Open Grain Market Comments 4-23-12
Markets are called mixed this a.m. behind a choppy mixed
overnight session and rather weak outside markets.
In the overnight session old crop corn was up 2 cents, new
crop corn was unchanged, beans were down 3-6 cents, KC wheat was up 2, MPLS was
up 1-4 cents, and CBOT wheat was up 1-2 cents a bushel. At 8:55 outside
markets have European wheat off about ½ of a percent, the US dollar is firmer
up 300 at 79.495 on the cash index, equities are in the red with the DOW off
160 points, crude is off about 1.80 a barrel, and gold is off about 12 an
ounce.
We still have yet to see confirmation of any Chinese corn
purchase which was rumored late last week and we now have some rather ugly
outside markets. Not exactly a great receipt for higher prices; but we do
have a market in beans that seems to just want to run and we are at the bottom
end of the ranges we have had for a long time for corn and wheat. So I
don’t think I want to get overly bearish this a.m.
The volatile outside markets along with the prospects for
big crops should keep us rather defensive in our grain marketing
approach. Remember 2008 anyone? The funds are now record longs in
the bean market, near record shorts in the wheat market, and they have trimmed
their shorts big time in the corn market.
We will have export inspections out this a.m. and this
afternoon we will have crop progress and crop conditions. The market is
expecting that a good amount of corn got planted last week. Enough that
one of the articles I read this a.m. mentioned 1 billion bushels of corn
available by September; more then 3 times normal.
I don’t think now should be panic time for corn and wheat,
but the bottom line is the wheat crop looks great and has got bigger the past
several months and the prospects for corn look good too. So if we
continue to get ideal weather and were to see the outside markets under some
extended pressure the downside risk for the grains is rather large(even at
these levels). I think we should find good values at or near the present
levels but if money flow decides to leave or weather is simply ideal there is
plenty of downside risk that should tell us to be pro-active and don’t be
afraid to make sales on the bounces and perhaps don’t be afraid to get
protection at or near these levels.
For a scary thought one of the regulars that I follow who is
simply a technical trader has a target for corn at 3.50 on the board.
That would be under 3.00 cash price (ouch). One thing I do know is that
bottoms are usually made when everyone becomes bearish and things look the
worse. While tops typically happen when everyone is bullish and thinks
things can only go up. I keep both of those in mind but I also think in
grain marketing one needs to simply practice good risk management in a way that
takes out those extremes and allows comfort whether the markets go up or
down. Don’t be afraid to give us a call if you need some help with your
grain marketing plan.