Opening Comments - Morning Comments - Day ahead of USDA report

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

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

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

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

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

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

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

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

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

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

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670

605-295-3100 (cell)

605-258-2166 (fax)

jeremey.frost@chsinc.com

www.midwestcooperatives.com

http://grainmarketingplans.blogspot.com/

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

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

Good Morning,

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

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

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

Here are the full rundown of estimates according to Reuters.

Corn –

1.       Old crop

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

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

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

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

2.       New crop

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

b.      Acreage historically doesn’t change for now.

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

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

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

f.        Ending stocks should be around 1.8 billion.

Soybeans –

1.       Old crop

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

b.      Crush should be steady.

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

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

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

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

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

Wheat -

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

               

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

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

Neutral Nick Update - Nearly 200k booked profits

It's been a while since we heard from our mock trading character Neutral Nick.  That is both good and bad; good in that he hasn't been over trading and bad that he hasn't done a good job following up and monitoring his positions as much as he should be.

He recently had his May options expire; in which he left most expire worthless; both the ones he owned and had sold.  But he did have some soybean options that left him long; he chose to get out of them on the close on Friday.

Net with all of his May options expiring and his now turned futures positions Nick booked $193,437.50 profit before his costs and commissions.

Under normal full service brokers he would have paid about 10,800 in commissions; discounted online brokers could have been much less.

For his new trades or updates he has plenty of them with it being some time since he has followed up.

For corn his updates are buying back all of his cheap call options sold for nice profits and selling other options to pay for them as well as some more deferred options that fit his market ideas so he did the following basis Friday's close

Bought 70 CN 700 calls
Bought 120 CN 750 calls
Sold 50 CN 600 puts
Sold 50 CU 600 calls
Sold 50 CZ 600 calls

For soybeans he sold 100 of each of the following

July 1500 calls, 1450 puts
Nov 1600 calls, 1200 puts

For wheat he bought back 40 of the July 8.00 calls that he had sold and then sold 50 of each of the following

Sept 7.00 calls
Sept 6.00 puts
Dec 6.00 puts
Dec 7.50 calls

Overall the one thing you notice is he tried to take away some gamma risk and tried to sell more deferred options; his preference is out of the money with about 5 months left.  He also bought back and placed trades that follow his bias


Below are his P L Graphs; this doesn't include the nearly 200k winner he booked above; also keep in mind that he has risk between commodities and between different months.

Following that are each commodity broke down per contract month as he is looking to book consistent winners every time an option expires via continuing to sell time and volatility and that is what the above trades are trying to accomplish.


Keep in mind that he does have plenty of risk in in strategy

Trade Strategy ahead of USDA Report - Allendale Estimates on Balance Sheet

Below is a press release with Allendale’s estimates for the next USDA report.

Things could get very ugly if we see a carryout number close to where Allendale has it pegged at

Don’t be afraid to get some protection ahead of the report that is out May 10^th

My thoughts are that we should see 5.00 area on the board hold as support until the point that the market feels like the corn is actually going to be there; if Allendale is right and we see a 2 billion bushel carryout or higher many have targets for corn starting with a 3 on the board; one that we regularly follow has a 3.50 target…………..as mentioned I am not that bearish and I think we have a long way before knowing that the crop is made but still the risk is out there and we need to keep in mind that USDA is king as to moving the prices; so it is very possible that we see bearish numbers that leave many unsold and un protected

For those that are undersold for new crop and wouldn’t be against selling some at 6.00 on the dec board here is a trade that would protect should things fall out of bed between now and July 4^th;

It is a trade that I wouldn’t hold after July 4^th because of how time value tends to work and depreciate against one

The trade is selling a 6.00 Dec call; which now becomes the max you get for your corn;

Then selling a 5.00 put and using finance of the short call and short 5.00 put to buy a multiple of 4.00 Dec corn puts (aprox 14)

Here is the trade on a graph; it shows that a steady market to slightly up market the trade doesn’t cost you anything by July 4^th; at expiration the max you can get for your corn is 6.00; but likely one pulls off this trade right after or before July 4^th and replaces with a sale or opens the top side back up

If we lose a dollar between now and July 4^th ish the trade should net you over 5,900 or about 1.18 a bushel in protection.

