Grain Market Comments for a very strong session - May 17th grains closed higher

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

IN the overnight session CBOT wheat was up 1 cent, MPLS wheat was up a penny, KC wheat was off a penny, new crop corn was up 5 cents, new crop beans where up 7, old crop corn was up 7, and old crop beans where up 4 cents.  At 9:25 outside markets are weaker/mixed European wheat is up about 1 percent, equities are softer with the DOW off 40 points, and crude is off about 60 cents a barrel.

Outside markets with fund liquidation/risk coming off the table versus friendly fundamentals appears to be the story this a.m.  A battle that has been going on for weeks and continues to lead the headlines; weather is supportive to our markets as it simply remains either too dry or too wet in many places.

Winter Wheat conditions dropped yesterday which was a little bit of a surprise, while spring wheat came in at only 36% planted which is near record slow, corn planting was 63%, and beans at 22%. 

It is about 10:40 now and markets are open with the grains holding in there tremendously well despite the rather weak outside markets.  Presently we have the equities under pressure with the DOW down 165 points, the US Dollar is firmer with the cash index up 350 at 75.82, crude is off 2.00 a barrel, while the grains have CBOT wheat up 9 cents, KC wheat up 2, MPLS wheat up 5, beans off a dime, corn up 2 cents on the old crop, and new crop corn up about a nickel.

So far I consider the grain price action great; wheat in particular having gained on the overnight session despite the outsides.  One caution would be that wheat is being lead by CBOT wheat which could be due to the quality concerns starting to hit the SRW wheat area (scab and disease with all of the rain) but it CBOT wheat leading the way for wheat’s strength today could be more risk coming off the table as the funds on Friday where short CBOT wheat and long the other wheat’s.

When everything was said and done the grains all ended up showing some strength and closed very firm across the board; wheat lead the way with CBOT wheat up 28, KC wheat was up 19, and MPLS wheat was up 26, Corn was up 23 on old crop, while NC corn was up 18, beans where up 14, crude bounced back towards unchanged and at 5:30 is up about a dollar in the night session, the US dollar is down 101 points at 75.369 on the cash index, and the equity markets bounce well off of their lows with the DOW closing down 69 points.

Overall a great day; especially considering where the outside markets where for most of the grain market session; many thought we could see the grains close in the red; but we did manage good solid strength as most of our grains close near the highs when all was said and done.

Basis strong, spreads supportive, weather supportive (dry in Europe, dry in the south, Wet in Ohio, ND, Indiana, SRW Areas), and outside markets bouncing all helped the grains today in very impressive action.  Technically it appears we are still in sideway’s markets; but a decent bounce could turn some signals into buy’s in the near future.

Birdseed buyers seem to have more interest the past couple of days as it appears that business has picked up; I would note that business on the books via increased shipments is the main attraction but I have also had some buyers inquire about purchasing product that really seems to be in tight hands.

Watch for more volatile price action as we move forward; there has been rumors lately that Russia and the Black Sea region will be back in the export game rather soon.  That in itself wouldn’t be the most friendly thing for our grain markets.

Also don’t forget tomorrow we will have another session of our MWC Marketing Hour Round Table; in Onida Wednesday at 3:30.  We will be updating charts, going threw strategies and then do some more mock trades.  We hope to see you then.

Thanks

A correction......or are the Bull Markets over for the Grains?

Was today a correction in our grain markets or has the tide changed?  Are the great bull markets of 2010-2011 coming to an end or was today just another natural (needed) correction?

As many others have been talking about lately such as http://www.dtn.com/ag/assets/thegatheringstorm.pdf it appears that we may be nearing the end.  As I stated in an agweb.com blog I think the time is near to have one foot either ready or already out the exit door.

Here are some of the things that look like they have perhaps started to change lately; indicating to me that things might be changing.

our bull markets do have some holes starting to form in them

1 russia exporting.......what I believe is the biggest change in our fundamentals........and my view is this is more negative the feed grains then quality wheat...............as that is what they are exporting.........
2 outside bearish months/weeks......key reversal seen in many grains and outside markets........like equities........some longer term trends have turned either sideways or down.............. seen the dtn link above for more detials
3 key reversals in many markets..........such as MPLS July today............couple year high followed by a close nearly 80 cents off of that high
4 Wheat in CBOT showing a constand series of lower high's........we hit the down trend perfectly a week or so ago..........now we are back near uptrend line support........will that hold or if it breaks will the selling really hit?
5 Crop conditions increasing in corn..........planting nearly finished.......weather forecasts seem to be changing...............European Rain........some heat units in other parts of the US that need them......95 ish in central south dakota today
6 over all economic situation..........feels like those markets have turned to sell the bounce..........not buy the break.......watching CNBC/Bloomberg....many are talking about risk diversification.......pulling money out perhaps?
7 funds caught wrong..........listing to top third........which is on agweb.com they commented how the funds had added about 50k contracts of corn......and at best they are around even...... and more then likely carrying a loss now
8 stages set for june report to not show the decreased stocks like many expect.........market is geared up for a bullish report looking at average trade estimates..............the report doesn't have to be bullish........last few months haven't been......that trend is perhaps changing
9 seasonal trends - I believe Ed Usset's rule is to not hold corn after July 4th; that is less then a month away
10 History repeats it self............high prices do cure high prices............also anyone notice when we made our lows in the grains??? about a year ago.........June 29th..........when where many of the 2008 highs made?  June 29th for corn.......  could we see an economic meltdown like we did in 08?  has the past couple years simply been a false correction in the big world picture?  Are things really better today then they where back then?.............

bottom line is all of the above is probably debatable........but i think for marketing and risk management purpose one foot should already be out the exit door............ or at the very least ready to make small PROFITABLE sales..........with little notice

July CBOT Wheat Chart and July CBOT Corn Chart

Here are couple of charts with the futures prices for corn and CBOT wheat.

