Opening Comments 5-9-2013 USDA report preview

Markets are called mixed/choppy this a.m. behind a two sided overnight session.

When the overnight session paused July corn was unchanged as was December corn, KC wheat was up a penny, MPLS wheat was off a penny, CBOT wheat was off 2, old crop soybeans were up 6 cents a bushel, and November soybeans were down a penny a bushel.  Outside markets are also fairly choppy with the US dollar up slightly with the cash index at 81.99, crude is off 50 cents, gold is off 10 bucks an ounce, and equity futures are pointing towards an unchanged start.

We had export sales out this a.m. and tomorrow we will have the May USDA Supply and Demand report.  Otherwise we seem to be in a weather market and one that seems to be controlled more by money flow then anything.   It hasn’t seem to matter if producers or buyers are interested in a given day for some time.

As for export sales kind of a non-event this a.m.  Corn sales were below expectations as well as the needed levels to hit the USDA present projections.  Will they be lowered on Friday?  Old crop wheat sales were also below the needed levels.  Soybeans sales were above needed level and positive for the first time in 3 weeks but nothing great.  Soybean meal sales continue to be positive; but also continue to slow down from the super strong pace we have had.

Last week we had super strong new crop sales for the big three grains; but that wasn’t the case this a.m.  New crop wheat sales came in at 8.3 million bushels; which is less then ½ of last week, corn sales for new crop came in only at 6.7 million bushels which was about ¼ of the previous week, and new crop soybeans sales came in at 14.4 million bushels also about 1/3 to ¼ of last week’s new crop sales.

The big thing that stands out for new crop sales is the fact that wheat is well ahead of where it was a year ago and corn and beans are well behind were they were at a year ago.  If you look at present balance sheet projections or thoughts.  (The actual first new crop USDA balance sheets will be out tomorrow Friday May 10^th)  One would think that we need to increase our corn and soybean exports versus this year or have massive carryout numbers simply based on the increased acres and fact that odds favor a little better yield versus last year’s drought impacted crops.  While our wheat ideas today are that the crop is smaller year over year and thus we will have less to export.  Bottom line is it could mean less wheat business as we go forward and hopefully it means more corn and soybean business as we go forward.

Weather still looks to be neutral for our markets; with the deferred slots still fairly open in the major parts of the corn belt.  Time however keeps going by and field work is slow in the corn belt; much got hit with a small amount of moisture yesterday; maybe not enough to push things back several days but probably enough to slow things down or halt things for a day or maybe two?  Next week’s crop progress report will be very important; but so will the deferred forecasts.

Tomorrow we have USDA report…….below is recap of trade estimates.  Typically I like taking a little risk off ahead of the USDA reports.  Not sure if that is the right move or not; really depends on how comfortable one is in the present marketing plan.  I would point out that there could be some huge risk; very un-likely and I still think we could and should see a weather rally at some point for the row crops. 

But here is the risk that I see and it is in regards to new crop corn primarily and remember corn seems to be king; so that risk could be transferred on to the other grains fairly easily.  The risk is that our new crop carryout number comes in much higher than the 2 billion bushels; maybe add to that a favorable forecast Sunday night along with planting progress better than expected and we could see extreme pressure and how knows how low the funds could drive us.  Now I think it is unlikely that the USDA does that and I think our old crop tightness is for real and that should keep some support for new crop but if we want to look just at the demand side you can make some big arguments that the USDA pencils our new crop corn carryout 200-500 million bushels above the 2 billion. 

For one we seem to have an ethanol blend wall; secondly as mentioned above we are well behind last year’s new crop corn exports; but more than that is we seem to have some talk of big crops in other places in the world.  Can we really just turn on a light switch and gain the exports back because now we need them?  How about feed demand how fast can that actually increase?  Then we have the production side of things; the USDA has had a history of overstating production; while will they not do that once again tomorrow?

If we look at the big picture we need to realize that a decent crop at all can leave us with a 2 billion bushel plus carryout while still needing to increase demand more year over year then we have EVER done in HISTORY.  That is scary and so is the fact that this is a USDA report as the logic they use should tell us as marketers that there is no guaranteed what they will print; right or wrong.  Bottom line is we could have plenty of risk and if you are not comfortable with it maybe do something about it?

What would one do?  That is a big struggle as I don’t really like making sales at present levels; nor do I like spending tons of money to buy the put options.  Perhaps the short dated new crop options are a move but who knows.

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

As mentioned here is the USDA estimates.

The below is coming from the Van Trump Report.

