6-11-2012 Mid Day Comments from Country Hedging's Christopher Steinhoff

Below are 6-11-2012 Mid Day Comments from Country Hedging's Christopher Steinhoff

Spain banks get a bailout, but do not know what that really means for their unemployment??? DJIA is 37 points lower..US$ is slightly weaker…Crude oil is  90 cents lower…see CME announcement below

Corn----old crop was higher and new crop was down a couple, the BOOM pit opens at 930 and selling shows up. Must be trading radar as apparently the last system for a week moves into ILL. This system looks to be the last for a week to 10 days and keep hearing that parts of the ECB are not looking good and “burning up”. Well we need a yield larger than ever before to solve our corn balance sheet issue, can we get it? I am not ready to say no but it appears it may become more difficult as it seems today’s hybrids like it alittle too dry than a little too wet. USDA is out tomorrow and they may not change the corn balance sheet much as an early harvest will be in this old crop marketing year. Many expecting corn conditions to decline this afternoon. Export inspections of 17mbis incredibly disappointing as 33mb is needed weekly to achieve the USDA estimate, so maybe it is a good thing China bought some old crop otherwise what would our exports be? WCB looks to be in pretty good shape except parts of NE and KS are dry. US farmer hauls DP in some areas as “free” is what they like. A few are doing some pricing. $5.00 cash may be a price where they begin to sell some new crop, but time will tell on that. Spreads are firm as CN gains a nickel on everything else. We will begin the transition from old crop to new crop at some point so manage your cash and futures positions!!!!!!  Z/H is an 11 ¾ carry. Movement is slow enough basis remains firm. Could be some pre report positioning.

Soyabeans----same weather for beans but beans have time to be helped. Many expect the USDA to tighten old crop  carryout tomorrow to sub 200mb. Supplies seem tight as we keep shipping beans and crushing beans. Export inspection were 14.2mb, well above the  11 mb needed weekly. Looks like there may be some spreading of buying beans and selling corn as the SX:CZ is 2.48:1 and some believe it could go to 3:1. Farmer selling is light. Many still believe SA will run out of shippable soybeans sooner than later---but maybe their farmers are a lot like the US farmers who ALWAYS have more at home than they tell us. Here too the WCB seems to look better than the southern or ECB, but it is only June 11 and we have plenty of time. Biggest question is how many acres got planted? 74? 72? Or 76? Big USDA report is on June 29 on acres and stocks. Could be some pre report positioning.

Wheat----firmest for the first few hours this morning, why? Not following corn, not trading HRW harvest as yield reports definitely have a shot at a 400mb Kansas crop. Do we have a lot of pent up demand? Doesn’t really look like it. First weekly export inspections of the new marketing year were 21.5mb. Most DNS areas look very good as even a few of the dry areas actually got rain this weekend. Specs are buyers as we bounce out of last week’s lows. US spring wheat farmer is quiet and we are getting to where the winter wheat farmer will seed double crop beans if he has the moisture to do it.

Overall pretty quiet in the world as Egypt may begin to tender again. World and US have plenty of wheat!

Floor Opens at 7:20 a.m. CT for CBOT Grains and Oilseeds Tomorrow--June 12, 2012

As previously announced, pending CFTC review, floor trading for CBOT Grain and Oilseed futures and options will open at 7:20 a.m. CT on Tuesday, June 12 in advance of the release of two major USDA reports: Crop Production and World Agricultural Supply and Demand Estimates. Note that the current floor close (1:15 p.m. CT) will still be in effect on this date.

Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

www.countryhedging.com

Overnight Highlights from Country Hedging's Tregg Cronin 6-12-2012 USDA Report day!

Below are Overnight Highlights from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.101 at 82.414; NYMEX-WTI down $0.19 at $82.53; Brent Crude down $0.43 at $97.57; Heating Oil up $0.0058 at $2.6415; Livestock markets are mostly firmer; Gold down $5.70 at $1589.80; Copper down $0.0135 at $3.3315; The Yen is weaker but all other major commodities are firmer; Cocoa, Milk and Cotton are all firmer; S&P’s are up 3.50 at 1310.50, Dow futures are up 49.00 at 12,431.00 and Treasuries are softer.

