Closing Grain Market Comments 5-14-2013
Markets closed mixed today in choppy trade despite the
rather friendly crop progress report that we had yesterday.
Old crop corn was off 3 cents, new crop corn was off a penny
a bushel, KC wheat was up ½ cent a bushel, MPLS wheat was down a penny a
bushel, CBOT wheat was up a penny a bushel, old crop soybeans closed down 4 ½ cents,
new crop soybeans were up a 4 cents, the US dollar is up 310 points at 83.586
on the cash index, the stock market made more new all time highs on the DOW
today up 124 points, crude was off
almost a buck a barrel, and gold was off about 10 bucks an ounce.
Rather choppy market action today. The May contracts went off the board without
much for fireworks; but spreads did end up at record levels or at least go off the
board at the highest levels in history.
Hopefully that means we have set a target for the July futures to
achieve; but it might take more than basis strength and a lack of producer
selling. It might take the funds or “big
money” getting interested in the grains if we want to see the July contracts
get up to the levels that the May corn and May soybean contracts went off the
board at.
The past couple of days we have had plenty of news; with the
crop report out last Friday the 10th of May and then yesterday we
had an updated crop progress report that showed us with the lowest corn
planting pace on record. I didn’t think
the report on Friday was negative; but it wasn’t enough to get the funds buying
either. It showed big world production
idea’s and big United States production ideas for the 2013/2014 crops; but everything
was very close to the pre-report trade estimates. The present balance sheets remain
historically tight and the late planting progress won’t help new crop aid in
the old crop tightness like it did last year.
I also thought the crop progress coming in at only 28% corn
planted; slow spring wheat planting, slow soybean planting, and a poor winter
wheat crop would have been supportive to our price action; but that wasn’t the
case. We didn’t mustard much of anything
today; despite the fact that some deferred forecasts are also wet for much of
the corn belt. Part of the reason is we
a planting window going on now. But the
bigger thing is the funds don’t seem to want to buy our markets because off too
much rain. Will that change at some point? Perhaps?
But when the funds see the USDA print a 2 billion bushel carryout with
production of over 14 billion bushels it is going to be hard to get them on the
bull bandwagon. Especially if they look
deeper into the balance sheet and see that to come up with a 2 billion bushel
carryout; we need to increase demand by nearly 2 billion bushels over this year’s
demand. On a percentage basis that has
been done; but never on as a raw number.
As I have mentioned many times recently the most probable
logic to increase demand is via lower prices; the USDA average farm price as
example.
Bottom line is the outlook that the funds see for present
fundamentals needs to change; at the end of the day it doesn’t matter much what
you or I think our fundamentals are or could be. It might eventually; but on a day to day
basis it’s what do the funds or “big money” think. So realize that they might not add the
premium that many in the industry feel should be warranted. And if the USDA’s latest forecast is close to
accurate; being pro-active will be the move for this year. Notice a lot of “if’s” ; but keep in mind that
doesn’t mean we shouldn’t be pro-active.
Tomorrow will bring some demand news with the weekly ethanol
numbers and the NOPA soybean crush numbers.
Otherwise we really don’t have much new news out there. We can talk about the weather and the new
crop demand projections but those are becoming old. The bottom line is weather should drive our
markets; but I don’t see it driving us up until things become a total train
wreck and even then it might be hard for wet weather to drive grain prices
up. Everyone know it takes rain to make
grain; so too much rain isn’t the best candidate for a grain price rally.
Our best candidate for future price rally might be the old
crop tightness and then after that weather issues elsewhere in the world. But keep in mind the time table of when
weather issues to happen probably isn’t ASAP……….our weather rally last year
didn’t start until the Middle of June.
The 2010 weather rally via Russia’s issues didn’t start until July.
The other slim possibility is just a reason for the funds to
get interested; keep in mind that the 2008 corn rally happened with a big
carryout; it started via the wheat market and overall good things going on in
the world economies along with talk of hedging commodities against
inflation. So that might also be
something to lend some support at some time; a black swan that says buy grains
or commodities for X reason.
The other thing that can happen is just the technical trade;
at some point things become over done and then with the funds involved we seem
to have an ability to overdue things in the opposite direction. A technically driven or emotion driven market
that decides to accelerate to the upside at some point is also a possibility;
it just probably doesn’t happen until we least expect it.
Elsewhere things rather quiet. Corn basis feels firm; but I can’t sell much
August corn to the ethanol plants as they just don’t like the huge inverse that
they have on the ethanol side of things; not to mention the corn inverse from
July to September futures. Winter wheat
basis is steady to firmer; while spring wheat basis feels a little weaker up
front; but a little more interest in the deferred slots.
Birdseed orders have been strong; but buyers are not paying
up either.
I do have buyers looking for milo if anyone has offers on
that; things there are very tight.
One thing we need to watch is the US dollar which is at the
highest level this year; another negative check mark for grain price outlook.
Please give us a call if there is anything we can do for
you.
Thanks