US Ending Stocks 2012/13  May # April USDA # Avg Guess Range of Guesses Corn ??? 0.757 0.749 0.684 - 0.800 Soybeans ??? 0.125 0.123 0.107 - 0.130 Wheat ??? 0.731 0.733 0.720 - 0.747 US Ending Stocks 2013/14 May # Feb Ag Outlook Avg Guess Range of Guesses Corn ??? 2.177  1.993 1.387 - 2.427 Soybeans ??? 0.250 0.236 0.147 - 0.325 Wheat ??? 0.639 0.658 0.486 - 0.800 Global Ending Stocks 2012/13 May # April USDA # Avg Guess Range of Guesses Corn ??? 125.290 125.646 123.500 - 132.100 Soybeans ??? 62.630 62.300 61.111 - 63.000 Wheat ??? 182.260 181.528 178.300 - 183.200 Global Ending Stocks 2013/14 May # Avg Guess Range of Guesses Corn ??? 151.695 130.000 - 168.300 Soybeans ??? 68.991 64.000 - 83.000 Wheat ??? 184.368 175.000 - 195.800 US Wheat Production May # 2012 Totals Avg Guess Range of Guesses All Wheat ??? 2.269 2.062 1.832 - 2.190 All Winter ??? 1.646 1.497 1.359 - 1.604 Hard Red Winter ??? 1.004 0.776 0.676 - 0.875 Soft Red Winter ??? 0.420 0.504 0.473 - 0.636 White Winter ??? 0.222 0.217 0.204 - 0.226 South American Production May # April USDA # Avg Guess Range of Guesses Brazil Corn ??? 74.000 74.708 73.000 - 77.500 Brazil Soy ??? 83.500 82.807 81.500 - 83.500 Argentine Corn ??? 26.500 25.583 24.000 - 26.500 Argentine Soy ??? 51.500 50.714 48.500 - 51.500

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670

Mock Trading - MWC Marketing Hour Round Table

Below are some of the trades that we placed in our mock trading session in this afternoon's MWC Marketing Hour Round Table

For the futures trades we had the following:

Dan bought KC July wheat and Sold MPLS July wheat; risking a nickle with an objective of 20 cents

Dan also bought Dec corn at 5.32; risking 10 cents with an objective of 5.60

Kevin went long a couple KC July wheat contracts with a risk of 7.40

Dan placed an order to buy Nov Soybeans at 12.02; with a dime risk if hit

I placed an order to buy a couple KC July at 7.60; with orders to buy 2 more every dime down to 7.00 bucks; with a risk to 6.90..........scale trading

On the options side of things we did the following

Dan sold the 5.50 Sept corn call and put both; which was a trade that Van Trump had out today

Kevin bought a couple of the 6.70 July corn calls

Jordan sold 5 of the 6.10 July corn puts and 5 of the 6.60 July corn calls

I bought a couple July 6.40 corn calls, sold a couple of the 6.10 corn puts, and sold a couple of the 6.80 corn calls...........with the plan of risking the long calls and short puts to a future close below 6.00 on the July contract

We had a few adjustments from previous trades that we had on; I added to my wheat option trade via selling the 7.00 July put and call both;

We also booked a couple gains and losses

...........not much for pre-report trades..........if we did we probably would have looked at calendar spreads or maybe ratio spreads...........Also like the idea of short dated new crop options..........


Hope to see some more of you next week in Onida

Opening Comments 5-8-2013 - USDA Report Estimates

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

In the overnight session old crop corn was down 2 cents a bushel, new crop corn was down 4-5 cents, KC wheat was off ½ of a cent, MPLS wheat was off ¾ of a penny, CBOT wheat was off ½ of a cent, old crop beans up a nickel, and new crop beans up ¾ of a penny.  Outside markets have the DOW futures pointing to a lower start of about 20 points, gold is up about 17 bucks an ounce, the US dollar is off 370 or so points with the June futures at 81.97, and crude is up about a quarter a barrel.

Not tons of new news out this a.m.; we really are in a weather market and wait and see market.  Weather forecasts at any time could spur additional selling pressure or give us a reason to run up.  Wait and see portion is referring to a couple things; first off wait and see what Friday’s USDA report tells us for the balance sheet projections and thus importance of weather and demand.  But secondly wait and see how important weather is based on crop progress over the next few weeks.  Keep in mind that last year despite our drought going on very early the market didn’t really respond until the middle of June and the USDA didn’t acknowledge anything in terms of yields until the July Supply and Demand report.  Last May and June they had the corn yield pegged at over 160 each month; only for it to end up closer to 120 when everything was said and done.

So we need to wait and see how important or how big of a factor our delayed planting is or will be.  Will we actually lose acres?  The bears and guys trading it seem to think not; while producers and bulls seem to think so.  How about effect on yield?  No clue yet; arguments can be made for both sides.  We do know as I stated yesterday that longer we are behind in planting and more potential and more risk premium should be added at some point for things like a frost scare, yield loss, acre loss, old crop tightness, pollination under a heat dome…..etc.  But many of those things are well down the road and frankly if the crop looks huge come July/August will some of them even matter or be material should they happen in isolated spots?

