USDA Crop Report Preview, 2011-2012 Corn, Soybean, Wheat balance sheet projections, trade estimates,

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. 

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

Charts 6-23-11 - Did the grains just put in the lows and reverse back up? Closing Comments

Grain Markets closed mixed today in another very volatile session as we seen huge swings in corn and wheat while the outside markets got hit hard.

Old crop corn closed up 3 cents, new crop corn was off 4 cents, beans where off 12-15 cents, KC wheat was down 10 cents, MPLS wheat was down 16 cents, July CBOT Wheat was up 11 cents, Dec CBOT wheat was off a nickel, crude oil was off over 3.00 a barrel but that was over 2.00 a barrel off of it’s lows, the US dollar was firmer with the Sept up 527 at 75.715, and the equities closed weaker with the DOW down 60 points.

On the surface nothing above looks too great; but when you consider the fact that CBOT wheat close 43 cents off of it’s lows, July corn 41 off of it’s lows, and the DOW 175 points off of it’s lows; the price action or close has to be considered good to great.  Perhaps we finally flushed out all of the weak longs while running out of sellers in today’s panic type action that we seen on the open.  Both the wheat and the corn market opened down very hard compared to where the overnight session had left off at; not a real big surprise given the weak outside markets we seen this a.m.

Attached are some charts for more technical information.  I personally think (maybe I should say Hope) that today’s price action gives our markets a chance to rally into next week’s USDA report.  But only time will tell if the little bounce off our lows is just a selling opportunity in a big market that has turned bear or the past 10 days has been a buying opportunity before moving to higher levels.  The main longer term components that should drive our markets remains weather, money flow, the overall world economic situation, and how those factors effect the demand / supply situation.

The spread price action that we seen today with the front month’s gaining on the deferred was a good sign of possible demand; especially given the fact that we have high open interest left in the July corn contract; perhaps end users buying the board to take delivery?  The CBOT July contract leading the wheat market was also nice to see; but that could have simply been short covering.

Basis remains steady to firmer for corn and winter wheat; while spring wheat basis has been hit very hard behind many end users finally getting applications as many are now getting double booked.

Today’s price action doesn’t mean that we will go up or that we will continue to go down; it perhaps provides clues that at least the nearby pressure could ease.  But more then anything today’s price action as well as the price action the past 10 days tells us that risk management with risk diversification is nearly a must.  Don’t be afraid to spread the risk out as we really don’t know which direction the next major move will be.

About 2 weeks ago we had a friendly USDA report out that kept our supplies tight for the corn crop; we made highs the day of or after the report in the corn markets.  Since then we broke a 1.60 off of those high’s in July corn and we haven’t changed the fact that we needed to ration off some demand or increase supplies or our balance sheets remain historically tight.  Mother nature will help decide the supply side of the equation; but on the demand side we have seen margin levels for all of the major buyers off corn go from borderline profitable to very profitable.  It doesn’t look like the lower prices have rationed away the demand; perhaps just added to it. 

grain market comments 7-7-11 price in commodities just a chance to sell?

Markets are called mixed to better this a.m. behind firmer outside markets with a mixed overnight session that saw wheat in the red and the row crops positive.

In the overnight session corn was up 5-6 cents, beans where up 5-6 cents, KC wheat was down 9, MPLS wheat was off 4, and CBOT wheat was off 4 cents also.  At 9:05 outside markets have European wheat off about 2 %, equities are firmer with a better then expected jobless claims as the DOW is up 75 points, crude is 1.90 firmer, and the US dollar is softer with the Sept at 75.320 down .120. 

We do have a little grain related news out there today; first off we seen export business for wheat go the other direction last night as Egypt bought Russian wheat which has many talking about our wheat being over priced.  In other export news we did have a reported sale of corn to China; 540 k ton and then 300 k tons to unknown which is assumed to be China. 

