Opening Comments 5-8-2013 - USDA Report Estimates
Markets are called mixed/choppy this a.m. behind a choppy
overnight session.
In the overnight session old crop corn was down 2 cents a
bushel, new crop corn was down 4-5 cents, KC wheat was off ½ of a cent, MPLS
wheat was off ¾ of a penny, CBOT wheat was off ½ of a cent, old crop beans up a
nickel, and new crop beans up ¾ of a penny.
Outside markets have the DOW futures pointing to a lower start of about
20 points, gold is up about 17 bucks an ounce, the US dollar is off 370 or so
points with the June futures at 81.97, and crude is up about a quarter a
barrel.
Not tons of new news out this a.m.; we really are in a
weather market and wait and see market.
Weather forecasts at any time could spur additional selling pressure or
give us a reason to run up. Wait and see
portion is referring to a couple things; first off wait and see what Friday’s
USDA report tells us for the balance sheet projections and thus importance of
weather and demand. But secondly wait
and see how important weather is based on crop progress over the next few
weeks. Keep in mind that last year
despite our drought going on very early the market didn’t really respond until
the middle of June and the USDA didn’t acknowledge anything in terms of yields
until the July Supply and Demand report.
Last May and June they had the corn yield pegged at over 160 each month;
only for it to end up closer to 120 when everything was said and done.
So we need to wait and see how important or how big of a
factor our delayed planting is or will be.
Will we actually lose acres? The
bears and guys trading it seem to think not; while producers and bulls seem to think
so. How about effect on yield? No clue yet; arguments can be made for both
sides. We do know as I stated yesterday
that longer we are behind in planting and more potential and more risk premium
should be added at some point for things like a frost scare, yield loss, acre
loss, old crop tightness, pollination under a heat dome…..etc. But many of those things are well down the
road and frankly if the crop looks huge come July/August will some of them even
matter or be material should they happen in isolated spots?
Speaking of the USDA report out on Friday here are the
latest estimates I have seen. The below
is coming from the Van Trump Report.
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The
big thing that stands out to me is the projected guesses for the 2013/14
balance sheet estimates you will notice that both the corn and bean numbers for
the 2013/14 carryout are nearly double that of the present carryout. The bigger question should be are we already
trading that type of carryout??………if not how low could prices go? The other important question is how realistic
are those numbers that we get on Friday going to be? Will the USDA be aggressive and overstate
yield potential like they have for the past couple of years? What about on the flip side will they be overstating
demand?
Bottom
line is we could get just as many questions as answers on Friday’s report; but
it will be what the market trades and should really give us direction as to the
importance to some of the factors that we will see as we move forward. Such as weather and demand.
The
other big thing on the report will be wheat production and the world
numbers. The US numbers took a back seat
last month because of the massive increase we seen in the world corn carryout
numbers. If you remember the USDA
numbers came in a good 100 million bushels less than the average estimate for
old crop corn carryout yet we didn’t manage much of a gain because of the increase
in world numbers. The USDA will tell the
traders how important our piece of the pie is versus the rest of the world and
as we move forward we will need to keep in mind that old saying looking out our
back yard. But now we have to look at
both the rest of the United States but also the rest of the world.
Other
news to watch include ethanol numbers out today at 9:30; hopefully we can
continue our trend that we have had the past few weeks. Tomorrow we will have export sales out and
the past few weeks have seen beans being negative; it would be nice to see that
trend change.
Other headlines I did notice today include China buying more
new crop US Soybeans. South Korea buying
more South American corn and Chinese soybean imports down in April.
Please give us a call if there is anything we can do for
you.
Thanks
Jeremey Frost
Grain Merchandiser
Midwest Cooperatives