The key with buying multiple puts is not to get stuck in the range where one sold the 1 put and the area where you bought multiple so this trade is designed to exit either right before the June 30^th report or shortly after because the risk in between the strike levels used

The short call should be treated like always when selling covered options; some of you that might mean just making a sale when option expires; others might want to buy back if you can at 25% or less of what you sold for; some might risk it to double what you sell it for.  (keep in mind that the short call gives you margin requirements and possible margin calls and carries unlimited risk)

Here is the mentioned graph

The redline shows the expected what if 64 days from now or July 6^th; the green line is at expiration which I wouldn’t recommend at all for this strategy ;  it is a plan to prevent against a train wreck where we see acres go up or carryout numbers huge like the Allendale press release below

This first screen shot shows 5.80 down to 2.80 red line is July 6th

This next screen shot is for July 6^th; but it shows the market if we go up or stay the same; where the strategy would cost you about 1400; but in a sideways to slightly up market one might hold this trade longer with proper risk management as net cost is 0 at expiration if Dec corn stays between 5.00-6.00 on the futures; presently at 5.30

It also shows the unlimited risk in an up market; but if this is a hedge the cash should be sold and that should off set the hedge loss

To recap

The thoughts are to place above trade; exiting around July 4^th in a down hard market; and holding re-evaluating the trade in a sideways to slightly higher market (probably lifting the short put at that time)

Bottom line is with the risk out there some sort of marketing plan is advised that helps one lock in profits while keeping a little upside open; the above is just one thought out of thousands of possibilities; if you want to discuss any please give me a call.  Some might want to just look at doing something simple like buying the cheap out of the money puts for comfort.

As always keep in mind that futures and options are risky and not suitable for everyone.

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670

605-295-3100 (cell)

605-258-2166 (fax)

jeremey.frost@chsinc.com

www.midwestcooperatives.com

http://grainmarketingplans.blogspot.com/

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

From: Allendale, Inc. [mailto:gmcbride@allendale-inc.com]
Sent: Thursday, May 03, 2012 7:45 AM
To: CO-Pierre, Jeremey Frost
Subject: May 2012 Supply & Demand Estimates

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PRESS RELEASE 5/3/12 For Immediate Release Contact: Rich Nelson 800-551-4626 Allendale, Inc. Allendale's WASDE Estimates May 2012 Corn - USDA yield will be 166.2 due to early plantings. Their production will be 14.645 billion and stocks of 2.072. Allendale assumes 161.36 trend yield adjusted to 163.78 due to early plantings. Our production estimate is 14.432 billion and stocks of 1.934. Argentina production is 20.5 mt (USDA 21.5). Brazil production is 62 mt (USDA 62). Soybeans - Estimates are made using 43.96 for trend yield. New crop US exports are a record 1.525 billion bushels. Argentina production is 43.0 mt (USDA 45.0). Brazil production is 66 mt (USDA 66). 2012/13 stocks are calculated assuming massive 50 mt and 78.5 spring 2013 crops for ARG and BZL. Wheat - A record yield of 46.40 is expected. This surpasses 2010's 46.35. A record winter wheat yield of 48.5 is used. The previous winter wheat record was 1999's 47.7. USDA will use trend yields for other spring and durum.      Supply & Demand, to be RELEASED 7:30 AM CST ON 05/10/12 PRODUCTION           11/12      12/13       Trade  Average     Actual     In million bushels   USDA      Allendale    Range Estimate   05/10/12 Corn                 12358       14645 Soybeans              3056        3207 All Wheat             1999        2271 Other Spring           455         481 Durum                   50          83 Winter                1494        1707  HRW                   780        1060  SRW                   458         428  WW                    256         219 US ENDING STOCKS           USDA       ALDL       USDA     ALDL in million bushels         11/12     11/12       12/13     12/13 US Corn                     801        772                  2072 US Beans                    250        210                   132 US Wheat                    793        775                   916 WORLD ENDING STOCKS         USDA       ALDL       USDA     ALDL in million metric tonnes   11/12     11/12      12/13     12/13 World Corn                122.71    121.30               162.20 World Soybeans             55.52     54.10                60.20 World Wheat               206.27    205.92               206.21   Commodity trading is risky. Allendale, Inc. assumes no liability for the use of any information contained herein. Past financial results are not necessarily indicative of future performance. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. Allendale, Inc 800-551-4626 www.allendale-inc.com   research@allendale-inc.com

opening grain market thoughts 4-30-12

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

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

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

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

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

This a.m. we will have export inspections.

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

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

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

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

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

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

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

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

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

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

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

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

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

Open Grain Market Comments 4-23-12

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

open grain market comments - China buying US Corn again?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Opening Grain Market Comments 4-11-12

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

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

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

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

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

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

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

Thanks

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

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

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

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

S and with the actual highlighted in green

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A recap of trade estimates for tomorrow is.