Asian stocks were weaker while European indices are stabilizing this morning following yesterday’s meltdown in the US.  Heading into the 4:15 close yesterday, the Dow posted a huge outside reversal lower to settle off 142 points.  Bond yields for both Spain and Italy continue to quietly work higher, creeping near or above the 6.5% mark, but still below the unsustainable 7.0% level.  Overnight, UK industrial production posted its 14^th monthly fall, down 1% in April compared to the same month a year ago, while it was unchanged from March.  In the US today, we’ll get May import prices followed by the Federal Budget at 2:00 EDT.  The Dollar Index is still in a short term downtrend, but the intermediate and long terms trends are arguably still up.

Rainfall in the last 24 hours was heaviest in MO/AR/MS/AK/GA/SC which all had areas receiving 0.50-1.0”.  The heart of the corn belt also saw rains with IL seeing a general 0.25-0.50” although a few spots in SC-IL did see 1.0”.  IN was almost completely dry while OH saw anywhere from a trace to 0.50”.  Storms are moving across the southern plains and Dixieland this AM.  5-day forecasted precip maps are showing heavy rains impacting places NW of a line from Kansas City to Green Bay with areas in IA/NE/MN seeing as much as 2.9” the next several days.  The southern plains will also be seeing sizable chances of rain, but everything SE of that line will be dry, including MO/IL/IN/OH/MI.   The European model is holding out chances for 0.50-1.00” to fall in the OH-River Valley towards the beginning of next week, but other models are more timid.  Temps should mainly be in the 70’s and 80’s with a few 90’s.  The 11-15 is putting a disturbance in the central/southern corn belt, but a bit far out to get much confidence.  Weather remains unsettled for the central belt.

Grains are trading in similar fashion to the way they closed yesterday with corn weaker, soybeans and wheat firmer.  This is definitely the feeling in the trade heading into the USDA reports that we could get something bearish on corn (even though the average estimates point towards cuts to carryout), while soybeans and wheat could receive supportive numbers.  The breakdown in the outside markets late yesterday helped knock us off our intra-day highs as did the storms which rolled through the central and western corn belt.  When IA gets rain, people assume the entire crop just got better.  Last night’s FOB comparative (attached) does illustrate some concern on the corn side of the ledger.  Without freight, our corn price is $30-40/MT over Argy and Brazil, and probably worse on Ukraine.  Fortunately, our soybean prices remain very competitive with Brazil, and while Argentina is better by $4-9/MT, their ongoing labor disputes make the issue much less black and white and is currently slowing grain to the ports.

Data from Australia continues to confirm a robust export program, as the Australian Bureau of Statistics said the country shipped 2.36MMT in April, the second largest amount of wheat moved in a single month over the last nine years.  This was up 15% from March and 40% y/y.  Dryness in W-Australia is still a concern for winter grains being seeded at present.  South Korean mills bought 23,800MT of US-DNS, SW and HRW for Aug 15-Sep 15 shipment from LD.  Prices were $247-324/MT FOB.  From Beijing, China’s 2012 wheat output is expected to fall 1.63% from last year to 109.5MMT as rainfall during flowering and disease cut yields.  This is in stark contrast to the CNGOIC which said output would rise 2.02% to 120.3MMT.  Crop conditions fell much more than analysts expected last night in the US.

Open interest changes saw liquidation in about everything with wheat down 2,010, corn down 10,270, soybeans down 130, meal off 1,730 and oil down 7,260.  Soybeans continue to show very little open interest change which would suggest ownership is continuing to change hands.  While weaker yesterday, spreads have been on a firming trend and basis remains above delivery equivalence, implying commercials have a reason to own soybeans.  FWIW, crop scout Dr. Michael Cordonnier cut his national corn and soybean yields last night thanks to sharper than expected declines in the national condition ratings.  He is now 161bpa on corn and 43.0bpa on soybeans.  He also made the comment soils are drier now than they usually are the 3^rdweek of August based on an 11-year soil moisture index.

