Closing Grain Market Comments - Day Ahead of USDA Supply and Demand Report

Grain markets closed mixed to weaker ahead of the USDA report that will be out in the a.m.

Corn was off 7 cents, beans closed up 2-3, KC wheat was down 7, MPLS wheat was off 7, CBOT wheat was down 12, equities seen the DOW close up 15 points, the dollar is near unchanged, and crude is down about a quarter.

Not a big news day today; more of just a risk off day with all of the unknowns such as the USDA report that is out in the a.m., the fiscal cliff, ideal weather, and other tax concerns as we go into the new year. 

One positive that we had today was the reversal that soybeans did; after trading down nearly 20 cents they managed to turn around and close up a couple; which I viewed as a good technical sign.

We did get a little wheat business today doing a little more SRW and white wheat with Egypt; but there was also some Saudi Arabia business done that have very little US wheat; more EU and Australia wheat.

This morning we had export shipments out and they continued the trend as of late.  Good bean shipments of 46.6 million bushels which is well above the 18.3 we need on a per week basis to meet current USDA estimates.  Wheat came in at 13.9 million bushels nearly 10 million bushels light of what we need on a per week basis to meet current USDA projections.  While corn came in a 7.9 million bushels shipped versus the nearly 25 million bushels we need per week to meet current USDA projections.

We haven’t come close hitting what we need on a per week basis for either corn or wheat since sometime in September.  While beans have been super strong since that same time.  I guess the point isn’t bean demand is super strong or wheat and corn demand is super weak.  We do need to keep that in mind; but the point is that keep in mind there is only so much elevations in our infrastructure.  As example I know our local elevator’s can’t handle ton’s of corn at the same time they handle ton’s of wheat; as there are only so many rail cars along with so many bin’s.  I think more important then shipments has to be sales as this point because we are in the time period when many exporters are still focusing on handling the beans due to the inverse in the market.  In  few months hopefully that opens the door for more wheat/corn shipments.

Below is information for the USDA report.

US 2012/13 Ending Stock Estimates
	USDA Dec '12	Avg. Trade Guess	Avg. Trade Range	USDA 2011	USDA Nov '12
Corn	?	0.663	0.493 - 0.752	0.988	0.647
Soybeans	?	0.130	0.063 - 0.145	0.169	0.140
Wheat	?	0.712	0.612 - 0.754	0.743	0.704

Global Ending Stock Estimates
	USDA Dec '12	Avg. Trade Guess	Avg. Trade Range	USDA Nov '12
Corn	?	118.006	115.700 - 125.100	117.990
Soybeans	?	59.409	56.700 - 60.700	60.020
Wheat	?	173.435	170.000 - 175.680	174.180

As you can see the market is expecting a bearish report for both corn and wheat; while a bullish report for soybeans.  Ideas are they cut the US corn export numbers, cut the US wheat export numbers, and increase the soybean export numbers. 

Typically the December report isn’t a huge market mover.  The big report is Jan 11^th; which if memory serves me right has had one grain or another trade limit up or limit down every year since 2008.

One somewhat silver lining is that if the reports do come in a little bearish for both wheat and corn perhaps that adds back a little needed demand.  Longer term I think the January report and what it does for final production and quarterly stocks to be very important.  The January report will give us final production whereas the report in the a.m. won’t have any adjustments to production.  The January report will also have winter wheat acres planted.

Possible unknown cards that the USDA could throw out tomorrow include demand estimates and world production estimates.  The above shows the markets expectation but the above doesn’t say exactly what the market is already trading.  Sometimes for markets to really move on report days you need to really miss the trade estimate while other times just coming in inline with trade estimates causes sparks.  To me the recent sell off the past couple days on corn…..nearly  35 cents from the highs on Thursday to the lows today has priced in a bearish report.  So to me that says if we don’t get a bearish report the market has a good chance of bouncing and if the report is bearish will it already be priced in???

Basis was mixed to weaker the past couple of days.  But with the weakness in the board thus lack of producer selling basis seems to have stabilized.  Also I would note that for the first time in a long time the railroad didn’t set cars in when expected; but rather a couple days late.  If this is wide spread it could quickly cause some pop in basis values.  But nearing the holiday’s probably doesn’t help because many industries have plenty of down time.

A couple of announcements don’t forget we will have our weekly MWC Marketing Hour Round Table meeting in Onida on Wednesday’s at 3:30. 

 Grain Marketing Seminar 2012

We would like to invite you to our

free grain marketing seminars:

Dec. 19^th, 2012 – 1:00 pm MST at the

Ambulance Building in Philip, Tregg Cronin Speaker

Dec. 20, 2012 – 10:00 am CST at the Ramkota in

Pierre, Kevin Van Trump and Tregg Cronin will be speaking on the grain markets.  Lunch will be served

Please RSVP for either location by calling

800-658-3670 or 605-258-2686

Opening Comments 5-9-2013 USDA report preview

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

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

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

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

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

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

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

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

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

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

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

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

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

As mentioned here is the USDA estimates.

The below is coming from the Van Trump Report.

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

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670