US corn carryout at 720 million bushels versus 801 last month

Soybean carryout in the US at 245 versus 275 last month

Wheat carryout in US at 790 versus 845 last month

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

Bean carryout in the world at 55.42 versus 57.3 last month

Wheat  carryout in the world at 208.62 versus 209.58 last month

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

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

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

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

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

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

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

Thanks

Opening Comments day ahead of USDA Report

Markets are called mixed to weaker this a.m. behind a mixed overnight session that saw a choppy overnight price action and rather weak outside markets from Friday’s unemployment number which was a disappointment.

In the overnight session corn was unchanged after being up about a nickel, beans where unchanged after being up about 13 cents at one point, KC wheat was up about a penny, MPLS off a couple cents, and CBOT was up 2.  At 9:15 outside markets are weak; but they where weak all night; presently the DOW is off 133 points, crude off about 2.00 a barrel, gold is up 15.00 an ounce, European markets are closed, and the US dollar is back to about unchanged.

Weather has put in a little premium with a lot of cold areas that should slow down planting and potential put some risk back on the table.

The other big thing in the markets besides the weak outside markets is the crop report that is out in the a.m.

Below are the Reuters estimates for the report.  You can see that our risk really has to be to the downside given what happened last year when we didn’t see any changes on the corn balance sheet despite the March stocks report that was below estimates and the fact that all the estimates are for reductions to our carryout numbers versus last month.  I don’t know that ethanol numbers or exports have been all that great to think the USDA curves a bunch off of the numbers they have out there.

TABLE-USDA April stocks/world crop production - RTRS                      05-Apr-2012 11:22
    April 5 (Reuters) - This table is provided to Reuters clients as a convenience before the U.S.D.A's April crop production reports on Tuesday.
    U.S. ending stocks data are quoted in billions of bushels.
    The world production figures are quoted in millions of tonnes.
    The 2011/12 marketing year for wheat began on June 1, 2011, and will end on May 31, 2012. For corn and soybeans, the 2011/12 marketing year began on Sept. 1, 2011, and will end on Aug. 31, 2012.
-------------------------------------------------------------------------------
                   USDA 2011/12 U.S. grain and soybean ending stocks  
  
  
           USDA April       Average of      Range of         USDA March 
             2011/12        analysts'       analysts'          2011/12      
            end-stocks      estimates       estimates         end-stocks    
            estimates                                         estimates     
  
  
Wheat        _____           0.792          0.720-0.825         0.825  
Corn         _____           0.721          0.626-0.812         0.801  
Soybeans     _____           0.246          0.214-0.300         0.275  
 -----------------------------------------------------------------------------
                 USDA 2011/12 global grain and soybean ending stocks  
  
  
           USDA April       Average of      Range of         USDA March  
             2011/12        analysts'       analysts'          2011/12      
            end-stocks      estimates       estimates         end-stocks    
            estimates                                         estimates     
Wheat         ______        208.621      207.000-209.660       209.580 
Corn          ______        122.449      119.000-126.000       124.530
Soybeans      ______         55.417       52.600-58.000         57.300
 -----------------------------------------------------------------------------  

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

One thing that is different then a year ago has been the spread price action for corn; the May – July is very strong while last year that wasn’t the case.  Basis and the spreads are both saying something that they didn’t say last year.  Hopefully it means we go higher from here; but it could easily be other components that one isn’t looking at.

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

Opening Comments 4-5-12 - Strong Export Sales for Corn, Soybeans, and Wheat

Markets are called mixed to better this a.m. behind a choppy mixed overnight session, good export sales, and mixed outside markets.

In the overnight session corn was off a penny on old crop, new crop corn was down 3, beans where up 3 on old crop, new crop beans where off a penny, KC wheat was up 2, MPLS wheat was unchanged, and CBOT wheat was up a penny.  At 9:00 outside markets have European Wheat up about 1%, gold up $18 an ounce, equities weaker with the DOW off 32 points, the US dollar is firmer with the cash index back above 80 at 80.039, and crude is up about 50 cents a barrel.

With the good export sales most calls are better then where the overnight session left off at; but I think we need to be careful for profit taking ahead of the long weekend as there are no markets in tomorrow.  Plus we have a crop report out on Tuesday that will have updated supply and demand numbers; so we could see some position squaring heading into that.  I also will note that the outsides and just the overall money flow feeling has me a little nervous that we don’t quiet see the strength that many would think because of the solid export sales.

