wheat is up about 2% or about 12 cents a bushel, the dollar is stronger up nearly 800 at 79.911, equities are better with the DOW up about 45 points, and crude is up about a dollar.

Quick highlights of the report are US corn carryout unchanged at 801 million bushels, US bean carryout unchanged at 275 million bushels, and US wheat carryout down 20 million bushels to 825 million bushels.  A little disappointing as the market was looking for cuts in the US corn and bean balance sheets due to ideas of increased exports due to smaller South American Crops.  The USDA did take some of the SA crops smaller as world carry out numbers where cut across the board for the grains.

Beans down to 57.3 MMT versus 60.28 last month, corn down to 124.53 versus 125.35, and wheat down to 209.58 versus 213.1 last month.

On the surface trading just the US numbers markets are probably weaker for corn and beans; but with the friendly world numbers perhaps we see some two sided trading today.  The price action leading up to today could also provide a little idea of what’s to happen; beans bulls have to be a little disappointed while corn and wheat weakness may have the bears a little scared as the numbers really are not super bearish.

I think when everything is said and done we will be looking out for the end of the month crop report that will have planting intentions as well as quarterly stocks; perhaps that leads to some choppy sideways action.

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

opening comments 2-24-12 grain markets

Markets are called mixed to weaker this a.m. behind a choppy to weaker overnight session.

In the overnight session CBOT wheat was off 5-6 cents, MPLS was down 4, KC was off 5, Corn was off 3 cents, and beans where unchanged to up a penny.  At 9:15 outside markets have the dollar under pressure down 565 at 78.257 on the cash index, equities are firmer with the DOW up 26 points, and crude is up 60 cents.

Yesterday and today the USDA is having their Outlook Forum; this has pressure us a little bit.  Many don’t put much into these numbers; but their isn’t much else to trade either.  The big news yesterday was wheat acreage up to 58 million a big increase from last year and from baseline projections.  This put their 2012-13 ending wheat stocks at 957 million bushels, versus 887 in their baseline projection and 845 currently. 

Corn carryout is pegged at 1.616 billion bushels; more then double the current market year.  One interesting fact is that the USDA used yields slightly above trend line yields in both corn and beans.

Beans had carryout projections for 12-13 at 205 which is a cut from the current 275.

Export sales where out and all grains came in above what is needed on a per week basis to meet current projections.  Overall most where in line with trade estimates and probably not a big market mover.  China buying some corn yesterday still could lead to some support.

Basis remains defensive up front but deferred slots are showing strength for wheat.  It shows that we don’t have anyone really looking for anything up front as we really lack export to domestic competition for wheat right now.  Corn basis is still hit and miss; many local ethanol plants have good coverage and margins are a struggle.

One positive our markets have is the fact that basis is above delivery values; one of the first times in a long time so this should lead to some support.  Bottom line is producers don’t have much interest moving until we see a rally.  Add to that fact that spring is coming shortly and we probably don’t see basis under much pressure until producers start moving some grain.

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

MWC Marketing Hour Round Table

I put up an interesting trade this week in our weekly mock trading session.

It was a hedge trade......well kind of

the trade was buying 2 May 6.00 Corn puts and sell 1 8.00 Dec wheat call

below is some of the thinking i had on in the agweb.com marketing old and new crop discussion thread


http://discussions.agweb.com/showthread.php?14346-Marketing-Old-Crop-and-New-Crop-2012&p=225650#post225650

-------------


one strategy that we looked at in our marketing meetings this week was selling dec wheat calls to buy may and july corn puts

based on theory that dec-dec corn-wheat spread has corn well under valued versus wheat.....so selling a call in wheat instead of corn in hopes that if it turns into a HTA corn has gained some of the 1.20 or so discount that it presently is

i think the level we used was buying 2 6.00 may corn puts and selling 1 dec 8.00 wheat call for a small credit

the reason we used may instead of july or dec is protection cost of only 14-15 cents or so; plus if market breaks i don;t think new crop breaks nearlly as hard; i think breaks or rallies will be lead by old crop corn.........so if i want to protect a price break i want to protect the area that has the most risk......in this case old crop corn

it is much more risky and tricky to manage then using the same month and same commodity but it does have some reasoning behind it

any thoughts on the trade

selling 1 dec 8.00 to 8.50 cbot wheat call to buy 2 6.00 ish may corn puts......as protection against corn.....and a sale on top side for corn

Neutral Nick Update

Well it's been a couple week's since Neutral Nick jumped back on the scene; so it is about time for an update.