Speaking of the USDA report out on Friday here are the latest estimates I have seen.  The below is coming from the Van Trump Report.

US Ending Stocks 2012/13  May # April USDA # Avg Guess Range of Guesses Corn ??? 0.757 0.749 0.684 - 0.800 Soybeans ??? 0.125 0.123 0.107 - 0.130 Wheat ??? 0.731 0.733 0.720 - 0.747 US Ending Stocks 2013/14 May # Feb Ag Outlook Avg Guess Range of Guesses Corn ??? 2.177  1.993 1.387 - 2.427 Soybeans ??? 0.250 0.236 0.147 - 0.325 Wheat ??? 0.639 0.658 0.486 - 0.800 Global Ending Stocks 2012/13 May # April USDA # Avg Guess Range of Guesses Corn ??? 125.290 125.646 123.500 - 132.100 Soybeans ??? 62.630 62.300 61.111 - 63.000 Wheat ??? 182.260 181.528 178.300 - 183.200 Global Ending Stocks 2013/14 May # Avg Guess Range of Guesses Corn ??? 151.695 130.000 - 168.300 Soybeans ??? 68.991 64.000 - 83.000 Wheat ??? 184.368 175.000 - 195.800 US Wheat Production May # 2012 Totals Avg Guess Range of Guesses All Wheat ??? 2.269 2.062 1.832 - 2.190 All Winter ??? 1.646 1.497 1.359 - 1.604 Hard Red Winter ??? 1.004 0.776 0.676 - 0.875 Soft Red Winter ??? 0.420 0.504 0.473 - 0.636 White Winter ??? 0.222 0.217 0.204 - 0.226 South American Production May # April USDA # Avg Guess Range of Guesses Brazil Corn ??? 74.000 74.708 73.000 - 77.500 Brazil Soy ??? 83.500 82.807 81.500 - 83.500 Argentine Corn ??? 26.500 25.583 24.000 - 26.500 Argentine Soy ??? 51.500 50.714 48.500 - 51.500

The big thing that stands out to me is the projected guesses for the 2013/14 balance sheet estimates you will notice that both the corn and bean numbers for the 2013/14 carryout are nearly double that of the present carryout.  The bigger question should be are we already trading that type of carryout??………if not how low could prices go?  The other important question is how realistic are those numbers that we get on Friday going to be?  Will the USDA be aggressive and overstate yield potential like they have for the past couple of years?  What about on the flip side will they be overstating demand?

Bottom line is we could get just as many questions as answers on Friday’s report; but it will be what the market trades and should really give us direction as to the importance to some of the factors that we will see as we move forward.  Such as weather and demand.

The other big thing on the report will be wheat production and the world numbers.  The US numbers took a back seat last month because of the massive increase we seen in the world corn carryout numbers.  If you remember the USDA numbers came in a good 100 million bushels less than the average estimate for old crop corn carryout yet we didn’t manage much of a gain because of the increase in world numbers.  The USDA will tell the traders how important our piece of the pie is versus the rest of the world and as we move forward we will need to keep in mind that old saying looking out our back yard.  But now we have to look at both the rest of the United States but also the rest of the world. 

Other news to watch include ethanol numbers out today at 9:30; hopefully we can continue our trend that we have had the past few weeks.  Tomorrow we will have export sales out and the past few weeks have seen beans being negative; it would be nice to see that trend change.

Other headlines I did notice today include China buying more new crop US Soybeans.  South Korea buying more South American corn and Chinese soybean imports down in April.

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

Thanks

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

Opening Grain Market Comments - Choppy Grain Prices - Crop only 12 % planted worst since 1984

Markets are called mixed/better this a.m. behind a choppy overnight session and supportive crop progress data last night.

Corn spend most of the overnight session firmer; but when the overnight session paused it closed up ½ cent on the July contract, while December corn was unchanged, KC wheat was up 3 cents, MPLS wheat was up 4-5 cents, CBOT wheat was up 3, and soybeans were up 6 cents a bushel.  Outside markets have a weaker US dollar with the cash index at 82.10, equity futures are pointing towards a positive start of about 40 points on the DOW, crude is off 40 cents, and gold is down 18 bucks an ounce.

A little disappointing to see corn only mustard an unchanged after the beating it took yesterday along with yesterdays crop progress coming in at only 12% which would be the lowest since 1984.  But I guess we will see how things shake out with the pits re-open here in 15 minutes or so.

As for new news this a.m.; not much to report.  We have a crop that is flirting with losing acres and potentially yield; but we still have some open forecasts that might allow for things to move quickly in a week or two. 