One thing is for certain is the fact that it is great to see export sales firmer; shows that the breaks are really supported.  Keep in mind these are the export sales for last week.

Yesterday we had ethanol production numbers out and that trend of lower production has continued; it should be a little concerning and a reason not to get over bulled up.  Also margins for other end users and spreads between corn and other grains like KC wheat have become very tight and could lead to less demand for corn as we go forward or lead to a switching from feeding corn to feeding wheat.  This has been talked about a lot lately because it appears we have a big wheat crop coming on down south as those areas continue to get moisture; it also indicates a lower pro wheat crop making it more competitive into the feed rations with corn.  Look at the KC July wheat versus July corn; it is now under a 30 cent spread after historically being a dollar or more and just before the last USDA report the spread was nearly 70-75 cents.  Bottom line is corn has quickly become a little expensive versus CBOT and KC wheat; or maybe the market is just trying to tell us that wheat is too cheap?

As a reminder no markets tomorrow; they won’t open up again until Sunday night.

Watch outside markets and see if we can get some follow threw off of the good export sales.

I have seen some bids on the west coast start to roll from the May to the July for corn; if this starts happening a lot you could see the May-July corn spread get rather wild.

As for marketing grain keep in mind where this market was just before the last USDA report; very nervous and much lower.  So don’t be afraid to take a little risk off the table when we see rallies like we have recently. 

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

Opening Comments - UGLY Equity Markets - Mixed calls for grains

Markets are called mixed to weaker behind a mixed overnight session and rather weak outside markets.  Weakness in the outsides seems to be coming from yesterdays FED minutes that indicate their will not be a QE3.

In the overnight session corn was up 2 on old crop, new crop corn was down 2, beans where off 5-6 cents, KC wheat was down 8, MPLS wheat was down 4, and CBOT wheat was off 8.  At 9:15 outside markets have European Wheat off about 1 %, Gold is off about 50 an ounce, crude down 1.40, the US dollar is firmer up 300 points on the cash index at 79.79, and the Equity markets are under pressure with the DOW off 140 points.

It looks like we could have a risk off type of day; with the funds massive longs in beans there should be some risk to that market and with them very short wheat we could actually make an argument that we see some short covering at some point; but overall the outsides probably hurt our markets and potentially throw a train wreck to them. 

There was a company out this a.m. that estimated the EU wheat production down 6.3 mmt versus last month due to dry weather in March.

Next week their will be an updated USDA S & D report; the estimates I have seen so far are looking for cuts to our old crop corn and bean balance sheets while they had wheat unchanged.  The market is also looking for much smaller SA crops.  More estimates should be out in the next few days; we need to look for some sort of follow threw from this last bullish report.

Don’t forget that this afternoon we will have our weekly MWC Marketing Hour Round Table meetings; in which we go over charts and various strategies for marketing.

Where do we go from here? Are the highs in for beans? What about corn highs?

Where do our markets go from here?

Are the highs in?  Have we seen the lows for wheat?

One thing I don't know is the answers; but I do find a couple things interesting.  First off beans versus corn; how long can protein and beans win?   One thing that I look at is the two commodities against each other a year ago.  Was corn greatly overvalued or where beans under valued?  or is the price spread we see today in line?

My point is that beans are very near last years highs while corn is a about a dollar and a half away from it's highs.

My main reason for concern is the balance sheet differences.  Corn if I remember right is expected to see a decline from last years balance sheet for the current marketing year.  Estimates are around 800 million bushel carryout versus last years 1.1 billion bushel carryout  (and very similar to last years projection around this time)  Beans on the other hand have a increase over last year

So how much can we put into the new crop story for beans and the small SA crop that is driving beans up.....and really only adding mainly new crop demand.

I guess my point is that in marketing one might want to ask what is overvalued and what is undervalued; hold the undervalued and sell the overvalued.

Eventually all the fear will be built into the bean market and at the very least we should see some correction.  Or perhaps a reversal of some sort.

Overall as you can see i am becoming more bullish old crop corn.  New crop should be another story and maybe that is really what i am missing or is my logical reasoning behind the present price spreads.  Then again maybe our 8.00 corn was just overvalued last year?

One thing is certain the markets feel tighter then they did last year at this time; even though for months the market has been talking about all the product that is sitting in the bins; yet it seems like alot of that product has slowly disappeared.

If the spreads are for real then fundamentally the price of the present corn crop is suppose to take out last year's prices.......isn't it?