Average estimates for this morning’s report are 11/12 carryout on corn at 828mbu, soybeans 197mbu and wheat at 757mbu.  12/13 ending stocks are seen at 1,740mbu (down 140mbu) on corn, 147mbu on soybeans and 728mbu on wheat (down 7mbu).  Winter wheat production is seen being trimmed slightly.  Argentine production should see cuts on both corn and beans while Brazil is expected to rise a bit.  Trade will be open at 7:30 in both the pit and electronic when the numbers are released.  More at 7:30 CDT.

Tregg Cronin
Market Analyst
800-328-6530
651-355-6538
651-355-3723 fax
www.countryhedging.com
Country Hedging, Inc.
The Right Decisions for the Right Reasons

Mid Day Comments from Country Hedging's Chris Steinhoff for 6-12-2012 USDA Supply and Demand Report Day!

Below are Mid Day Comments from Country Hedging's Chris Steinhoff for 6-12-2012

Crude oil is 30 cents firmer…DJIA is up 105 points…gold is $22.00 firmer….Spain, Greece blah blah…ND

Corn---Fund and spec selling in moderate volume. We got to experience a USDA report during mkt hours and we saw volatility as CN moved up 6 to down 15 in a minute or two. USDA basically left the US balance sheets unchanged. 2011/12 lowered exports and raised ethanol for unchanged carryout of 851mb. They also left the 2012/13 carryout at 1.881bb, leaving prod and acres alone as the next 30 days we will get qrterly stocks and acres and another USDA balance sheet where they may begin to adjust yields. World corn balance was left at 152mmt 2012/13 carryout vs 129 in 2011/12 and 124mmt in 10/11. Much of that depends on US crop being quite large.  Funds just do not appear to like to play in the corn market much anywhere, why?  I do not know. Rain totals were decent in parts of ILL, MO and OH, but IN appears to have gotten missed and forecasts do not look too good. WCB appears to be getting decent coverage in the next 5 days…ECb just seems to keep missing it. Farmers are selling some old crop corn where they’ve received rain and the crop looks OK, but it is light movement. New crop selling is non existent as they missed it and know it!!!!. Funds roll positions from CN. Spreads are firm vs the CN. CN/CZ is a 62 inverse. Z/H is an 11 ¾ carry. June 29 (june 1) stocks report could be interesting as to how they fill out the surveys currently in their mailboxes!!!!!! Corn is coming out of its ugly phase and growing fast in the WCB as many people believe we’ll see head high corn by July. Curly takes golf lessons

Beans---USDA drew a line in the sand and says 140mb carryout is the smallest it is getting! USDA also tightened the 2011/12 carryout to 175mb  by raising crush and exports. China is basically the world market and their economy is being questioned…maybe they just need to inject $ into Chinese banks and see what that does for the ghost cities. Farmer selling is light and difficult to figure out where the crusher and exporter is actually getting enough beans to do what needs to be done!!!!! I keep hearing scattered stories of soybean stands being poor as beans are in their ugly phase. World supplies getting larger depends on the big US crop. But we are stillprojected nearly 17mmt less than a few short 2 years ago…So we need Brazil and Arg to step up and produce beans for China next year. What will uncle sam find on acres??? With s ILL and MO getting rain and winter wheat harvest is well along in those states on June 10, plus SE US getting rain, what does the chance of double crop look like????? Spreads are firm vs SN and SX/SF is a penny inverse.

Wheat---HRW harvest, SRW harvest go fast and overall DNS crop looks promising. When will farmer sell to make space???? US and World have plenty of wheat even though some “experts” think the situation is tighter than expected. Why did the USDA not address winter wheat harvest in the 2011/12 balance sheet??? What did the farmer put on the June 1 stocks survey??? Are all those new tin piggy banks as empty as they say????? I personally do not think so, has anyone knocked on the side of these bins lately? What noise do they make? MGEx is inverted as many run scared of bids rolling soon, like maybe today???? Some are playing games as commercial isn’t about to let the farmer get paid to carry that wheat  that he says he doesn’t have. DNS farmer awaits the new crop protein premiums/discounts thinking he may hit a home run. US HRW yields are very good as KS is in gut slot harvest. Moe is in Canada fishing.