Below you will see some screen shots showing Nick's updates and projections; keep in mind this time nick is much more diversified into the months he has options sold and purchased.  Generally he has purchased a few nearby options and sold deferred options. He also has used his idea's on where spreads go to decide how to position himself.  His goal is no longer to stay 100,000 delta short.  His system this time is trying to make about a million dollars in each of the grains; without huge margin exposure; watching his gamma risk and not building such a huge and unrealistic mountain if you will.

Check out his info below.

The above graph on his delta position is really one thing that needs to be managed.  A couple of reasons.  A) so he doesn't swing too direction bias and stays "neutral" so to speak  B) So he can help control his margin cost.  What is his plan to do that; take a little off the top side via near term closer to the money options that have a big gamma advantage over other options he has sold or is selling.

opening grain comments

Markets are called better this a.m. behind a firmer overnight session and supportive outside markets.

In the overnight session beans where up 11-12 cents, CBOT was up 9 cents, KC wheat was 3-4 higher, MPLS saw the front month up 3 with some of the deferred months down 4-8 cents, old crop corn was up 5, and new crop corn was down 1.  At 8:50 outside markets have European wheat up a little over 1 %, equities are slightly firmer with the DOW up 40 points, crude oil is up about 80 cents and the US dollar is near unchanged with the cash index at 79.283.

Yesterday it appeared as those we seen some index fund re-balancing as the deferred MPLS really took off and that helped spike up some of the KC markets where we actually seen a close higher then the electronic high of the day.  It appears in the overnight some of that got corrected as seen with front month MPLS stronger while deferred slots where weaker.

Basis has steady out on the MPLS spot floor as producer selling has really dried down.  Basis for winter wheat however feels very defensive and plugged up front.  We really need a little export to domestic competition for both of the wheat markets to have a long term rally and that seems far fetched given our world supplies that are showing record carryout’s.  Along those same lines we India’s wheat crop up to 88.3 MMT; a 60 year high.

We did get some more SRW business done with Egypt in the past day or so; a change from Russia/Black Seas and the 2^nd time in a week or so that it has happened. 

The birdseed market really feels like a buyers market as demand is very slow and it is hard to find bids that don’t run away from you.

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

Grain Market Opening Comments 2-15-11

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

In the overnight session corn was unchanged to up a penny, KC wheat was up 3, MPLS wheat was up 2, CBOT wheat was up 3, and beans where leading us once again up about 8 cents on the old crop (new crop beans where 2 firmer).

At 9:00 outside markets are weaker then when the grain markets paused at 7:15 this a.m. with the equities slightly in the red with the DOW off 20 points, crude oil is up 75 cents a barrel which is about a dollar off of its highs, and the US dollar is back to nearly unchanged with the cash index at 79.560.

Not a lot of new news out there this a.m.; more cuts are being talked about for the South American bean crop and other logistical issues have slowed movement and brought business back to the US.  It was reported that a soy ship collided with a grain loader in a Brazil Port on Monday.

We did see 116,000 mt of beans go to China which helps support us again via showing business coming this way despite harvest happening in Brazil.

Basis is a little defensive on most of the grains; we simply don’t quiet have enough export to domestic competition.  Add to that the fact that most ethanol plants are running break even at best we don’t have a lot of reason to see massive competition between the two markets.

Wheat basis is even more being controlled by the domestic market as export’s just haven’t been happening for the hard wheat’s.

