Markets closed sharply higher today for most of the grains; as dry hot weather in the south and wet cool rainy weather in the North helped propel wheat prices firmer. Crude up over 5.00 a barrel didn’t hurt either.
Corn was up 21 cents on the old crop, Dec corn was up 17 cents, KC wheat was up 41 cents, MPLS wheat was up 41, CBOT wheat was up 31 cents, soybeans where up 9-11 cents, crude up a little over 5.00 a barrel, crush sunflowers up 15 cents a cwt, equity markets where firmer with the DOW up 46 points, and the US dollar is weaker with the cash dollar index down 180 at 74.661.
Overall a good/great day for most of the commodities; but was today just a dead cat bounce ahead of further losses in the days, weeks, and months to come? Only time will tell but many of the commentaries I read/listen to indicate that it might be just that a selling opportunity; today’s crop progress report was a little of a surprise with the corn planting ahead of what most had anticipated it at? It should also be noted that despite the nice gains seen today our grains and the outside markets that seen some strength are any where close to where they where versus last week’s highs; so technically a bounce like today (1/4 to ½ ) of what was lost last week is usually only considered a natural correction.
We did have export inspections out this week and we continued the pace that we have the past few weeks in that wheat met or exceeded their per week sales numbers needed to meet current USDA projections while corn and beans both failed to meet their needed numbers. Wheat came in at 34.6 million bushels, corn was at 27.8 million bushels (15 million or so off of what is needed), and beans came in at 6 million bushels (also about ½ of what is needed on a per week basis to meet current USDA projections).
This afternoon we had the crop progress/conditions report out; corn planted came in at 40% versus 13% last week, an average of 59%, and expectations of 30-35%. For more info on the crop progress report please see Country Hedging Link at http://www.countryhedging.com/media/Research/Archive/2011_05_09Crop Progress5-9-2011.pdf
Later this week we will have one big news item out for the grains and that will be the updated S & D tables; they will also have their first 2011-2012 balance sheets out. When you look at the ranges of estimates you can see why we have been a little volatile as of late. (Many unknowns and uncertainties as see via wide ranges).
Estimates are shown in the table below
Carryout in million bushels | |||
2010-2011 | Average | Range | Last Month |
Corn | 665 | 565-700 | 675 |
Soybeans | 153 | 140-180 | 140 |
Wheat | 844 | 825-868 | 839 |
Carryout in million bushels | |||
2011-2012 | Average | Range | Last Month |
Corn | 811 | 575-1,025 | n/a |
Soybeans | 176 | 122-250 | n/a |
Wheat | 674 | 432-800 | n/a |
The way I look at the above is that the market is basically looking for a decrease on wheat stocks year over year; undefined on soybeans, and mixed on corn but slightly more looking for an increase year over year. I think big risk is what the market isn’t looking for happening and that to me is wheat. If the wheat projected carryout comes in above the average trade estimate which would basically say we end up producing and using the same amount of wheat; if that happens and no one is looking for it to happen it becomes a big price risk especially given the huge volatility we have seen as late; I can’t count how many 50 cent moves in 2-3 days that wheat has had over the past month.
New crop corn also could come under some pressure if we see the billion or so bushel carryout as a billion bushels is thought to be a magically number to the markets. If we get the crop in the ground while taking away a threat that next year’s ending stocks will be as tight as this years carryout; if not tighter then the new crop corn could see tremendous downside pressure at least in the short term. Weather likely keeps premium in these markets no matter what the report says and fund money flow direction also likely keeps the markets volatile; but the report coming in negative, weather breaking, and the funds continuing their sell off’s that started last week is a possibility and a reason to practice good solid risk management.
If we do see something solid change from a fundamental standpoint and it happens at a time when the markets are talking deflation or money outflow our risk is simply huge; technically many have mentioned the fact that the volatility we have seen lately is usually around market tops. Bottom line is one probably should be ready to pull the trigger on profitable sales with very little notice.
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