Talk of the weather starting to get too dry in the eastern corn belt and a possible ridge building later in July is also leading the headlines.  We really should move into a weather market especially if the last USDA report is accurate in that we have a little more cushion on our balance sheets then we previously did.  Yield will end up driving prices by the look of things and the yield will be determined by weather; outside markets along with the money flow that they help create will be important; but it really comes down to weather.  Demand has remained good and margins are rather good for most of the users of corn.

The markets did open and have continued a mixed direction; at around 10 we have CBOT wheat up 2-3 cents, KC wheat off 12 cents, MPLS wheat off about a dime, while corn is 11-14 cents better, and beans are 15-20 cents firmer; while outside markets really haven’t changed.  It appears to be a little short covering on the CBOT wheat; while funds look to be selling the ownership off a little in the other wheat markets behind the thoughts that our wheat is becoming expensive.

As the day progress we did see the markets change up a little bit as the row crops lost a little steam while wheat managed to bounce a little off of their lows; outside markets continue to be supportive with the DOW now up 125 points as of about 1:30.

When the grains closed we saw KC wheat off 2-3 cents, MPLS wheat off 2-3 cents, CBOT wheat was up 7 ½ , beans where up 15-19, corn up 1-7 cents (with the July up a penny and Dec up 7), and the equities ended with the DOW up 93 points.

Overall a mixed day; rather interesting that we seen the Sept CBOT wheat contract showing strength over the deferred contracts; perhaps it was simply some short covering.  But any time real rallies have started it is usually the front month of CBOT leading the way. 

Technically we seen corn go back and fill it’s gap on the Dec contract; then close back below that old support new resistance level.  The price action seen the past couple of days since the report is rather similar to the price action we seen in 2008 when that big bull market turned into a big bear market.  The crop report in 2008 gave us a 64 cent break from the highs the day before the report to the lows the day after the report; we then followed that up with a 48 cent rally from the lows the day after the report and then the meltdown started back up as we slide all the way down to from a 7.99 high to a low of 2.90.  The price action on the Dec contract the past couple of days threw the last report is very similar; in that we broke 67 cents from our highs the day/night before the report to our lows the day after the report and then the past three days have bounced 46 cents from those lows. 

Who knows what the next coming week’s and months will be like; the potential for a 2008 repeat has to be considered when looking at risk management.  Outside market price action has hit and miss been similar to 08 and scary thing is the fact that the funds have more ownership now then they did back then.  Yield is yet to be determined and the one positive that have going for us now that we didn’t back then is a feeling of strong demand; which is being lead by old crop corn.  If we start to see basis pressure or a even a hint of coverage complete for end users one might really need to turn the marketing ideas much more aggressive if you are undersold at levels that despite the recent break are very profitable.

The birdseed market is one of those markets that is starting to display good coverage; sunflowers are still very tough to buy but the market feels like they are tougher to sell; the biggest wild card for that market will probably be when weather allows for a harvest; if the harvest is late there becomes the potential for little to no product creating a market where the sellers once again are in control.

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

Closing Comments 6-28-11 - Charts and Strategies

Markets where called better this a.m. behind a firmer overnight session, supportive outside markets, and oversold conditions.

In the overnight session corn was up 7-8 cents, beans where up 12-14, KC wheat was 11-12 firmer, MPLS 8-12 firmer, and CBOT wheat was 9-12 cents firmer.  At 9:20 outside markets are adding support with crude up a little over a dollar a barrel, equities have the DOW up 90 points, the US dollar is softer with the Sept down 393 at 75.435, and European wheat is 3-3 ½ percent firmer.

With the huge sell off we have seen over the past couple of weeks a little profit taking or position squaring into this week’s stock’s and acre report is expected; perhaps that can lead to the upside getting over done as the next couple of day’s sessions unwind.

Fundamentally not much has changed in our markets since the last USDA crop report; but we will have some potential changes off of the quarterly stocks and planted acres number which comes out Thursday June 30^th.