Don’t forget we have our annual meeting in Pierre tonight and this afternoon we have our MWC Marketing Hour Round Table meeting at 3:00; which is 30 mins earlier then normal.

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

Thanks

opening comments - weekly marketing meeting time change- reminder of annual meeting

Markets are called firmer this a.m. behind supportive outside markets and a firmer overnight session.

In the overnight session corn was up 4-5 cents, beans where 7-11 higher, mpls wheat was 6-8 higher, and CBOT wheat was up 9 or so.  At 9:00 outside markets are supportive with the US dollar weaker down 250 on the cash index at 78.86, equities are firmer with the DOW up about 60 points, and crude is up about 1.10 a barrel.

It was noted that we sold 55 TMT of US SRW off of the US East Coast to Egypt and some of the wires I read this a.m. mentioned that was the first time since June.

USDA will release baseline acre numbers this a.m.; with the market looking for about 94 million corn acres a USDA number above 95 or below 93 could swing our push our markets one direction or another.  These numbers are not survey or producer driven; that won’t come until the March 31^st report which is also another quarterly stocks report. 

Basis has been a little defensive the past couple of days; but with the drop in the board it could stabilize soon.  Bottom line is for wheat basis we really need some export to domestic competition; today’s lead of Egypt purchasing some might be a step in the right direction; but last weeks report that left us with an all time world record in wheat carryout should tell us that we might simply not see the export-domestic competition needed to have an explosion in wheat basis.  The good think about the world wheat carryout is that it doesn’t breakdown milling quality to feed quality.  Ideas are that there is much more feed quality then milling quality; if that is the case we have plenty of competition for corn.

A couple other announcements.  First don’t forget we have our Annual Meetings this week.  Tuesday in Philip and Wed in Pierre.  Along with our annual meeting on Wed we will be having our marketing meeting a little early on Wed; this week it will be from 3:00-5:00 instead of the normal 3:30 start time.

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

Thanks

Pre-USDA Crop Report comments - projections- close grain market thoughts comments

Markets closed weaker in the grains today despite outside markets that turned positive. 

Corn was down 2 in old crop, new crop corn was off 6 cents, old crop beans where down 1, new crop beans where up 2, KC wheat was off 7 cents, MPLS wheat was off 2-3 cents, CBOT wheat was off 6 cents, crude was up about 1.50 a barrel, metals higher, the dollar weaker with the cash index off 541 at 78.527, and equities ended higher with the DOW up 33 points.

Rather quiet and somewhat disappointing day for the grains; disappointing from the fact that despite the outside turning around the grains struggled.  There is a crop report out on Thursday and it appears the trade is once again setting up for a bullish crop report.  (Anyone remember the January crop report that saw us with an unchanged carryout in corn yet we traded limit down because the market was anticipating a cut to the carryout?)

Here are the pre-report estimates.

                                 U.S. ending stocks 2011/12

                                                          Wheat      Corn   Soybeans

Average trade estimate           0.867     0.791      0.273

Highest trade estimate             0.935     0.846      0.300

Lowest trade estimate              0.836     0.680      0.245

USDA January estimates          0.870     0.846      0.275

                             Global ending stocks 2011/12

                                                     Wheat    Corn     Soybeans

Average trade estimate      208.963  124.896    61.380

Highest trade estimate        210.000  128.140    63.770

Lowest trade estimate         205.000  120.000    58.000

USDA January estimates     210.020  128.140    63.430

The above estimates really should be pointing out some risk; or let down potential if we don’t see cuts like expected.  The cuts being expected on the other hand do have very sold logic behind them and I wouldn’t want to make a big bet that the report doesn’t see cuts.  After all ethanol usage is ahead of pace on a weekly basis and exports have picked up and both could allow some positive demand revisions. 

Now the methodology as to how the USDA goes about its carryout projections is up in the air and always will be kind of an unknown with some going as far as to say that the powers to be won’t allow too tight of a balance sheet because of higher food cost implications.  Along those same lines one has to ask themselves how much weight does the USDA put into future demand over present usage pace? 

