Closing Comments 3-25-2013 - USDA Report Preview
Mixed day for the grain markets today.
Corn closed up 7 with much of that strength coming from fund
buying near the close, soybeans closed down 3, KC wheat was down 3, MPLS wheat
was down 1, CBOT wheat was down 3, equities closed weaker with the DOW off 64
points, crude was up about a buck, and the US dollar was sharply higher.
An ok day for the grains; but one that also left me feeling
a little cautious. First off the strong
close by corn seemed to come from the funds and idea’s that this week’s report
will be bullish. The only bearish
forecasts I have seen for the report are those worried about the fact that
everyone seems to be bullish on it and I land in that camp. That we have had a nice rally since the last USDA
report; but we also seem to have too many looking for bullish numbers which opens
the door will they be bullish enough.
What if they are not bullish but actually bearish. No one is talking about it; but this report doesn’t
have a history of always limit up; there have been numerous times when it has
been limit down. I do feel that the report
happening when the markets are open will take a little of the extreme out of
the report; but also add to the volatility.
What I mean by the extreme out of the report is the fact
that we won’t have everyone waiting for the open to and getting more bulled up
or bearish. I guess I have a theory that
the longer the info is out without pricing itself into the market the more
extreme the movement when the market opens.
I.E. in the past the markets had always been closed when the USDA
released it’s stocks or S & D reports.
The past few the market has been open and the market seems to trade both
sides in rather choppy volatile trading action when the report is
released. Before if we had a bullish
report; we wouldn’t see the market trade both sides; it would simply trade
higher off of the open or lower off of the open if we had a bearish
report. Before by the time we had the
report out everyone had already jumped on the buy or sell bandwagon; now with
the markets open the price discovery happens for a little longer period of time
in my opinion.
Back to my point; it just feels to me that we have some risk
on old crop corn in particular that everyone is looking for a bullish
report. It might take something super
bullish to have follow through buying.
Also a little concerning is the local fact that I can’t find much if any
homes for nearby corn. End users completely
plugged and having no interest for a few months is not bullish; but that might
just be a local thing as some areas still need corn hence we still have a
decent inverse on the board.
The other thing that made me a little nervous today was the
price action on the outside markets. A
very strong US dollar doesn’t help us get additional exports and an overall
risk off type of attitude won’t promote money flowing into investments such as
commodities. I didn’t like the DOW price
action today; perhaps it was just another small correction in what has been a
big bull market since 2009; but trades like today were we put in new all time
highs and trade lower than the previous day’s lows are yellow flags to me and
technically made give some a decent risk reward spot to go short. Plus we have all seen the arguments on the
actually strength of our economy; so I won’t go down that road; but some of the
things going on in Europe and with Cyprus should make us nervous. That isn’t all bad either because it means
that at least some are playing the market from the short side which means we
have a little balance. When everyone
gets supper bullish or supper bearish and we don’t have that balance that is
when typical blow off tops or bottoms tend to be made.
Else were today basis felt a little weaker for corn. As mentioned above a lack of homes; or at
least homes at values that are being posted.
There is always a price that will trigger buyers; but right now that
price is much lower than most of the posted bids. The positive for corn is that most end users
especially in our area have little to zero coverage for
June-July-August-September corn and I know of a couple plants that use 4-5
million bushels a month. That’s a lot of
corn that they need to buy at some point?
Wheat basis felt a little weaker today as well; seen a small
increase in producer selling with some moisture hitting parts of the southern
growing regions. (Heard of a foot in
parts of Kansas for snow in the last event.)
We also still really lack hard red winter exports; we haven’t had any of
the wheat in our area go to the export market.
While years of some bull markets we seen wheat in our area go that
direction. Right now those markets are
still 30 cents or so away from our domestic market for winter wheat. Spring wheat is close; but part of that is
due to the fact that spring wheat in our area can trade a small discount to the
ND spring wheat due to quality and spreads going west.
The sunflower market is slow; bids and offers seem to be
getting a little wider. But orders have
been decent and the crush is competitive with the birdseed.
Seen a rumor that some more Argentina corn has been booked
into SE US Feeder markets. That would be
a both bullish and bearish thing. Shows
us how expensive our corn is versus some other places in the world; but also
friendly because we don’t have enough corn to meet our demand.
We did get some cars into most of our locations over the
weekend and we are offering free delayed price on most of the grains. With the cars most of our locations have room
for almost any grain………….call if you have questions.
Thanks