Closing Comments - Corn up the limit - best day in 10 months
Markets closed firmer across the board today on weather and
short covering.
Corn lead the strength up the limit of 40 cents on the
nearby contract, while new crop December corn was up 35 ½, KC wheat was up 25,
MPLS wheat was up 15, CBOT wheat was up 24, July soybeans were up 28, Nov
soybeans were up 19, the DOW was up 106 points, gold was up 22 bucks an ounce,
crude was up a 1.50 a barrel, and the US dollar is about unchanged with the
cash index at 82.12.
Weather got the markets moving; then some technical buying
and short covering gave corn it’s best up day in months. Weather has cool and wet in the deferred forecasts
and parts of the corn belt forecasted to get 1-3 inches this week; some of which
could be snow in Iowa. This leads to
idea’s that the yield and acres could shrink.
Typically we see a yield reduction when corn gets planted too late and
that is what the market focused on today.
Adding some fuel to the fire this afternoon was the crop
progress; that showed corn at only 5% planted versus the 31% on average and
last year’s 49% planted.
Here is a good recap of the crop conditions from CHS Hedging
Some strength in the corn market also came from the fact that
the funds had moved to their shortest position since April of 2010. So perhaps many had already sold our market
down because of the known fundamentals and now we add talk that perhaps those
fundamentals are changing. Perhaps we
are losing both acres and yield via the slow planting.
Here is link to Friday’s CFTC recap from CHS Hedging.
So today we had the picture change; but today’s picture
changing is a weather market change. One
thing that helped our markets out is the fact that when everyone left on Friday
the forecasts had some warm and dry in them; just a few days later come Sunday
night they had changed. Weather markets
can change in a hurry so by no means is there a guarantee that we will follow
up today’s strength. It could happen but
the market could easily be selling off later in the week saying “rain makes
grain”.
Plus fundamentally how high do we need to go? Think about the fact that we have to increase
demand year over year unless we grow a crop something like 11 billion. If we grow 12 billion we need to find about a
billion bushels demand increase over what we are projected to use. If we dropped our corn acres down to 90
million and yield of 150; and harvested 90.6% we would still grow a crop of
about 12.3 billion bushels. That would be
a decrease in the yield of 5-15 bushels versus most of the estimates out
there. Some of the guys I talk to have
thought for a while that we are trading 155-160 on yield; the USDA in their outlook
for had a 163-164 yield. As for the
acres the March planting intentions were 97 million acres; have we already lost
7 million acres? In our area we have probably
actually gained some acres via the failed wheat; not enough to make a
difference but a small increase none the less.
Bottom line is if this is a rally that is simply driven by
fear; fear that we won’t get the corn in it is probably a rally that at some
point should be sold. I wouldn’t bet
against the American Farmer; and if we can continue a rally and guys don’t take
some risk off the table via getting protection or making some sales that is
what you will be doing. Betting against
yourself.
That being said if the funds decide to jump on board things
could get crazy over the next several days, weeks, and months ahead. If that happens it should make marketing
difficult; as when our markets go up it feels like they just don’t want to
stop. Bottom line is using some risk
management or having a game plan is recommended; because when this thing falls
it could get very ugly.
The other thing that we really need to keep in mind in
regards to marketing is the fact that the average producer is very undersold
for new crop corn. The market likes to do
what it can to hurt the most.
I don’t want to come off as all bearish; as I am not. I think the charts perhaps have turned and we
could see a bounce as we go forward; but I do think that guys need to realize
that this might be a second or last chance.
We don’t have the demand to really have a huge run up (sustained) on new
crop prices; at least not today.
Moving on; other news today included export shipments. Corn came in line with estimates but well
below what we need on a per week basis, wheat shipments were very strong and
well above estimates and the needed per week to meet current USDA supply and
demand balance sheet projections, and beans came in very close to estimates as
well as what we need on a per week basis.
Bottom line no real market mover here.
Winter wheat conditions did drop 2% in the G/E category, and
spring wheat planted jumped to 12% which is still well below the 37% on
average. Neither this nor the lack of
corn planting is probably new news; the wheat crop tour will be new news as we
see those updates over the next couple of days and the latest forecasts will
also be important. If the rain fall for
the corn belt doesn’t materialize and the latest forecasts start calling for
warm and dry we could easily give back some of today’s rally.
For the wheat crop tour you can follow some of the info on
twitter using hash tag #wheattour13.
Here is link for the map of the tour that some will be
following. By the looks of it tour is
probably starting in good area’s but as it moves on it appears to be moving in
to more stressed areas. I find it hard
to believe that this tour will be bearish; but we do have to ask our self how
bullish can it be and how much of it is already built into the market.
Also looks like parts of KS could get down below 30 on Wednesday
night after being close to 90 today.
That could make things interesting with the possible freeze happening
during the tour.
Tomorrow is first notice day for May futures. No limits and with the lock limit move for
July and September corn limits will be expanded starting tonight to 60 cents a
bushel.
Please give us a call if there is anything we can do for
you.
Thanks
Grain
Merchandiser
Midwest
Cooperatives
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800-658-3670
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