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

Markets closed mixed today in a choppy rather volatile session.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Here are the latest updates for estimates.

Average Trade Guesses

Acreage

                                             

                                          USDA Estimates

                                         February

               Average      Range         2012       2011

Corn           94.658      93.7-95.7       94.0      91.921

Soybeans       75.429    74.495-76.676     75.0      74.976

All Wheat      57.551      56.0-58.3       58.0      54.409

Spring Wheat   13.35     11.895-14.5       n/a       12.394

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

             U.S. March 1 Inventory Forecasts

2011      Average     Range          Previous USDA

                                March 1, 2011  Dec. 1, 2011

Corn       6.160   5.925-6.400      6.523       9.642

Soybeans   1.371   1.270-1.467      1.249       2.366

Wheat      1.250   1.181-1.400      1.425       1.656

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

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

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

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

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

Thanks

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

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

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

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

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

TRADE ESTIMATES FOR USDA MARCH 30 REPORTS

                         Corn    Soybean  All     Winter  Spring  Durum  

                                          Wheat   Wheat   Other            

Average trade estimate  94.720   75.393  57.422  41.963  13.313   2.223  

March 1 stocks:            Wheat      Corn       Soybeans

Average trade              1.223      6.150      1.387          

Source: Reuters       

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

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

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

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

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

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

Thanks

Opening Grain Market Comments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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?

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

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

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

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

Here are the latest estimates for Friday’s report.

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

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

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

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

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

USDA report day........Limit up here we come???

Markets are called sharply higher beans, wheat, and old crop corn behind a bullish USDA report.

Here is the report recap.

USDA NUMBERS
Planted Acreage Estimates (in millions of acres)
	USDA #s	Low Guess	Average Guess	High Guess	USDA Outlook	USDA Last Year
Corn	95.86	93.6	94.75	95.6	94.0	91.921
Soybeans	73.90	74.0	75.45	76.7	75.0	74.976
All Wheat	55.9	55.5	57.422	58.2	58.0	54.409
Winter	41.7	41.5	41.963	42.6	N/A	40.646
Spring	11.976	12.0	13.30	14.5	N/A	12.394
Durham	2.23	1.4	2.30	2.5	N/A	1.369

USDA NUMBERS
US Quarterly Grain Stocks as of March 1st (in billions of bushels)
	USDA #s	Low Guess	Average Guess	High Guess	USDA 3/1/11	USDA 12/1/11
Corn	6.01	5.925	6.150	6.288	6.523	9.642
Soybeans	1.37	1.270	1.387	1.585	1.249	2.366
Wheat	1.20	1.181	1.223	1.251	1.425	1.656

The above has what I call bullish numbers highlighted in green and bearish numbers in red.  You can see that one of the major headlines is corn acres and that is bearish versus last year as well as the estimate.  But the old crop quarterly stocks number probably more than off set’s the acreage and it could cause more diversion between the two also. 

The spring wheat acre number is very bullish on surface; but I do think we need to remember what happened on last year’s small crop; it ended up destroying demand.  We can’t afford a small crop with the low acres; but we also need to find a way to add some demand.  The birdseed sunflower market is a good example of what can happen; last year we had one of the smallest crops ever; but we also killed demand so much that today’s report shows sunflower stocks ahead of a year ago at this time.   Granted we almost ran out of sunflowers last year; but the fact that we haven’t exactly ran sunflower prices up should tell us too high of prices don’t help demand.

Bottom line even though this report is friendly for wheat we still need to add some demand; because if we just cut supply there is no gtd that a long term rally is sustainable. 

The one thing this report should do a little bit is fuel a little acre war debate; if you plug in the latest USDA demand projections with the bean acres you end up with a carry out that is in the red.  The report however doesn’t tell us how many acres have switched the past month.

I did notice a major buyer already up their spring wheat basis bids for new crop today.  That is one positive.

The lower corn stocks number also brings back into play possible needed price rationing and the China card.  What could happen to our stocks if China comes back in to buy; keep in mind their corn has been $10 or so; and with our price levels a couple of days ago they could buy our corn for their domestic market and make around $70 a ton from what I was told.

Overall this report should be took as bullish; but don’t forget to use proper risk management.   (Don’t be afraid to sell a little bounce) Keep in mind the price action we have seen the past couple of weeks; nothing fundamentally really changed it was simply money flow and with the funds at or near record soybean length we have be watch out for a turn in money flow.  After all eventually everything runs out of buyers or runs out of sellers as we near extremes. 

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.

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.