morning comments 10-9-12
Markets are trading firmer on Tuesday Oct 9th.
Around 8:15 we have KC wheat up 7-8 cents, MPLS wheat up 7,
CBOT wheat up 9, beans are up 14, and corn is up 4-5 cents. Outside markets have a firmer US dollar,
equity futures up slightly, and crude is up 90 cents a barrel.
Not lots of new news lately; more position squaring ahead of
the USDA Supply and Demand report which is out Thursday morning. Yesterday’s holiday delayed export shipments
and the crop condition progress reports until today.
The other news out there seems to be more of the same;
firming wheat basis, bigger than expected yields (mixed by some but bigger than
expected is leading when it comes to headlines along with more and bigger grain
piles then expected), fund still holding rather big positions in corn and
beans, concerns over world wheat situation as crops get smaller in Australia.
As for the report estimates for corn yield are 122.8 which
is basically unchanged from USDA. I have
seen production number all over the board with some thinking less harvested
acres and others thinking bigger yields.
But overall not much expected change for corn production; the last
overall estimate I seen was 10.6 billion bushels versus the 10.727 that the
USDA has in Sept.
Probably as big if not bigger than production will be where
ending stocks are projected and what the USDA does with demand; exports have
been lacking yet the stocks report at the end of Sept showed a smaller starting
spot than what was expected; average estimate for ending stocks is 656 million
bushels for the 2012-2013 marketing year versus 733 in Sept. Keep in mind that the USDA was already
projecting over a billion bushel of demand cut from last year.
As for beans production ideas are 2.76 billion bushels
versus the USDA at 2.634; with yields at 36.9 versus 35.3 last month. Lots of debate of yield here but some
estimates are closer to 40 bushels per acre.
Once again as big as production will be were the USDA pegs carryout at
and what they do with demand. We are well
ahead of the needed export pace so there is potential that we see any increases
in production are offset by demand increases.
Carryout estimates are at 135 versus 115 last month; I should mention
that the September stocks report showed more than expected as well; which
should lead to a bigger starting spot.
Wheat is pegged at 627 million bushels versus last month’s
698 million bushel carryout. We had a bullish
stocks report that indicates good feed demand; while production didn’t have major
changes. Lots of eye’s will be on the
world numbers here and spillover to our exports. We are currently running behind the needed
exports yet we have our competitors getting less available to export. Year over year world wheat numbers are
getting friendly; but enough for another leg up? In my opinion not until we actually see some
of that demand hit our markets.
Going into the report we have to realize that even though there
is plenty of upside potential should things go good there is also plenty of
risk. Who know what type of curve ball
or change up the USDA has up their sleeve this time?
Bottom line with the extreme volatility we have seen the
past several months and all of the unknown in our markets as well as the world
economies make sure you are comfortable no matter what the USDA says come
Thursday. For those that where pro-active
making sales early it might mean catching up a little bit and working on
getting your average a little higher; for others it might be doing nothing as
everyone situation is different; bottom line is heading into a report that
could move us tremendously either direction one needs to be a little pro-active
when it comes to risk management. One
can be bullish and have tons of great reasons to be bullish but the market is the
market and it tends to follow what the USDA says right or wrong. If you need help with a marketing plan or
want to look at some strategies to help protect one heading into the report
please give us a call.
The birdseed market is still showing little interest in
sunflowers; but the good news is the crush market should put a min price we see
as right now those two markets are near par.
With beans firming and looking like they have maybe made a seasonal low
perhaps sunflowers are close to one also.
The birdseed market really needs to have a good wet snowy winter along with
a good economies if we want to see a huge rally later. The thing that is a little scary is way too
many are putting all there sunflowers in the bins thinking that 30-40 cent
sunflowers is a given; we can’t get things too out of balance or we will simply
have some many sellers on a small bounce that a big bounce just might not be in
the cards. One positive I see is the
flowers flowing to the crush and the birdseed end users not buying at what
could be the seasonal low; their lack of coverage gives huge potential; but the
huge amount of unsold product with bigger yields is also going to be a
risk. At the end of the day it could
really end up being a weather market; good wet weather that leads to good
demand we go higher; otherwise perhaps we see long tail effect?
Bottom line for sunflowers is risk management is recommended;
many didn’t sell many the past 2-3 months because of the unknown in yield; I don’t
really want to make tons of sales at what could be the bottom yet if one isn’t any
were sold near the percentage they should be there is still nothing wrong with
making a profitable sale.
Please give us a call if there is anything we can do for
you.
Thanks