Shows the next couple of days could be important for wheat.  The corn chart shows us that despite today's nearly limit down move we have simply went back to the bottom end of the range we have had for several months.  It could get really scary if we don't hold the support.

Market Comments - 5-23-12 - What used to be open grain market calls!

It is about 8:45 and presently we have the grains weaker along with outside markets weaker.

Presently we have corn off about 4 cents, KC wheat off about 15 cents, MPLS down 13 cents, CBOT wheat off 19, and beans off 25 cents.  Outside markets have the cash dollar index about unchanged, EU wheat lower, equities a lower with the DOW off 80 points, and crude is down 60 cents.

One comment I had from a buyer today was is wheat really down 15 cents?  With the real lack of volume do the present prices mean much?  Yesterday it was like that as we seen big movements at 9:30 for the grains and seen volume really pick up and then really die off at 1:15.  So I guess it will be a learning lesson for many on all sides in the industry.

Technically things have turned a little ugly; we commented yesterday how the bean chart really looked ugly and how corn was just back towards the bottom end of it’s nearly 8 month range.  Wheat now weaker looks like we maybe put in a top on Sunday night; I guess it still goes back to how we close out in the next couple of days.  Was the correction the dollar rally wheat seen in it’s prices or is the 40-50 cents we are off of the highs from Sunday night the correction in the start of a bull market.

Forecasts are calling for some moisture in Russia and that has helped push the markets weaker.  But I also seen a comment this a.m. that Ukraine rain won’t help wheat, National Meteorology Center Says today. "As much as 30 % of the grain harvest in E and S Ukraine may be lost". 

We have seen Russian wheat production lowered by a couple different analysts the past few days.  So Hopefully the price action we are seeing in wheat is that just of a correction as the dollar rally in less then a week might have been a little much.

The other side of that is there are analysts out there that thing and feel wheat is just a feed grain and that it can’t hold it’s recent rally versus corn. 

When markets have so many factors and variables like our markets do; plus the fact that the funds are just huge players and make money flow be the biggest fundamental at times out weighing actual supply and or demand when it comes to marketing the only thing I can preach is to practice good risk management.  As I can give you possible outcomes where we are much higher; but I can also give one possible outcomes where the grains are much lower.  So finding a way to be comfortable whether the markets are falling out of bed or exploding higher really is key in having a grain risk management plan. 

Please don’t forget we do offer a Country Hedging Branch that can help you utilize futures and options when putting together your grain marketing plan.

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

Grain Market Comments June 5th - Old Crop New Crop Corn Spreads wild; have you locked in basis?

The grain markets closed mixed to weaker today.

Old crop corn was about unchanged, but new crop corn was off 16 cents behind some moisture in some of the recent forecasts, soybeans where up 8-10 cents, KC wheat was off 17-20 cents, MPLS wheat was 12-14 cents lower, CBOT wheat was off 14-16 cents, equities where mixed to slightly firmer with the DOW up 26 points, crude was near unchanged, and the dollar was firmer with the cash index at 82.77.

Some better yield reports in KS for wheat harvest and better moisture forecasts helped the grains come under some pressure. 

Technically the Dec corn had a rather bad session; putting in an outside bearish day this helped pressure the July corn to close near unchanged after being stronger for much of the session.  Yesterday’s crop conditions that came in unchanged for corn didn’t help either as the market was expecting a decrease in conditions behind the weather we have had lately.

Helping keep the July contract firm is basis; which is very strong for old crop corn.  Buyers lack summer coverage still and the weakness in the board the past couple of weeks has slowed producer selling to about zero.  I would note that the spreads widening is a good sign of up front demand out pacing the up front supply but it is also a great risk that many have.  Sitting on product threw an inverse is more then costly.  Cash bids have around a dollar spread between old crop and new crop corn price; so if nothing else don’t forget to look at locking in the basis on the old crop corn at some point in the near future.  We do allow you to lock in the basis versus September or December contract also.  One other possibility is a min price contract.  Bottom line is that with old crop corn so tight; there is great potential; but with that great potential you have just huge risk.  If you need help managing it please give us a call; you don’t want to give up that big inverse.

Wheat basis remains steady and actually feels a little firmer as selling isn’t happening off the combine down south.  I wouldn’t say demand is robust by any means.  The fact that basis is holding in there despite it being gut slot harvest is a good sign; but not a great enough sign to get too bullish wheat.  Weather in Russia and the conditions across the world leave me slightly friendly the wheat market.

The outside markets have been on the stable side the past couple of days; yet our grains really haven’t done anything.  We blamed the outside markets for the fall apart the past couple of weeks as funds have been aggressive sellers; but despite the fact that the equities and US dollar really haven’t done anything the grains still struggled the past couple of days.  That in itself is not good and the fact that the corn crop conditions didn’t show a decline really caught people off guard today and unchanged crop conditions when rated very high isn’t what you would expect with all the dry and hot weather talk.

Watch for weather and the funds to continue to dictate price direction as we move forward.  With wheat harvest very near look for some local basis pressure as producers look to move product to empty bins.  This probably makes basis rallies hard to happen until we get threw wheat harvest.  This probably effects all of the grains as there just doesn’t seem to be enough demand to offset the supply that wants to move before wheat harvest.  Sunflowers are a great example; every day I get a couple producers calling to move product just to help get bins empty short term.

Depending on how much grain gets moved here in the short term things could be much different when producers get out of the have to move or have to sell mode.   But the fact that short term we are likely to struggle and the fact that outside markets are (should) be reminding us of 2008 price collapse tells me that proper risk management is still needed as we are still at rather profitable levels; so don’t get yourself in a have to sell situation.

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

Thanks 

Closing Comments- Wheat Charts 5-29-2012

The grain markets closed mixed today; with beans holding in there while corn and wheat had plenty of downside pressure as money flow continues to hit the exit door.

Old crop corn was 16 cents, new crop corn was off 4 cents, beans where up 5 cents, KC wheat was 22 lower,  MPLS wheat was off 15 cents, CBOT wheat was off 23 cents, equities where firmer with the DOW up 126 points, crude near unchanged, and the US dollar near unchanged.