One thing the trade seems to focus on is how fast acres can be covered when given the opportunity.  Just look at your own operation; how many more acres can you do in a day versus 5 years ago?  What about 10 or 20 years ago?  How much more efficient and bigger equipment do you have?

Friday we will have an updated USDA Supply and Demand report; with a first look at 2013/14 carryout levels.  Market is looking for very little changes on the old crop balance sheets; while they are looking for a big year over year increase in the US carryout numbers for corn and soybeans; while they are looking for a decrease in the US wheat carryout year over year.  For the world numbers market is looking for an increase across the board for carryout numbers in comparing this present year versus new crop.

One thing that we have to keep in mind is what happens in some of these other countries.  I lot of guys think that if we have more corn we will export more corn; but I don’t know how easy it will be to regain some of that business that we have lost.  It’s not like our competing countries are just going to say go back to the United States we don’t want the export business. 

The export card is also a reason to not get over bulled up on wheat; despite the horrible crop down south and locally.  We still need to export some; keep in mind that for wheat we are typically exporting around half of what we grow.  On the positive side we could easily see some hiccups around the world in the wheat production.  I am hearing some concern in regards to Australia who is presently seeding wheat.

I haven’t seen much for changes in the forecasts that pushed us lower yesterday; but they do get updated numerous times a day; so keep your eye open.  From what I hear one more major system in the heart of the corn belt could push things back close to memorial day for many.  Bottom line is in regards to weather we should expect volatile choppy markets.  One day they can be selling us off because rain makes grain and the next they might run us up because things are so far behind.  Just depends what side of the half empty glass “big money” sees on a given day. 

The one thing that the late planting is opening up is potential fireworks later.  First off late planting opens the door to potential early freeze production and quality loss.  It opens the door to early snow storms that don’t allow for harvest to be complete in Oct/Nov.  It opens the door to high potential of warm/hot and dry weather during pollination.  It also opens the door for old crop tightness; in the past couple of years we seem to have had some new crop early enough that we didn’t run out of the old crop corn.  How tight could things get come August/September/October in some areas? 

Bottom line is the market could look at the present weather and sell things off or they could decide to look at it and run things up; not sure which way they will look at it on a given day.  But the present weather does open up some other cards that potentially give us fireworks later.  That doesn’t mean to get too bulled up; but just realize that things tend to get over done in our markets.  We go up and down more than we probably should on many days.  Stay disciplined but get yourself comfortable and be pro-active as we really don’t know what the next card that mother nature or “big money” will play.  If we did these markets wouldn’t be called future markets.

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

Closing Market Comments - only 12% corn planted - grain prices down hard!

Markets closed down hard today behind weather forecasts that appear to have a planting window open for much of the corn belt.

Nearby corn was off 25 cents a bushel, December corn was down 15 cents, KC wheat was off 21 cents, MPLS wheat was down 13 cent, July beans were off 18 cents, November soybeans were down 14 cents, CBOT wheat was off 18, equity markets had the DOW close of 5 points, crude up 20 cents, gold was up 5 bucks, and the US dollar up a couple hundred at 82.375 on the June contract.

Just a horrible day for the grains; one that started with a gap down when the markets opened up Sunday night.  The selling seem to accelerate once we seen the poor export shipments that were out at 10.  Hard to find much positive as most of the markets closed near the lows of the day; December corn did manage to close 6 cents off of its lows; but nothing impressive.  Hopefully over done; but I guess only time will really tell on that.

This afternoon we did have a crop progress report that came in a little on the light side and perhaps that will give a little support to the market; but it really feels like weather forecast updates will be more important then what we did or didn’t get done last week.  Should they be?  I guess that is debatable; as it is early May and we are very far behind planting in the corn belt.  Some areas are needing the deferred forecasts to be dry or they might end up going to something else or even some prevent planning.  But today that wasn’t the focus; nor was the focus on the yield potential that can be lost with late planted corn.  The focus today was that we will get in the field and that the American Farmer will get things done.

As mentioned this afternoons crop progress should be considered friendly and it might make forecasts that much more important.  Corn planting came in at 12%; which was on the low end of most of the estimates I had seen.  I had seen a range of 10-20%; with most in the 12-15%.  But I don’t know that it is enough by itself to take us higher.  It could and in my opinion should slow down the bleeding and make forecasts that much more important; but it isn’t a game changer.

Last year planting was a 69% and the 5 year average was 47%; so coming in at only 12% really tells us this crop is behind and that there is a potential train wreck but that wreck won’t happen until the future and right now the future forecasts look to be open.

Soybean planting came in at 2% and spring wheat planting came in at 23% which is about ½ of the average and well behind last year’s 82%.  Winter wheat conditions also seen another point drop in the Good/Excellent slot. 