Idea’s for the planted acres on this week’s report are 90.7 million acres of corn; which is a big increase from last year’s 88.2 million acres; but a decrease off of the March report and unchanged from the June report where they updated acres even though they typically don’t.  Soybean acres are pegged at 76.5 million acres which is off from last years 77.4, but very close to where the March numbers came in at.  Spring wheat is pegged at 13.35 million acres which is a slight decrease from last year’s 13.7; but the market is expecting a rather sizeable decrease from the March planting intentions report where 14.4 million acres where estimated.

In my opinion planted acres above 92 million for corn shoot us limit down potentially starting a change to the balance sheet for a long time; while acres below 89 million or so potentially push our markets limit up.  One of the big wild cards will be and is the stock’s numbers.  If you remember the couple of year’s these reports have had rather big swings from time to time; where they seem to find or lose a couple hundred million bushels on a regular basis. 

Even though the report out this week should really set the stages for fundamental price direction for some time to come our longer term price direction and actual fundamentals really come down to mother nature; what the weather does and what money flow does or doesn’t do continue to outweigh what one things logically should happen.

As one can see I didn’t get these comments emailed out this a.m. but the thoughts of today’s price action where in line as our markets closed firmer; and sharply firmer in many of the markets lead by corn and supportive outside markets.  Technically we may set stages where Thursday’s report can act as a catalyst for confirmation that markets have reversed back towards the upside with last week’s sell off being a last ditch panic sell or the price action the past couple of days will end up looking like a normal correction in markets that technically are on the weak side of things. 

Personally I love the price action the past three to four sessions if we are going to have an attempt to see higher prices; as we seen basically an exhaustion gap on last Thursday’s opening followed by doji’s left on the chart as we bounce well off of the lows.  The market then went back and tested those lows yesterday and has since bounced rather well.  Fundamentally weather is ideal in many of the areas that have the crop planted; but plenty of areas have lacked heat units while overseas there has been some talk of dryness in the Russia crop.  Could that start a wheat rally similar to what we seen last year?  The funds are sitting similar in that they are short plenty of wheat (CBOT) and the spreads are rather wide.

The price action of the Equities, crude, and the US dollar is also on the supportive side or at the very least has re-opened the doors that the sell off the past month or so was just a correction in longer term bull markets; this would be another supportive factor for our grains.  For more technical information please take a look at the attached charts.

When the dust settled out today we seen old crop corn up 22-26 cents, Dec corn was up 26, KC wheat was 15-16 cents firmer, MPLS wheat was up 30, CBOT wheat was up 18-21, beans where 1-4 cents better, crude over 2.50 a barrel firmer, equities up strong with the DOW 145 points higher, and the US dollar was softer with the Sept down 393 at 75.435.

Overall a good day to see and probably a long over due day with our oversold conditions that we have had in our markets with the massive sell off we have seen recently.  Basis feels firmer across the board for all of our grains; part is from logistics so that makes it hard to judge; but overall there seems to be more demand then supply.  The birdseed markets are similar in that there is very little supply out there; but the bids are even harder to find; so that market is really a waiting game; if buyers need coverage it won’t be cheap but if you have to call to find bids they won’t be as high as one hopes.

As a reminder we do have our MWC Marketing Hour Round Table Wednesday in Onida at 3:30; we hope to see you there.

Grain Market Comments 7-25-11 Re-Ownership Options

Markets closed weaker today behind weaker outside markets lead by fund selling and weather that has seen moisture in many of the dry areas.

Corn was down 11 cents, Beans where off 16 cents, KC wheat was down 10, MPLS was off 8, CBOT wheat was down 4, European wheat was off about 1 %, the US dollar is near unchanged with the Cash Index at 74.110, crude was off about 60 cents a barrel, and the Equities struggled behind the inability to come up with a resolution to the debt ceiling as the DOW closed down 88 points.

Disappointing day for the grains but with the moisture that much of the dry areas received the price action wasn’t that surprising and with the weak tone the outsides had it could have been worse given the fact that we are still around a dollar off of our lows seen at the start of the month.   If one looks at the markets or charts from where we closed today at versus where they opened up at on Sunday night we really didn’t do much damage as many of the grains closed very similar to where they opened last night’s session; with a couple of them closing better then where they opened Sunday night at; so nearly all of the grains had either small candles or Doji’s left on their charts.  Technically the charts say to me that they are waiting for some catalysts be it weather or maybe the outside markets, or another supply/demand factor to help determine which direction the move will be.  Bottom line is my view on today’s technical price action wouldn’t be considered either bearish or bullish; just stage setting for the next big move.