Christopher Steinhoff
Market Analyst
800-328-6530
651-355-6558
651-355-3723 fax

www.countryhedging.com

USDA Supply and Demand Report Comments - Grain Market Comments

To start with today was a USDA report day and here is a recap of the report versus last month and versus trade estimates.  You can see that we got neutral to bearish report for corn, neutral to wheat, and neutral to friendly beans.  Price action indicated we had a bearish report for wheat; but the numbers really didn’t indicate that.  But wheat really has been a follower for some time as corn seems to remain king; especially on crop report days.

June 2012 USDA Supply & Demand Worksheet / Trade Guesses

2011/12 Ending Stocks Estimate (billions of bushels)
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	0.851	0.821	0.688 - 0.901	0.851
Soybeans	0.175	0.189	0.130 - 0.218	0.210
Wheat	0.728	0.753	0.727 - 0.775	0.768

2012/13 Ending Stocks Estimate (billions of bushels)
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	1.881	1.750	1.223 - 1.950	1.881
Soybeans	0.140	0.143	0.052 - 0.220	0.145
Wheat	0.694	0.714	0.647 - 0.772	0.735

2011/2012 Global Ending Stock Numbers
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	129.19	127.630	126.000 - 128.800	127.560
Soybeans	53.36	52.090	51.000 - 53.000	53.240
Wheat	195.56	197.124	196.000 - 198.835	197.030

2012-2013 Global Ending Stock Numbers
	USDA June	Avg. Trade Guess	Avg. Trade Range	USDA May
Corn	155.74	149.745	145.000 - 154.000	152.340
Soybeans	58.54	58.140	55.700 - 62.000	58.070
Wheat	185.76	184.791	180.800 - 190.674	188.830

As you can see we continued the trend of disappointment for the corn bulls with this latest USDA report as we once again left the numbers unchanged from last month.  The only change was a decrease in exports that was offset by an increase in ethanol usage.  No changes where done for new crop corn balance sheet at all.  It feels like the trade doesn’t believe the 166 bushel yield for new crop corn that was left unchanged; but eventually the trade will have to start believing or the number will have to come down.  I would say that we are very high priced if next January’s report shows the type of yield that is presently being used; so keep that into consideration as we move forward.  From what I hear most in the industry are using a corn yield someplace between 155-163.  Bottom line if we end up close to the 1.8 billion bushel carryout that is presently projected look for prices to drift lower.

World corn stocks actually rose from last month for both the current marketing year and next year’s projection.  Another bearish headline that is being partially offset by the ideas that yields and crop production potential isn’t near where the USDA pegged it at.  But bottom line is the same here plenty of risk if the USDA doesn’t change and ideas have always been that big crops get bigger……..hasn’t it?

Bean numbers where good with the decrease in ending stocks for the US both this year and next; but the world numbers where increased. 

Wheat numbers still say that there is plenty of wheat in the US and in the world; but the trend is going the correct direction.  Less then last month in both the US and in the World for both last crop year and the present crop year which started June 1^st. 

Below is a little history of the crop supply and demand numbers; it comes from Mike Sperry……..the big think on it is looking year over year and month over month.  You will see that we now have a US and World wheat carryout numbers as low as they have been since 2008.  While we have corn numbers potentially as high as they have been since 2000 in the world with the US numbers pegged at their highest spot since 2005.  Bottom line is if those number or these trends don’t change things for corn price outlook are not very good.  I am in the camp that doesn’t believe the carryout or yield that the USDA posted today; but the below trend really shows one that there is plenty of risk so I am also in the camp of practicing good risk management.  Making some sales on the bounces and maybe buying some puts for protection or selling some covered calls.