The winter wheat condition and soybean/spring wheat planting are not really a surprise and likely not a market mover either.

I did see a comment this afternoon that ideas are planting progress will be 35-40% by next week Monday and they also commented that the potential is still there to have 75% of the corn planted by May 20^th.  I don’t think that I agree with that; but it doesn’t matter what I think nor what others that might agree with me think.  It is trade and “big money” opinions that matter as they are what move our markets. 

On Friday we will have USDA report out; as mentioned in comments this a.m. small changes are expected on the old crop balance sheets.  While the trade is looking for a year over year decrease for wheat carryout; while they are looking for both the corn and soybean carryout numbers to nearly double.  They are expecting major increases in the world carryout numbers for all three of the major grains.

The question that we really need to know as we go forward is what has this market already priced in?  What will it take to get a rally?  Perhaps we need to consider the fact that some late planting and loss of corn acres might be needed to hold present price levels?

I don’t know the answer to those questions; but I do know that the nearly 2 billion bushel carryout was a possibility about a year ago before the drought hit and we managed to hold the 5.00 level on Dec futures.  I do know that we have talked about a 2 billion bushel carryout for the 2013/14 year for some time now and we have still held the 5.00 Dec corn futures level.  But I don’t know that we can still hold it if that is how things actually shake out.  I don’t know if money flow will start coming in to our markets if we get too cheap or if money flow might decide to get short our markets and try to find panic selling. 

For us to get a rally we need to get the funds interesting in commodities again; they haven’t had the best experience the past couple years.  But if we want to have bull markets we need to have money flowing in; we need “Big Money” on our side; that means we probably need a headline.  Can too much rain and moisture be that headline?  Maybe for a short time; but I don’t know that many are going to bet that the farmer who as advanced 10 fold in technology over the past few years won’t be able to get the crop planted.  We need to realize that we might not rally until after the fact; when the market realizes that we didn’t in fact get it all in?  So what else could help us rally?  Perhaps dry and hot weather sometime this summer can help?

But what do we really need for a rally to last?  Demand; we need to find more demand.  Be it demand that we gain from others misfortunes, (perhaps like some countries gained from our misfortunes last year)demand that comes from policy change, demand that comes from better economics of the end users, or demand that comes from some other black swan event.  This year if we do happen to get all of the corn in the ground and we end up with anything close to trend line yield.  We will need to find more demand year over year than ever in history.  That shouldn’t be easy and that is one reason why the pro’s, funds, spec’s, and even producers should be considering sell some of the bounces when we have them.

What is hard is the fact that the market doesn’t exactly tell you what it is going to do. 

I seen one well know advisors that had clients pull their short hedges last week Monday; which was the limit up day.  Now depending on when you got his advice you potentially lifted your short hedges in the 5.40-5.70 range; I don’t know exactly when he put his advice out nor know how quick guys could have followed it.  I did notice today that via a stop he has an order in to re-hedge December corn at 5.32 if I remember correctly. 

So two things; that means that potentially he is taking as much as a 38 cent hickey off of his sales.  That should for one show guys that this marketing thing isn’t easy.  Secondly it shows that perhaps using the right tool is important.  Third it seems to be re-active; not pro-active.  Last it shows how quickly things have changed in just a few days.

It doesn’t tell us how quickly things could change again the other way in a few more days should mother nature not cooperate with everyone.  Heck myself personally I am praying for some rain in our area; we could use it.

Bottom line whether you are now wishing you would have sold some last week or are contempt waiting out the storm; have a plan in place that makes you comfortable.  Don’t be super re-active but rather pro-active.  If you want some help with a marketing plan please feel free to give us a call.

As we go forward watch weather forecasts, demand news (haven’t heard a lot about it lately but the bird flu in China hasn’t helped out the bean demand and has some traders on edge), and money flow.

As for locally I keep hearing more talk of winter wheat acres not going to make it.  If you have had your wheat zeroed out and have a contract with us for new crop; please give us a call sooner than later and we can give you options.  I do worry a little bit about local basis because it doesn’t look like we will have much; but we also need to get some demand and that we really don’t have.

The bird food market remains slow.  Orders are very good but otherwise things are slow.  Some are thinking that acres are increasing via the failed winter wheat and the delayed planting.  I don’t know that it is a material change in my opinion; at least not yet.  It seems like most guys in our area are looking to go in with spring wheat into the failed winter wheat because of rotation.


here is link to CHS Hedging Crop Progress Update

http://chshedging.com/UserFiles/Documents/2013/Research/USDA%20Crop%20Progress/Crop%20Progressfirst%20050613.pdff

Opening Comments 5-6-2013 down hard markets

The grain markets are called weaker this a.m. behind a very weak overnight session.  The weakness in the overnight session coming via weather forecasts that show below normal precipitation in the deferred forecasts.