After our markets closed we did have crop conditions that came out.  They showed a decline in conditions; perhaps a little more then what was expected.  Here is Country Hedging’s link to an the updated crop progress and conditions report. 

http://www.countryhedging.com/media/Research/Archive/2012_05_29Crop Progress5-29-12.pdf

The big highlight was a 5 % decrease in the G/E corn crop conditions; down to 72% in the G/E.  Now it is really early and history has shown us that these conditions don’t always give us the yield we are expecting; but it is something the market will watch.  Bottom line is it could give us a chance that we have seen the biggest crop if conditions continue to go backward.  More important then this afternoon’s report will be the weather as we go forward.  Will the crop get bigger or smaller then the present USDA yield of 166 per bushel?

Corn price outlook really should be that simple; if we get a big yield or see an increasing yield trend we probably see prices trend lower.  If the yield gets smaller and macro’s, outside markets, or some Black Swan event don’t cause demand to curve the price outlook with smaller supply should be firmer. 

I would say that longer term to get bullish one much prefers demand over supply destruction as supply destruction has the ability to curve demand a little too much.  I would reference spring wheat this past year as case in point what can happen when we see smaller supply; as the spring wheat price really didn’t do much of anything as we simply failed to have the demand despite the smaller crop and less bushels.

The millet market has firmed up lately; we have had several buyers looking for offers.  Please give us a call if you would like us to offer some out.  It is almost starting to feel like buyers are realizing that millet might not have much for acres.  Not sure if they are in panic mode or not.  But they are looking for millet so don’t be afraid to have your offers out there.

It also felt like the sunflowers had a little upbeat today.  Perhaps it has something to do with a lack of coverage and the bean oil market stabilizing the past few sessions? 

The sunflower market and the old crop corn market really look like Mexican Standoff’s to me; lots of upside potential should the cards fall one way but lots of downside direction should the cards fall another way.  I guess most of the grain prices are like this; which is why practicing good risk management is simply the correct thing to do. 

You can find hundreds of people that can give you hundreds of reasons for corn price, wheat price, or grain prices in general to go up or to go down.  But not one of them can ever accurately predict on a day to day basis what it will do.  Sure sometimes guys will look like they know what is going to happen and plenty of times analysts or farm advisors get it right; but plenty of times they also get it wrong.  They too are guilty of selling fear and buying greed.  With this known the only thing I can preach is to practice good risk management in your grain marketing in a way that leaves you comfortable whether grain prices are going up, going down, or doing nothing at all.

Different things get different people comfortable.  Not everyone has the same goals or needs; sometimes making a good profitable sale with get a producer comfortable while other times just having some put protection might be what it is for some.  Bottom line in grain marketing get yourself where you want to be.  If you need help please feel free to give me our one of us in our grain department a call.

Attached are some wheat charts.

Thanks

Export Inspections

This a.m. the USDA report export inspections.

Wheat  came in at 20.5 million bushels; which should put wheat slightly above the USDA's projection of 1.025 billion bushels.

Beans continued to slow down showing only 12.4 million bushels exported; but still above the need on a per week basis to meet current USDA balance sheet projections.

Corn continued it's trend of not hitting the per week need to meet current USDA projections as it came in at 29.5 million bushels versus nearly 35 million needed on a per week basis.  With the lack of export bids out there for later summer months it could be a struggle to hit the USDA projections.  The 29.5 million was up versus the past couple of weeks.

Perhaps the lack of shipments helps explain part of the weakness on basis, the spread price weakness, as well as the board.  Have high prices or a tight balance sheet projection helped cure it self?  Or is this area the bottom we have been at just another head fake buying opportunity?  Technically corn breaking threw previous lows does not help the charts; some wonder if weather keeps cooperating if we can make another leg down.

The June 30th report looks to be a big market mover and should answer some of the questions we have had the past couple of months.

Market Comments 5-29-12 - Opening Calls?

Presently around 9:00 we have our markets trading mixed.

Old crop corn is trading about unchanged, while new crop corn is 4 weaker, Old crop beans are up 12 cents, new crop beans are up about a dime, KC wheat is off about 7 cents, MPLS wheat is 2 lower, and CBOT wheat is off a dime.  Volume is very light and has been during the non traditional hours; so it will be interesting to see how exactly our markets react once the pit session opens up at 9:30.  Outside markets should be a little supportive but adding to the mixed weaker tone is weather that seen some moisture in areas that needed some and some thoughts of some hedge pressure with wheat harvest starting to roll in some areas down south.  Presently we have European wheat off about 1%, crude is up about 60 cents a barrel, equities are firmer with the DOW up 96 points, Gold up about 10 an ounce, and the US dollar is softer with the Cash Index at 82.241.

It appears that a Japanese company Marubeni is buying Gavilon; not sure if it has any local effects.  But I do know that we have done some corn business with them in the past and I am sure it will be updated credit terms.  It sounds like they will be trying to get more China corn business in one of the stories I seen.

From what I am reading it doesn’t appear all areas that needed it got moisture coverage; but enough got it to pressure the markets a little bit.  At least until the next forecast comes out.  This should really tell us we are now deep into a weather market and mother nature along with money flow and the funds which should be linked to the outside markets control where we go or don’t go from here.

Many of the places down south and to the east still haven’t received needed rain; such as parts of the Delta and parts of the Ohio Valley; but forecasts do some for some.  I have also seen comments that parts of MN and Iowa have went from drought to flash flooding talks.   Bottom line is weather will likely remain volatile and influence our markets potential with big swings.

I did see some new crop Kansas wheat trains out this a.m.  It was a 60.7 # with 12.2 pro.  I asked my buyer on yields and pro versus last year.  He said pro was 2-3 tenths lighter then last year and yields seem to run between 35-55.  Overall that would be slightly disappointing but not a complete train wreck either.