As example presently I have seen reports the past couple of days where ethanol margins are in the red “near record negative for modern times”, domestic unleaded gas demand at a 10 year low, S Plains replacement cattle crude margins at a negative $125 a head, and prompt chicken moved to the red last week.

So if we take our two biggest users of corn; feed usage and ethanol usage and we see that many of them lose money if they buy today will economics allow them to keep their current pace.  How will the USDA look at their numbers; the present pace that says we should up our exports and ethanol usage or will the lack of margin that eventually will curve demand cause the USDA to leave their numbers unchanged or maybe if put in some cuts?

Another positive that has been talked about and reflected in the trade estimates is the world balance sheets from SA crops getting smaller; but it has also been reported for nearly a month now that weather has turned much more positive.  So in my opinion to assume that we get more exports my look good on paper and should happen but I don’t know that I am in the camp that our SA crops got smaller over the past 30 days; not based on what I have read over the past 30 days.  Now I would agree that the numbers we seen in the Jan report left room for them to get smaller as they were not as small as many thought; but I don’t know that weather really has caused a lot more damage since the last report.

The wheat numbers; any way you shake it we still have a lot of wheat in the world; and that is assuming we end up seeing a cut in the world stocks as expected.  The only thing the USDA has shown me over the years is that it doesn’t always stick out numbers that are expected.  Sometimes they are way off and the market gets it handed to them; sometimes the market and the USDA numbers come in line and then they look for a new reason to trade, and other times the opposite happens and we see numbers even more drastic the market thought would happen.  At the end of the day and ahead of each report we will always be left with these unknowns and for us in the grain industry this huge risk so we really have only one logical rational smart business decision choice.  Use good risk management in your marketing with a diversified approach while look to protect against extreme price (profit or lack thereof) swings.

If you need help with some risk management ahead of the report feel free to give us a call.  With a decent basis maybe one should simply look at making some cash sales and re-owning on paper if you are a bull.

Along those same lines don’t forget our weekly marketing meeting that we have in Onida every Wed; including tomorrow the day before our next report.

A couple of other things I am seeing:

ADM closed an ethanol plant in ND or laid plans to close it in the next couple of months.  (Permanently close it)

Basis for grains feels a little top heavy; some ethanol plants in Iowa dropped basis by 5-8 cents today and I have seen an uptick in producer selling.  Many comments about wanting cash flow right around March 1^st.   Wheat really lacks export demand and that is keeping a lid on basis for winter wheat and spring wheat.  Locally most ethanol plants seem to have good Feb-March coverage and basis for corn feels defensive overall; it doesn’t help that they can’t lock in a margin in deferred slots.  And overall it still feels like producers still have way too much ownership (hence risk) for a rally to really make much steam with end users losing money when they buy some of our grains.

The sunflower market has been in a free fall; but it is starting to feel like the panic selling is near and end.  Coverage also appears to be light so perhaps if business picks up and producers get back into the field  we have a chance to stabilize or bounce that market over the next couple of months.

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

Mock Trading Update

last week we did add a few trades during our Mock Trading session;

I adjusted my long 6.00 march puts via selling a 6.40 march corn put

I also adjusted my short July put via the sale of a 7.00 July corn call

Other new trades that where placed include Kevin with a long soybean contract versus 2 short wheat contracts

Scott went short some CBOT wheat at 674 with a stop of 6.85 and an objective of 6.50

Duane went long 2 March Wheat with a stop at 6.55 while going short 3 March corn

Please stop in Onida this Wed if you would like to join in on the fun; as it is great for learning.

Neutral Nick is back

Neutral Nick our mock trading character is back; this time with a little different rules and different game plan.  Not just focused on his delta position; nor does he no longer have an unlimited checkbook.  Plus he is planing on rolling things out this time; so no real end date.

Here are his trades to start off; many off of July futures; but some off of the Dec futures too.