In the overnight session corn ended down 17-19 cents, KC wheat was off 12 cents, MPLS wheat was down 7 cents a bushel, CBOT wheat was off 12-13 cents, and soybeans were off 3-9 cents a bushel.  Outside markets are choppy with the US dollar near unchanged with the cash index at 82.18, crude is down 30 cents a barrel, equity futures are pointing towards a choppy slightly firmer opening, and gold is up 7 bucks an ounce.

The main thing for the weakness seems to be the 6-10 and 8-14 day forecast that have below normal precipitation for the heart of the corn belt.  Many of the bulls will argue that we are very far behind and those deferred forecasts tend to change all the time.  They are correct you can’t exactly write in stone what a forecast is out a week.  Heck you can’t exactly write in stone a forecast for a few hours from now.

But what some in the market are looking at is the window is opening.  This afternoon we will have a planting progress update and I have seen estimates of 10-20 % corn planted with most in the 12-15% range.  The other thing that the bulls are pointing too is the fact that much of the corn belt just got hit with moisture and could get hit with a little more over the next few days. 

Bottom line is when we look at weather we can see both positive and negative; but the focus today or at least this a.m. is for the deferred forecasts that indicate a planting window will happen for much of the corn belt and at the end of the day we need moisture to make grain and that has happened for much of the area to the east of us.  Hopefully some of that moisture will spill over to our area in the coming weeks.

One thing that the late start for planting should do is give some support to corn in the summer.  The past couple of years we have had tight balance sheets that ended up getting “saved” via the early new crop.  Long way to tell how the crop develops but as it sit’s right now we have a later harvest then a year ago.  So the question becomes will all of the areas have enough corn in that Aug-early October time slot?

This a.m. we will have export shipments out and this afternoon brings the crop progress/condition report.  Otherwise we should really watch the forecasts; if the deferred forecasts indicate a halt to planting you cannot rule out a complete turnaround in our markets. But longer term we need to realize that if the present weather doesn’t take off some yield or acres our production prospects indicate that we will need to find demand.  Perhaps more than has ever been done on a year over year basis.

Friday will give us our first look at the new crop balance sheets as well as updates on the old crop balance sheets.  Perhaps this is also were some of the weakness is coming from.

Average estimates that I have seen call for 2013/2014 corn carryout of a hair over 2 billion bushels versus the present 757 million bushels that we have forecasted for this month. 

13/14 wheat carryout estimate via the trade is at 657 million bushels versus the 731 we presently have in this marketing year.

Soybeans are pegged at 239 million bushel carryout next year versus the present 125 million that we have in this marketing year. 

Overall not much changes are forecasted for the old crop balance sheets for any of the three major grains.  While world supplies are also pegged bigger for all three of the grains next year.

Now to decrease the carryout’s one of two things need to happen.  We need to increase demand or decrease supply.  We also need to keep in mind that the USDA has a history of automatically doing one or the other to help balance.  Keep in mind that despite our severe drought last year the USDA only printed so tight of balance sheets.  It will be the markets job to find demand or decrease supply. 

Softer prices in theory help demand and they also lead to decreased supply; but on the supply side of things look at your own operations.  Just because we have softer prices do you try to now raise less?  I don’t know of many that do or choose not to plant because prices are soft.  Mother nature seems to control the supply side of the equation; at least in the United States. 

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

Charts posted - KC Wheat, Corn, Soybeans

here are some charts

Opening Grain Market Comments 5-3-2013

Markets are called mixed on a mixed choppy overnight session.

When the overnight session paused July corn was up a penny a bushel, new crop December corn was off a penny, KC wheat was up 2, MPLS wheat was up 4, CBOT wheat was up 5, and soybeans were 5-7 higher.  Outside markets have crude up about a buck, gold back to about unchanged, the US dollar is up a little with the cash index at 82.351, and stock futures are pointing to a 120 point positive start in the DOW.

Looks like the stock market strength is coming from this a.m.’s employment numbers as the jobless rate dropped slightly.

We also had Stat’s Canada numbers out this a.m. and both Canola and Wheat came in below trade estimates. 

Yesterday the wheat tour concluded and it came in above what most of the bulls were looking for.  Production was at 313 million bushels for Kansas versus 382 last year.  Yield was 41.1; but harvest percentage based on the March planting report would equate to about 82 %; the lowest since 1996.  If you use the yield of 36 like some in the industry are it would drop production down to about 274 million bushels.  I guess we will have to wait until the combines roll; but bottom line is the crop report probably just opened up more debate on the crop size down south.

We did see overnight lows in the upper 20’s to lower 30’s in various parts of the HRW belt both yesterday a.m. and this morning.  Keep in mind that isn’t the area that has all of the good wheat; but it is also supportive.