Technically wheat did a good job bouncing off of support like it was suppose to on Friday; but now we need to see it follow threw to the upside.  We don’t want to see the markets give up Friday’s gains and presently it looks like the market is trying to despite the supportive outside markets.

Basis has been on the defensive and that hasn’t helped the old crop corn story; but cheaper prices don’t hurt demand either.

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

Thanks

Overnight Highlights 6-7-12 - from Country Hedging's Tregg Cronin

Below are the Overnight Highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.226 at 82.095; NYMEX-WTI up $0.78 at $85.70; Brent Crude up $0.30 at $100.94; Heating Oil up $0.0043 at $2.6760; Livestock markets are mostly firmer; Gold down $15.90 at $1616.90; Copper down $0.0015 at $3.3775 (but rallying); The Yen is weaker but all other major currencies are firmer; All of the softs are up, led by Cotton which is up 4.7% after being limit up yesterday; S&P’s are up 9.25 at 1324.75, Dow futures are up 60.00 at 12,479.00 and Treasuries are flat.

A host of economic data overnight with the most important being the People’s Bank of China moving to cut their benchmark interest rate by 25bp to 6.31% with their one-year deposit rate at 3.25%.  This is the first time China’s central bank has reduced rates since 2008.  This seems to be the responsible thing to do with growth still at 8.1% to prevent a harder economic slowdown than economists were forecasting.  Across our other pond, the Bank of England chose to leave its bond-buying program on hold and leave the key lending rate at a record low 0.5% where it has been since March 2009.  The decision was a close one with economists expecting the minutes of the meeting to show support for additional monetary easing.  Weekly jobless claims for the US at 7:30 CDT.

Rains in the last 24 hours were confined to N-TX and OK as well as some scattered showers in ND, W-SD and W-NE.  Radar returns this morning show the system in TX/OK as well as some rains working across SW-MN and ND.  Rains the next 5-days will finish up in TX, but also see 1-2” amounts fall across spring wheat areas of the US and Canada.  Overnight weather maps look to have a wetter touch this morning with the 6-10 still showing showers for a good swath of  the WCB.  This rain is expected to bring 0.50-0.80” with broad coverage Monday and Tuesday, although follow up rains later on in the week are being downplayed.  The 11-15 is putting rain in most of the upper-Midwest, although confidence is low.  70’s and 80’s should be the norm for Sunday to Friday, although heat is back by Sunday.

Grain markets are adding to their impressive gains from yesterday with additional strength this morning.  Interestingly enough, the soy complex is leading the way higher but seemed to do so around 4:00am, well before the news of China cutting interest rates hit newswires.  Basis is really firming, especially off the PNW where one major commercial elevator is thought to be caught short on some basis with limited supplies left in the country to cover it.  Corn basis is also getting hot with interior locations paying at or above record levels.  There are two schools of thought about remaining grain supplies in the country: 1) the farmer has the grain and is being very patient marketing it, or 2) he doesn’t have it and basis is reflecting it.  Both have implications for the June 29^th stocks reports.

The CNGOIC was out last night estimating June soybean imports at 6MMT, but also saying May and June imports likely exceeded 12MMT.  They are still forecasting crop year imports, which began on Oct 1, at 58MMT vs. the USDA at 56MMT.  In other export news, Japan bought 100,190MT of feed wheat and barley, and issued a tender for another 320,000MT for shipment by Sept. 30.  Taiwan bought 48,750MT of US milling wheat from Toepfer at prices ranging from $255.80-331.82/MT FOB.  Grades were DNS, HRW and WW.  In a state reserve auction, China sold just 13,902MT of soybeans out of a total of 600,000MT offered.  This is a big slow down from last week now that imported beans are near the same price, but domestic bean quality is much poorer due to the beans being from 2008.  South Korean flour mills are seeking 23,000MT of US origin milling wheat for Aug-Sep shipment.  Lastly, Japan bought 180,537MT of US, Canadian and Australian milling wheat.  The US share constituted 61,701MT while Canada sold 80,431MT.  Ukraine upped spring grain planted area by 17.1% thanks in large part to winter kill damage of wheat.  Much of the increased acres are thought to go to corn.

Open interest changes yesterday included wheat up 6,360, corn up 1,180, soybeans up 6,950, meal up 2,830 and oil up 3,570.  All of that is supportive given the firmer board yesterday.  Volumes look a bit light on the corn, but heavy on soybeans and wheat which again is a supportive input.  Chinese markets were mostly firmer last night with soybeans up 5.50c, meal up $5.50, oil up 47c, corn up 1.25c and wheat down 1.75c.  For the week, soybeans are up 29.50c so far.  There seems to be growing concern in the North China Plain, where they are harvesting wheat and grow a lot of their soybeans, about persistent dryness.  It is difficult to get an accurate assessment of Chinese growing conditions, but a forecast of record grain production for the 5^th straight year seems a bit of a stretch.

Call things better today given the friendly macro environment, the firm cash markets and tightening spreads.  Export sales this morning could offer a bit of pause because corn isn’t likely to best expectations.  We had no daily sales announcements, and basis hadn’t really began firming up prior to last Thursday’s cut off.  Next week could be a different story.  The other one to watch will be soybeans as week after week of more sales than needed will keep downward pressure on old crop soybean carryout estimates.

Trade as of 7:05

Corn up 4-7

Soy up 18-22

Wheat up 3-5      

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

What's now in store for the grain prices?

What's next is the for the grain prices is the question.

The answer.

Well to be honest I don't know the answer; I can give you a lot of different theories or possiblities but at the end of the day I don't know for sure what our grain prices will do.  There so many factors that make out guessing our prices nearly impossible.

So with that I will just point out some of the good and bad things I am seeing for grain prices; both bullish things and bearish things.

First off we are coming off the strongest 3 week rally ever for corn.  Now that is saying something.  First that is rally is powerful and that there is something behind it; but also that we are very overdone and we likely have started the rationing process in a hurry.  Also opens the door for a massive correction.

