Closing Comments 1-28-2013
Markets closed firmer today after having spent most of the
session trading choppy.
Corn lead the way firmer up 8-9 cents on the front end, with
new crop up 6, soybeans gained 7 cents a bushel, MPLS wheat was up 2, KC wheat
was up 3, CBOT wheat was up 3, the equity markets where mixed with the DOW off
14 points, the S & P off 3 points, the NASDAQ up 6, the dollar is about
unchanged, and crude up about 60 cents a barrel.
Not a bad day for the grain markets; but we still remain
rather range bound. Technically about
another nickel on March corn could open up some more strength.
The strength today seemed to be two fold; a little from the
weather as it remains very dry in most of the US especially the HRW areas;
while some parts of Argentina look to have some heat with dryness; while other
parts of South America are seeing harvest delays; perhaps keeping the US in the
export game for soybeans.
The second reason for the strength had to be the good export
shipments. Beans remained good which is
no surprise; but the surprise or good thing was the corn shipments at 21.1
million bushels. The best since September
and right at about what we need on a per week basis to meet USDA
estimates. The wheat number also came in
slightly above 20 million; a little less then we need but an improvement over
the past few months. Personally with the
way logistics and elevations work I think seeing corn and wheat above 20
million with beans still above 40 million is good.
Also heard of some improving ethanol margins over the past
few days. Stronger cattle prices also
gave a little support to the corn market.
Overall I think corn still needs to prove it can find demand
or stabilize demand at these levels for all of our users. Ethanol demand overall looks to be a little
weaker with a Poet Ethanol plant shutting down recently in MO. But also seen a local article that indicated
some local ethanol plants thought the way to make it through tough times was
via increased efficiencies or grinding more thus lowering the overhead per unit
cost.
As for other news don’t look for many known headlines;
perhaps a black swan event or two; but the next known headline will be the USDA
crop report February 8th; which is a Friday. We will then see if the USDA has seen many
reasons to increase or decrease our demand; but typically the February report
isn’t one filled with huge surprises as we just did the January that included
the quarterly stocks recap. The February
one could show some adjustments for crop sizes around the world; mainly South
America and right now if I had to guess I would say most are leaning towards a
little bigger bean crop with perhaps slightly smaller corn crop.
After that we will have the USDA outlook towards the end of February
and that is where we could see some more talk of 95-100 million acres of corn
with perhaps trend line or better yields.
I don’t think many producers will agree with the numbers that come out;
but the risk is that some funds (big money) agree and see it as written in
stone. Some of the bulls will continue
to talk about the drought; but most will put that on the back burner until
later in spring as a matter of a fact a drought early spring might mean corn
planted fast and that was one reason the USDA had to increase the yields in the
May/June reports last year.
I guess what I am trying to say is right now where I sit it
just looks like we have the stages set for some sort of repeat of last years
price action over the next couple months.
First off we just don’t seem to have the funds looking to get in and get
long grains. If that can happen at some
point for some reason then money flow can overweigh the perceived
fundamentals. But if we look at
fundamentals we simply have many starting to talk about and play the big crop
coming card. The scary thing is that
without a repeat of last years weather they are probably right. We simply look to grow plenty of supply
especially if the market has done it’s job and curbed demand. Meaning that demand that we had won’t come
back overnight; it might not even come back all marketing year.
As for the reality of what could happen; that remains up in
the air. A perfect growing season gives
us potential for corn under 4.00. While
a repeat of last year or worse probably gives us potential for 10.00 corn or
more.
Adding a little fuel to the fire has to be both the
producers and end user situation. I don’t
have an end user of corn calling me up looking to book new crop. They all think we are hitting 100 million
acres with 160 plus yields leaving a carryout of over 2 billion bushels. While on the other hand I think most
producers have far less marketed/hedged/or protected then they perhaps ever
have. Because of what happened the past
couple years where any early sales simply looked bad. Plus the fact that our conditions are
starting far worse than a year ago. No
subsoil for most of the western corn belt doesn’t give us record corn yields.
I don’t know which group will be right; whether mother
nature will allow us to grow a huge crop or a small one. All I see is that at this second we seem to
be set up for a volatile ride. One that
could be straight down or straight up.
As for the other grains I really feel were they go simply
depends on corn. I think the potential
for wheat to be much higher is there today; but if we see a huge corn crop I just
don’t see wheat being at 10.00 or 12.00; nor do I think beans could with stand tremendous pressure from the
corn market. Corn is king until proven
otherwise; so that tells me that there is still huge risk potential for those
guys that are growing wheat. To think
that there isn’t a couple dollar risk just isn’t accurate. Add that to the fact that we might only have ½
of wheat crop if we are lucky and we could
quickly see things that are not exactly printing profits.
Bottom line is some sort of risk management should be
used. I am not here to see sell
everything or sell nothing; more so I want to promote using risk management
that gets you comfortable. So I think
that means a pro-active plan that includes some exit dates to either make some
sales or get some protection in place.
Don’t save everything for the last minute or you could either be a hero or a goat.
If you want to put together a marketing plan please give
myself or one of the guys in the office a call.
Don’t forget we are a CHS Hedging branch so that allows one to use tools
like simply buying puts for protection or maybe making some sales and buying
out of the money calls so you don’t miss the next big rally.
As for other things happening today it did feel like wheat
basis was a little defensive. But I would
note that the railroad has slipped a little bit; I didn’t receive cars at any
of the 4 locations that I thought might over the weekend and sources say that
car supply is a little tighter then it has been. That could lead to a little
premium getting added to basis in a hurry; but freight will need to slow down
for a few weeks before we see any major pop as most mills have been very full.
The birdseed market is steady; with some buyers looking for
some offers but overall on the slow side.
We do have a couple buyers now willing to do some new crop
act of god millet contracts. Please give
me a call for more info on those.
Don’t forget that we will have our weekly MWC Marketing Hour
Round Table this Wednesday in Onida at 3:30.
Please give us a call if there is anything we can do for
you.