Weather in general seems to be a little mixed for the corn market.  Plenty of spots are getting or have got some moisture the past day or two; but the some of the deferred forecasts open up a little bit. Bottom line on weather is Sunday nights forecast likely determine whether this week’s strength holds, gains, or takes a step back.  We will have a couple days without trading so what the forecasts look like come Sunday night should really determine what our next move is.  Keep in mind that we might have the added pressure of rain makes grain at any time.  Monday we will have crop progress as well; which will show us well behind; but did some work get done in the past week before the corn belt got its present system?

Some areas are getting very behind in planting and this could make this planting delays a major event but keep in my that our present new crop balance sheet says we need to increase demand year over year or not have the type of supply that has been thrown out there.  Losing a few acres won’t kill our new crop balance sheet for corn.  Whether we end up with yields of 120-150-170 is what is going to make or break our corn market.  Losing a couple million acres just helps us keep that low price estimate that some advisors have out there should our yield end up in the 150-170 range.

Even though there is some debate as to how big the wheat crop is the bottom line we need to remember is that the headline from the crop tour was a bigger then expected crop.  It could lead to some of the bulls squaring up or looking for a better spot.

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

closing grain market comments - wheat tour results

Markets closed firmer today as spreads firmed up and old crop tightness was back in the headlines.

Corn lead the charge up with old crop corn up 15 cents a bushel, new crop follow up 8-9 cents, KC wheat was 9 cents higher, MPLS wheat was a dime higher, old crop soybeans were off a penny, new crop beans were down a nickel, CBOT wheat was up 8, equities bounced with the DOW up 131 points, the US dollar was very strong up 755 at 82.239 on the cash index, gold was up about 20 bucks an ounce, and crude was up 3 bucks a barrel. 

Not a bad day for the grains; one that actually seen the May corn contract fill the gap it had left after the March stocks report that had sent our markets into shock.  Hopefully that means that the 7.00 area will be a target for the July futures once the May goes off of the board.  I haven’t personally had much for calls for corn; but I am hearing of some basis levels firming up in other areas.  I think that leads us to a firmer basis; but maybe not today because most of the ethanol plants in South Dakota have very good May/June coverage.  They need to buy some of the summer months; but they can’t sell ethanol and make it work out there either.  So most plants are in a catch 22; they are full nearby; but need to buy nearly all of their July/August/September corn yet; but can’t because they can’t sell ethanol any place close to today’s ethanol numbers.

The ethanol futures market today closed at 2.71 on the May; which I believe expired today.  The June Contract was at 2.52, the July at 2.43, August 2.34, September 2.20, October 2.06, November 2.00, and December 1.97.  I am no expert when it comes to ethanol; but I can understand why an ethanol plant would be hesitant owning some of the deferred slot corn as on a percentage basis the ethanol inverse is basically as much as our corn inverse.  The May-Dec corn inverse is out to nearly a buck and a half a bushel.

Bottom line is basis should be very supportive; but some ethanol plants will have a hard time paying the same price or a premium for August/September corn over today’s values when the product they sell is a major discount.  Hopefully what happens is that the deferred markets come up to meet where the nearby is at; for both the ethanol and corn market.  Keep in mind that if that happens basis might struggle out in the summer months; or not get to the big over numbers like it did last year.

At the end of the day one has to be very friendly basis and as each day that goes by without much corn in the ground the chances of ethanol plants needing corn for late September and early October grows.  Keep in mind last year basis was hot; but the local ethanol plants were saved via an early corn harvest.  A late corn harvest this year won’t save the day for them.  Plus nearby margins have improved enough that some plants might be able to afford to lose some in the later months; versus shutting the doors and waiting for the new crop.

This a.m. we did have export sales out; good for new crop for all three of the grains.  But old crop was so-so with the only positive highlight being we continue to sell bean meal despite the fact that we are already over what the USDA has us pegged at. That should be considered friendly and lend support to our crush market.  Perhaps we have stopped exporting the beans because we simply don’t have them? 

One thing to keep in mind on beans is there is a lot of talk of imported beans coming over here and new crop ideas are that we are increasing the acres.   So some advisors are talking about the possibility of sub 10.00 new crop beans.  I am not in that camp; but we do have to realize that high prices cure high prices.  South America has done a great job of increasing their supply and we have the POTENTIAL to have a record crop in the US; plus questions have shown up on the China demand because of economic data as well as the bird flu.  I don’t want to jump in the bear camp; but I am not afraid to practice a little risk management either.  If you are uncomfortable on the present volatile ride perhaps use some options to help mellow the ride out a little bit.