Just a few weeks ago before this rally started we had some ethanol plants talking about and idling some plants; and since then we have rally the most ever in a 3 week period.  

I should note that when I looked at a monthly chart the move is very simliar to last year's July - August move; which was followed up by a Sept move that took out the whole gain.

I think everyone knows what is behind this rally; but to sum it up it is weather and row crop yield.  Crop conditions have been dropping very hard each week with many comparisons made to the 1988 drought.

Balance sheet projections on corn have quickly move from the 1.8 billion bushel carryout that the USDA had in their June S & D report down to some talking yield low enough to leave virtually no carryout.

Here in lies some of our biggest risk for prices.  Has the drought news been built into the prices already?  How much higher can this news carry us?  First off if we have demand; which is a big if; there is really no limit how high we could go as the last person needing it could pay a very high price.  But back to the carryout the latest estimates I have seen for the Wed USDA Supply and Demand report are calling for a 600 million bushel reduction down to about 1.2 billion bushels on average for 2012-2013 ending stocks.

Based on the previous USDA reports I think we have some risk come Wed that the USDA still doesn't acknowledge that their 166 bu yield is out of whack.  I don't think anyone believe that they will once again leave corn yield unchanged with the declining conditions; but there is the chance they don't lower it nearly as much as the market thinks or the markets.

There is also the risk that if they do lower the corn yields that they lower the demand nearly as much.

I guess you can see that i am leaning towards a bearish USDA report because of the fact that the market is expecting so much.

Does it mean you should be selling?  Yes and No......It means that you should be comfortable because these grain prices could pay out a couple different ways and those could be huge moves.  

I don't think 10.00 corn or 10.00 wheat is a super strech today; but then again the end users that are losing money today might not agree with me.  There in lies another risk that our high prices curve demand faster then the supply has dropped.  Is it possible?

That i don't know for sure; but I think it is possible that the USDA curves demand nearly as much as they curve supply.

Bottom line is our markets have plenty of risk either direction; look at the US dollar which at calendar year highs.  As is corn.  Can both of them hold?  History has told us no that we can't have super strong grain prices with a strong US dollar.  

So what happens if come Wed we start seeing some forecasts changing for cooler weather with rains and we get a USDA report with a 1.5-1.8 billion bushel carryout?  Will the rains be too late if they ever do come?  Will the market believe a bearish USDA report should it happen?  What about if one is in the drought them self and are wondering if they went from 50% sold to 100% sold; what do you do know?

You find a way to get yourself comfortable.  Whether corn rallies another couple of dollars or gives up a couple of dollars.  Find a way to feel comfortable on what you have or haven't sold.  Generic things like making small sales, using re-ownership strategies like min price contracts or buying call options, or buying puts should work for some. But getting comfortable in grain marketing isn't the same for everyone.  So do your homework and decide what it is that you need to do depending on the various possibly outcomes and keep in mind that even though things look bullish today one of those outcomes has to be a possible bearish out come.  

In other words don't get yourself comfortable via being bullish because you know prices will go up.  Get yourself comfortable by doing the right marketing that you know you should.  If you need help or want suggestions feel free to give me a call.

Overnight Highlights from Country Hedging's Tregg Cronin 7-10-2012

Below is overnight highlight's from Country Hedging's Tregg Cronin

Outside Markets: Dollar Index down 0.050 at 83.111; NYMEX-WTI down $0.21 at $85.81; Brent Crude down $0.82 at $99.50; Heating Oil down $0.0060 at $2.7430; Fat cattle are weaker, feeders firmer and hogs softer; Gold up $7.40 at $1596.50; Copper down $0.0015 at $3.4300; The Euro and Franc are a hair weaker while all other major currencies are firmer; Coffee is the only weaker Soft commodity this morning; S&P’s are up 4.25 at 1353.50, Dow futures are up 52.00 at 12,737.00 and Treasuries are weaker.

World equity markets are trading firmer this morning after the Eurozone drew up a Spanish aid blueprint for €100 billion bank bailout, a deal which is expected to see the first €30bn from the eurozone’s €440bn rescue fund.  The bailout will come with conditions such as stress tests for 14 of Spain’s largest financial institutions.  Other news included Chinese export and import growth both slowing in June, signs China could still be heading for a hard landing.  Exports rose 11.3% y/y, down from 15.3% in May.  Imports were up 6.3%, half of May’s 12.7%.  China’s trade surplus was $31.7 billion.  The other big news headline was word of PFGBest’s trading accounts being frozen on ideas customer seg funds could have been mismanaged.  Still in the early going for this story.

Before getting to specific weather, the National Climatic Data Center said the first six months of 2012 were the warmest of any year going back to 1895.  Drought now covers more than half the contiguous 48 US states.  The national temperature was 52.9 degrees through June, or 4.5 above average.  Rains in the last 24 hours were confined to the southern plains and delta where many states received 0.10-0.50” with localized amounts of 1.0”.  Nothing in the main corn belt states received rain.  Showers continue to work across the southern plains, Delta and SE-US this AM.  5-day forecasted precip is showing 0.4-0.8” totals for the Dakotas, nothing for IA/NE/WI/MO/KS, but IN/OH could still see some 1.0”+ total amounts.  The heaviest rains will fall in LA/AR/MS/AL/TN/GA/SC/NC with 1.5-6.3” possible.  That rain in IN/OH would be welcome.  Overnight 6-10 day maps are keeping the door open for more storms in the ECB on one model but not the other.  The Dakotas will be quiet.  The 11-15 has lots of rain in the central Midwest but needs verification.

Grains are trading weaker on a bit of profit-taking, led by wheat as the story remains a row crop one.  Between what looks to be already factored in crop condition ratings, and the PFGBest brokerage mishandling of customer accounts, both seemed like good enough reasons to set back a bit overnight.  Weather remains the dominant factor, and there are a bit better rain chances at the end of this week and in the extended maps, but this has been the case for much of June and July so far to no avail.  We are still trying to “realize” how small this crop actually is, and it doesn’t appear we’ve done that yet.  Already this morning, some are talking of national yields in the 130’s.  Today could also see some additional de-risking in front of tomorrow’s USDA report which could be bearish.