Basis on some of the grains is starting to feel a little top heavy as we have seen bids soften as of late and for more then one commodity.  Buyers are showing coverage and a lack of demand in comparison to their interest over the previous couple of weeks/month.  It is still up in the air how much actual coverage buyers have on the various products but bids are softer.

As a reminder we are going cash, condo, or contract only for winter wheat at our locations.  Please call us for more details.

In regards to marketing you still have some options that you can do that help one retain ownership or control the pricing of one’s wheat despite us going to cash/condo/contract only. The two main options that one has are two different type of contracts, a basis contract or a min price style contract in which we offer two a regular min price contract and a min-max contract.

In a basis contract one is simply locking in the spread between our cash price and the futures price; right now as example we have a basis of -95 the KC Sept futures for winter wheat in Pierre.  If you do a basis contract against the KC Sept futures at 95 under your price would then follow the KC Sept futures not our local cash price; so as example if KC Sept was at 9.95 and you decided to price the futures portion of your basis contract you would receive 9.00 for your wheat.  If KC Sept went down to 6.95 and you priced the futures portion you would only receive 6.00 for your wheat.  The cost to a basis contract is nothing, there is no storage against the grain either and basis contracts automatically roll at that spread between future months around the 20^th of the month prior to the contract going off the board; so for a basis contract against the Sept futures you would have until August 20^th to price the futures or your contract would be moved to the Dec futures at what ever the spread between the Sept and Dec futures is on August 20^th.

Benefits on basis contracts is you have unlimited upside with no cost nor a timetable in which the grain has to be priced by; but on that same token you have unlimited downside risk and you can not participate in basis appreciation or if the basis narrows.  Presently basis is about a dollar a bushel better then it was a year ago; so just looking at that it maybe makes sense to look at this type of contract if you want to price your grain at a later time.  Please call if you have questions.

Min price contracts and min-max contracts are options that create a floor or a worst case scenario for one in marketing their grain.  I many times refer to these contracts like insurance in that you basically will be buying insurance so the better insurance you want with the lower the deductable and the longer you want the coverage the more they will cost you.  With our markets a little on the volatile side these are not exactly cheap; but they do help one create a worst case scenario while leaving upside room should the market move higher.  As an example one could do a min price contract using Dec CBOT wheat futures for about 6.15 min for delivery into Pierre.

One wouldn’t have margin calls and the cost of the contract would just come off of one’s price received.  The above example would expire on Nov 25^th.  If one wanted to go out longer it could cost more; if one wanted to try something without the big cost you would have a couple of options.  Go with a strike that is out of the money; the above was with an option at the money or at where the futures closed at.  For a strike price 50 cents above the market one would be able to get in for about 20 cents less or for about 6.35 net min price.    The difference being that if these contracts expire and one hasn’t exited the cheaper option would be further behind then the one at the money.

The last type of contract we offer is called the min – max contract; it is a contract where one sets a floor and ceiling; as example via using the 8.00-9.50 CBOT DEC Wheat strikes one could create a min price contract of about 6.52 with a max price of 8.02.  For one to achieve the max price we would have to have Dec wheat at or above 9.50 when the min-max contract expires.  This is an example where one is only spending 24 cents but has a chance to add on a 1.50; it is out of the money and the probability of the market running up that much might not be that high based on some opinions out there.  But it is a cheap way to have re-ownership with the only cost being known and upfront thus it might be an option for some to consider.

If you have questions on any of the above please feel free to give us a call; also note that we do offer a full line of hedging services threw our country hedging branch thus opening another way to participate in the market once the actually cash grain is priced.

Thank you

USDA Crop Report - beans under pressure; corn strong wheat weaker but closes decently

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.