The other news out this afternoon was the wheat tour results.  The crop sizes in NE and OK down from last year; but the yield in Kansas wasn’t down nearly as much as some had thought.  Yield was pegged at 41.1 in Kansas versus 42.3 on the 5 year average and production was pegged at 313 million bushels versus 382 last year.  Smaller but not really what the bull’s were looking for.  One thing that many on the tour mentioned was the yields they gave were potential; meaning mother nature could change things a little bit.  Plus much of the crop is early so their measuring method likely lead to overstated yields.  Many areas failed to quantify how much frost damage was done.  In my opinion I think we see a smaller crop once the combines roll; but for marketing and risk management we need to realize that we will have a huge carry over going into this crop.  We will need solid demand or a wreck in one or two of the other countries that we compete with for exports.  Our crop failure by itself likely isn’t enough to warrant long term prices substanitly higher then we presently are.  We will need money flow or the funds to get interested and we will need some demand. 

The birdseed market was a little quieter today then the past couple.  Many buyers seem to have nearby needs covered; but I have also heard that orders and business has really picked up lately.

Winter wheat and spring wheat basis is a little defensive as mills just don’t need anything nearby and we are not exporting much.  Producers focusing on planting or trying to plant is keep basis supportive for wheat and the birdseed markets but not enough for us to see tons of strength either.

Don’t forget we are still offering free delayed price for most old crop grain.

Also hearing many are replanting some of the failed winter wheat to spring wheat.  Keep in mind that at times spring wheat buyers can get rather picky on WOCL; more than the winter wheat buyers.

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

Thanks

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

Opening Comments 5-2-2013

Markets are called better this a.m. behind an overnight session that saw a small bounce.

Corn was up 4-7 cents in the overnight session, KC wheat was up 4, MPLS wheat was up 5, CBOT wheat was up 3 cents a bushel, and Soybeans were up 3-6 cents a bushel.  Outside markets have a very strong US Dollar with the Cash index back above 82.05, crude is up about 40 cents a barrel, Gold is up about 20 bucks an ounce, and stock market futures are pointing to an up 40-50 point start for the DOW.

First thing that sticks out and has for a while is the price action of the grains and the price action of the US dollar.  Yesterday the US dollar was down which means that our commodities would be cheaper for other countries thus in theory our grains should have seen some support.  This a.m. the dollar is up strong which means our product should be more expensive when looking to export it and thus that should spill over a little weakness to our grains.  But that correlation hasn’t been very good for some time.  It is something however that we need to keep in mind should a risk off global event happen the US dollar is still likely the best of the worst and a stronger US dollar won’t help out our demand.

The other thing that stood out this a.m. is the numerous pictures of snow in parts of Iowa/MN; seen a couple pictures of what looked like a good foot of snow.  Overall moisture might be a hair less than the high side of some of the predictions but it does look like things in many areas east of us will or have come to a standstill.  The forecasts as we go forward will continue to be very important.  Optimal planting date for many that got hit with the recent moisture is the middle part of May. 

This a.m. we did have export sales out and they were overall good but that was due to new crop sales.  Soybeans actually had another net old crop cancellations or negative number again this week (-4 million bushels)…..but the new crop sales were huge at 49.3 million bushels. 

Corn came in at 13 million just slightly above what we need to meet the old crop USDA balance sheet projections.  New crop was very strong at 25.8 million bushels.

Keep in mind that even though both corn and beans had very strong new crop sales they are still behind last years at this time.

Wheat sales were 18.3 million for new crop which puts their new crop commitments at 127.6 million bushels versus 68.2 million last year at this time.  Old crop wheat sales came in at 8.1 million bushels just below what we need on a per week basis to meet present USDA projections.

Soybean meal sales remain strong; off from the last couple of weeks but still at 93.3 k tones leaving us needing to cancel about 8.2 each week to not go over the USDA estimate.

The wheat tour had a day 2 yield estimate of 37.1 bu down from 43.7 from last year on the same leg of the tour.  The tour has OK at just 25.5 bu/acre versus 36 last year and a crop size of 85 million versus 155 million last year.  Day 1 had the yield just slightly below last year.  Look for the areas looked at today to continue the down trend in yield.  The one thing that many on the tour have said is they are using what the yield potential is and I did see a tweet that mentioned their method is likely to overstate yields because of where the crop is at.  Bottom line is we are not getting quiet as bullish info from the tour as we would have liked.  Perhaps it will come today?  Or perhaps things are still up in the air a little bit based on what mother nature does over the next few days/weeks ahead?  The other possibility is that we likely won’t have good info or accurate info until the combines roll.  Harvest rally set up this year?  Could happen easily if we see a scare for the row crops around the same time.

As we go forward over the next couple of days we need to watch tour results and weather.  Weather likely being the thing that could easily move our markets.

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