Overnight headlines included several from China which said summer grain output would hit a record 129.95MMT, up 2.8% y/y.  Of course it is.  June soybean imports were up 31% y/y and 6% from May at 5.62MMT.  Jan-Jun imports totaled 29.05MMT, up 22.5%.  In exports news, South Korean flour mills bought 26,500MT of US wheat from STX for Sept 15-Oct 15 shipment.  The wheat included 8.5-9.5% soft white at $301/ton, 11.5% HRW at $314/ton and 14.0% DNS at $368/ton, all FOB.  Japan is tendering this week for 131,379MT of US-wheat for Aug-Sep shipment.  According to yesterday’s COT report, speculators increased bullish bets on commodities by the most in 2-years.  Ethanol prices rose to the highest level in 7-months to $2.504 yesterday, thanks to rallying corn prices.

Open interest changes yesterday were rather impressive in corn, up 34,100 contracts with fresh money pouring in as the market hit limit up.  Wheat was up 710 contracts, beans up 890, meal down 3,420 and soy oil up 3,880.  The soybean stat is a bit concerning as the 40-60c rally clearly saw big changes in ownership, possibly from the commercials to the specs.  There were 220 redeliveries in Chicago wheat overnight.  Chinese beans were down 10.25c, meal up $5.20, corn down 2.50c and wheat down 3.75c.  Paris Milling wheat is down 1.1%, UK feedwheat down 1.08%, Paris Rapeseed down 0.58% and Canola is down 0.24%.  Corn export basis backed off at both export fronts and at most ethanol plants yesterday as demand continues to wane.  I’ll detail the COT in this afternoon’s writeup.

Call things weaker in the early going, but don’t rule out two-sided trade today.  Our limit up move yesterday clearly priced in part of the 8% drop in corn conditions and the 5% drop in soybean conditions.  That doesn’t mean we’ve penciled in the smallest crop size as little rain is on tap this week.  Still, we’ve likely earned some more choppy trade at least.  Review % sold ahead of tomorrow and especially with this latest brokerage debacle getting going.  USDA releases their WASDE at 7:30 CDT time tomorrow morning.

Trade as of 7:00

Corn down 6-8

Soy down 8-10

Wheat down 8-15    

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 update from Country Hedging's Chris Steinhoff 7-10-2012 day ahead of USDA report

Crude oil is down $1.00…US$ is 0.200 firmer…DJIA is  up 4 points…grains-can’t be up everyday

Corn---can’t be up everyday as traders think to tomorrow’s USDA and square up and take profits. Tomorrow report may be irrelevant as traders may not agree with USDA anyway….. Rain seems to stay 7 days out, and we now needed it last week.  Get to July 30 and rain will not make much of a difference and we will transition to a demand market. Markets are at the highs when news is at its worst…can news get much worse??? The US corn crop is smaller today than it was yesterday. Period…but we need to remember we have already rallied $2.00+…. So something is factored in. Hearing ethanol plants being told by management to cut grind 30% immediately. Talk of selling contracts back to elevators and no new DDG sales! Also hearing farmers on the fringes of the “new” corn belt realizing they can not grow dryland corn as weather doesn’t allow it…there was a reason the old timers grew wheat. Because the rain was Nov to May, Not may to July!!!!!!!!!!!!!!! Spreads are slightly weaker. We are beginning to see major signs of a demand slowdown. Farmgate offers now well above the market as many open orders have been achieved. Much speculation on the mandate and whether uncle sam ever considered what happens when the US sees a drought.

Soyabeans---world demand remains strong. Mainly China. US crusher watches beans go by door to the export market. Dryness hurts the beans to as beans are losing yield potential daily as well in many areas, but there remains time to still have a good crop. Where moisture allows there are still double crop beans being seeded, but those areas are scattered. Total planted/harvested acres may not be as high as predicted as summer dryness hurts the double crop option. New crop export book is large but then again there seems to be plenty of old crop book too yet to execute. SX:CZ is 2.14:1, so there is room for beans to run on the spread.

Wheat---SRW and HRW harvest moves fast as the crop is now 75+% in the bin. Spring wheat is coming on fast as warm and dry weather brings it early and harvest will be sooner than we think. Still has great potential but could use a few cooler temps and a shot of rain. MT has a few issues. MGEx is flat, KC and CME are carries…World still experiences a few production issues but Canada looks mostly OK and the US skated by without any major, major issues. Black Sea region has a weather issue as their production is still in question, which in turn brings into question their ability to export. USDA report tomorrow may not really mean much

***new crop train values are slashed as all the grain seems to be in the WCB and the RRs want this new grain to move to the PNW and the export market. Farmer selling is quiet and they are now bullish again…World has experienced drought in Russia, Ukraine, Argentina, S Brazil and other areas the past 12 months!!! Will the highs be seen in July????? Call if you need anything

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

www.countryhedging.com

Country Hedging Mid Day in the Markets 7-12-2012

Midday In The Markets

GRAINS

Grains and oilseeds are climbing higher as we wonder just how small the corn and bean crop are going to be. We’re seeing plenty of buying today; it appears no one wants to be short. Export sales were good for beans. Wheat continues to follow row crops also finding extra support from production problems in the Black Sea and Japanese buying. Soybean spreads are still weaker. Soybean fundamentals are still bullish, but the elephant in the room is how much will China pay for beans if their economy is slowing down? China sold 390,090 mt of beans from reserves today.