World	/	US	Ending	Stocks	6/12/2012
Data	Provided	by	Central	Plains	Services,	L.L.C.
1	Metric Ton of corn = 39.36825 bu				Metric Ton of Wheat/Soybean = 36.7437 Bu
All	Ending	Stocks	expressed	in	Billions	of	Bushels
Year	Corn			Soybeans			Wheat
	World	US	Yld.	World	US	Yld.	World	US	Yld.
’00	6	1.899	1			-	7.5	0.876
’01	5.8	1.574	1.2			-	7.4	0.687
’02	4.8	1.087	1.5	0.178			6.1	0.491
’03	3.6	0.958	142.2	1.2	0.112	33.9	4.8	0.547	44.2
’04	5.1	2.113	160.4	1.8	0.256	42.2	5.6	0.54	43.2
’05	4.9	1.967	148	1.9	0.449	43	5.4	0.571	42
’06	4.3	1.304	149.1	2.3	0.574	42.9	4.7	0.456	38.6
’07	5.1	1.624	150.7	1.9	0.205	41.7	4.4	0.306	40.2
’08	5.7	1.673	153.9	1.5	0.138	39.7	6.1	0.657	44.9
’09	5.7	1.708	164.7	2.2	0.151	44	7.4	0.976	44.5
’10	4.9	1.128	152.8	2.6	0.215	43.5	7.3	0.862	46.3
’11	5.1	0.851	147.2	2	0.175	41.5	7.2	0.728	43.7
’12-’13 May Est	5.997	1.881	166	2.134	0.145	43.9	6.913	0.735	45.7
’12-’13 June Est	6.131	1.881	166	2.151	0.14	43.9	6.826	0.694	45.4

Question; anyone know what our low price has been since 2000 for corn?  Under 2.00 on the board; even in 2005 we where under 2.00 at one point in Dec of 2005.  Is our present pegged world corn estimate higher today then it ended up being when we where under 2.00 a bushel on the board for corn futures?  Yes it is.  Therein lies our risk

I don’t want to come off trying to tell one to panic sell as I have mentioned numerous times I am not that bearish; but I do want to come off as telling producers that we have perhaps more price risk then one might realize.  So if you need help marketing or want to look at some protection strategies please give us a call.

At 1:20 we have our markets show old crop corn down 9 cents, new crop corn is off by 13 cents, old crop beans are up 11, new crop beans are up about 6 cents, KC wheat is off a dime, MPLS wheat is off 12-15 cents, and CBOT wheat off 12 cents.  This are not the closes and the grain futures will be trading for about 30 minutes or so; but the above should be close to the settlements.

Outside markets are also still open but as of 1:30 equities are firmer with the DOW up about 100 points,  crude up about 70 cents a barrel, the US dollar near unchanged, and gold up 9.00 an ounce.

A little disappointing for the grains is the fact that we couldn’t brush off the bearish USDA numbers and trade positive for corn.  Perhaps if we consider the fact that we where not down the limit given the difference between new crop corn projected carryout versus the estimate you could consider today a small victory for bulls; but overall disappointing; nice to see the outside markets stabilize at least for a day.

As we go forward weather will be extremely important but it might be on the bulls to prove the USDA wrong, also important will be the outside markets and the June 29^th stocks and acre update. 

One thing that some have talked about is that they look for the USDA to cut yield in July but keep overall production for corn near unchanged behind ideas that the good spring allowed more corn to get planted.  We also have to remember last year’s stocks number for corn; one that caused July corn to be down over 70 cents a bushel.  Cash markets today and really all year have felt tighter then they did a year ago; but there will be the risk that our high prices or strong basis has curved some demand.  There might also be some risk out there that ethanol plants are much more efficient then they used to be; perhaps the 2.7 ethanol to bushel coversion get’s changed sometime?  Locally I know we have shipped milo to ethanol plants that never used it before and that means that they are not using as much corn.

The big thing that the markets will watch for fundamentally is if we do cut corn supply how much will we cut corn demand?  If you use some of the corn yields that some in the industry have thrown out there with the present demand forecast it is easy to get bullish in a hurry.  But ECON 101 should remind us that less supply also equals less demand; and that brings us back to what happened last July high prices curved demand and stocks came in higher then expected as we went from below 700 million bushel for a projected carryout to over 1.1 when all said in done on the September stocks report.

Don’t forget that we will have our weekly MWC Grain Marketing Round Table tomorrow at 3:00 in Onida; as we will discuss today’s report as well as go over charts and possible strategies to consider when pricing your crops.

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