Export Sales: In thousand tons

                Old         New

Corn:     172.7     492.1

Wheat:                 311.8

Beans:  332.1     427.1

Meal:    95.7        74

Oil:         34.4        -0.5

LIVESTOCK

Once again higher corn prices and slow demand for beef continue to put pressure on cattle. Weekly export data showed a net sales of 17,300 tons, down 2,600 tons from last week. With a stronger dollar and a majority of “grilling” holidays behind us, exports will continue to hold sway over the market. Also, an abundance of supply as more cattle come off drought-ravaged pastures into the market will be detrimental to prices as well. Lean hogs are trading higher today on firmer cash prices and as packers buy hogs to fill out the week’s slaughter quota. Yesterday’s average cash hog price form Iowa/ Southern MN was $97.30, up $2.26.

ENERGY & FINANCIALS

Stocks continue to fall as investors lose hope of QE3. Not even the good economic data was able to revive their spirits. US jobless claims were down 26,000 to 350,000. Global economic growth is still weighing on the markets as investors wait for Friday’s reveal of more Chinese numbers and any further developments in the euro zone crisis. Gold is down $8.90 at $1,566.80. Crude is down $0.67 at $85.14. The Dollar is up $0.12 at $83.85. It looks like the dollar may be shaping into a “head and shoulders” pattern, so that should give us something to watch as well.

Jenna Roe

800 328-6530

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Country Hedging, Inc.
The Right Decisions for the Right Reasons

Overnight Highlights from Country Hedging's Tregg Cronin 7-12-2012

Outside Markets: Dollar Index up 0.181 at 83.749; NYMEX-WTI down $1.00 at $84.81; Brent Crude down $1.18 at $99.05; Heating Oil down $0.0416 at $2.7202; Cattle are lower, hogs are firmer; Gold down $11.40 at $1564.10; Copper is down $0.0510 at $3.3965; The Yen is firmer, but all other major currencies are weaker; Softs are mostly weaker; S&P’s are down 10.25 at 1326.00, Dow futures are down 87.00 at 12,449.00 and Treasuries are a bit better.

Grabbing headlines this morning is the weakness in the EURUSD cross which has pushed the euro down to the lowest level since June of 2010 at 1.2189, while the US Dollar makes 2-year highs.  Nice if you’re going to Europe in the next year.  The other striking thing is how investors are still searching for short term safe havens.  German, Dutch and Swiss 2-year treasury yields are now negative, meaning you’re going to pay those governments interest to hold on to your money just so you know you’ll get it back in two-years.  After early gains, Spanish 10-year yields are back to 6.69% and Italy at 5.87%.  The data out of Europe this morning was factory orders which showed a 0.6% rise in May from April, but France and the Netherlands were weaker than expected.

Rains have fallen across the Dakotas in the last 12 hours, and continue to work East across both states this morning.  Totals so far look like a trace to possibly 0.25” with heavier amounts in the NE portion of both states.  Otherwise, additional rain fell across the Delta, putting the 4-day total at 0.75-3.0” in most areas.  5-day forecasted precip is showing continued rainsa cross the Delta with the northern tip of this system reaching up to S-IL/S-IN/OH and bringing anywhere from 0.50-1.50” in the heaviest areas.  ND and N-MN could also see more rain by the end of the weekend.  The 6-10 day models remain highly divergent with the American showing widespread rain across the Midwest, but the Euro limiting rains to the Delta/TN/KY with some chances in the far NW-Corn belt, but nothing organized.  Continue to stick with the euro until proven otherwise.  The 11-15 shows rains in the central Midwest, bringing rains to most corn belt areas.  Temps should remain above normal throughout the period with warmer temperatures in the upper-Midwest.

After the incredibly volatile session yesterday which saw prices hit lows and then rally slightly into the close, that momentum is carrying into the overnight and early morning session with corn up double digits, wheat up around 7-9c and soybeans posting very slight losses.  It looks clear the selloff was overdone yesterday, especially as the rumors Sec Vilsack was going to address the RFS mandate proved to be false, but the technical damage had already been done.  Fortunately, markets are focusing on the bullish fundamentals this morning.  A further correction shouldn’t be ruled out as these markets can easily set back further while keeping the uptrend in place, but these markets should remain supported by fund interest and eager end users to extend coverage on any big break.

Overnight headlines included Pakistan resuming wheat exports after almost a year as its grain becomes internationally competitive.  Small volume were sold for spot shipments to Malaysia and Indonesia.  13.0% milling wheat is being sold around $295-298/MT C&F.  Pressuring a bit to soybeans was China selling 390,090MT of soybeans from government reserves in an auction Thursday to sharply better demand according to CNGOIC.  The government sold 379,488MT at CNY 4,005 ($17.11/bu) in provinces with a heavy crush presence.  This is the function of the market: get China to sell its reserves down and stop buying US beans.  We’re not at that price yet.  Strategie Grains downwardly revised its EU 12/13 grain harvest by 2.4MMT to 278.8MMT.  Corn and wheat were both cut.

From Morocco we learn their wheat crop has dropped 40% y/y to 5.1MMT due to drought.  Imports are expected to pick up.  In tender results, Japan bought 131,379MT of US milling wheat from the US for Aug 21-Sept 20 shipment.  Our favorite investment bank ($GS) raised their price forecasts on corn to $6.90/bu, their wheat forecast to $7.70/bu and soybeans to $16.25 due to drought concerns.  Their corn yield estimate is now 143.5bpa.  There were 25 Chicago wheat re-deliveries overnight as well as 462 soybean oil.  Open interest changes during yesterday’s session included an increase of 17,070 corn, 16,440 beans, 2,120 meal and 2,370 oil.  Wheat was up 6,810.  Chinese beans were down 41c, meal down $13.10, oil off 122c, corn down 1.50c and wheat down 8.50c.  Paris Milling wheat is up 1.42%, Rapeseed down 0.88%, Canola down 0.83% and UK feed wheat is up 0.60%.

Call things better to begin with today as cooler heads prevail and the bullish fundamentals matter.  Rains this weekend will be falling in areas which could help the soybeans still, but questions have to be raised about the corn, and the WCB crops don’t look on tap for a soaking rain just as temperatures build back above 90 degrees.  Yesterday’s price action caught a lot of people off guard, so make sure you level marketed is where you want it based on your production prospects.

Trade as of 7:05

Corn up 11-14

Soy up 2-5

Wheat up 7-9

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

afternoon grain market comments from Country Hedging's Tregg Cronin 7-12-2012

Below is from Country Hedging's Tregg Cronin

No full write up today, but some comments worth sharing:

First up, both weather services we use were less aggressive with rains in the central belt this weekend.  One is looking for spotty rains across E-IA/IL/WI/MI/N-IN now thought to be less than 0.20”.  The Northern Plains should be quiet the next 5-days.  The other said they reduced their 1-5 day coverage 5% to 40% through Monday.  Then the heat gets turned back on beginning early next week with Chicago forecast to hit 100* on Tuesday.  10-day highs for select cities below:

Sioux Falls: 87, 92, 91, 92, 92, 93, 89, 92, 94, 92

Omaha: 91, 95, 97, 95, 95, 95, 94, 95, 98, 96

Des Moines: 90, 93, 94, 96, 96, 95, 93, 98, 95

Decatur: 92, 90, 89, 93, 93, 93, 93, 92, 96, 95

Marshall, MN: 88, 89, 91, 90, 91, 88, 89, 93, 88

Indianapolis: 91, 85, 86, 90, 91, 91, 90, 89, 91, 94

Madison, WI: 91, 94, 92, 90, 94, 94, 91, 89, 93, 95

Very few overnight lows below 70* it should be pointed out, and even during the chances of rain for the ECB, most fail to move below 90* for a daily high.  Worth pointing out the sharp rebound in Nat Gas prices around midsession when the maps came out.  Hotter next week? 

More and more anecdotal reports from the WCB about how dry things are getting with S-SD talking of chopping silage already before nitrates move into the plant and render it useless.  SW-MN is also hurting bad for a rain, and according to boots on the ground need one in the next 10-days or else….  Scattered headlines had the wheat market moving higher today including the Russian Grain Union stating the entire Russian grain harvest would be below 80MMT.  This likely implies a wheat crop around 46MMT vs. the USDA’s latest guess at 49MMT.  Paris Milling Wheat finished up 3.0% today, and one trader said there was talk of Black Sea export controls, but those seem unlikely at the moment.  Keep in mind, however, it was late July/early August when Russia banned exports in 2010.  We made our blow off top the first week of August, sold off until November before rallying into the 2011 highs near $9.00 basis Chicago Wheat.   There were also rumors running around Indian wasn’t going to allow wheat exports, presumably because of high food inflation.  Lastly, contacts suggested China was sniffing around for cash wheat for feed stock, but basis moves didn’t imply same.

Corn yield ideas continued to move lower today with Rosenthal Collins dropping their estimate to 135bpa while NewEdge cut theirs to 139.9bpa.  As noted in yesterday’s commentary, RJ ‘O Brien’s two analysts are using 140-141, but both said when taking a look at state yield data, it doesn’t take much imagination to move it below 140bpa.  Another interesting tidbit from today’s session was DTN took a look at comparable drought year’s and the differential between planted and harvested acres.  In 1988, 2002 and 2005, harvested acres were typically 10% less than planted vs. the current year’s 9.2%.  If the 10% is used, another 312mbu can be shaved off our production.  For every half a million acres which come out of the harvested column, subtract 73mbu if we take the 146bpa as fact.

As noted in this morning’s comments, China did hold a successful state reserve auction on soybeans overnight where 99% of the 394,000MT offered were purchased at a price between $16.87-17.11/bu.  Their markets were down 41c.  This is the function of the market: go to a price which discourages the buying of US soybeans.  As evidenced by Brazilian basis levels today, up 20c to +200Q, it will be US beans they have to stop buying as South America doesn’t have any.  Speaking of exports, soy complex exports continue to be incredibly strong.  In the last week, exporters sold 12.2mbu, way above the 2.5mbu needed per week.  The USDA will have a difficult time justifying further demand cuts if this keeps up.  Bean Oil and Meal were also very strong, wheat was mediocre and corn was weak.

Traders were making note of RIN prices today, which have rallied to $0.0345/gln from around $0.01/gln at the June lows.  When these start approaching $0.10/gln it will be significant and worth noting as the rationing process of corn rolls on.  Barge freight continues to push higher as low water inhibits grain movement.  CIF corn bids were slightly weaker on the front end, but 1c firmer for new crop.  More chatter about Brazilian maize trading into South Carolina with the first vessel said to be on the move.  Again, more instances of rationing.  The spread between live cattle and feeder cattle continues to blow wider thanks to rallying corn, improving cattle crush calculations.  Still not a business a guy wants to leap in to with both feed, but better than something that isn’t so great.

If you noticed yesterday in the comments, any and all protein premiums have been wiped out of spring wheat.  Right now, wheat is wheat.  ND weather has been a bit cooler/wetter than SD weather, so possible high protein isn’t uniform, and Canadian weather likely less threatening than ND for same reasons.  Scales in the country are around -2/+2c a 1/5.  It would seem the elevators in the northern plains are content to let the farmer store grain when there are no carries on the board, and the farmer wants to utilize his new storage.  With that in mind, expect limited carries and small inversions to persist in Minneapolis wheat as has been the case the last several months.  As the market wants the wheat it’s going to have to bid for it and keep spreads firm, but farmers aren’t being paid to store spring wheat, and that is something they should realize.

Grains are up nicely on the week, and should try to carry gains into the weekend tomorrow.  I don’t know too many who want to be short going into a weekend in which rain chances are iffy at best.  Our markets don’t feel like they’re done going up just yet, but the demand destruction taking place is clear and present.  When it matters, it’s really going to matter.  Keep making sales, especially on wheat as historically these prices are near the upper 10-15% of historic ranges and at harvest no less.  A couple pictures to follow:

   

North East, IA near Decorah.

Sláinte.

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