Opening Comments 5-9-2013 USDA report preview
Markets are called mixed/choppy this a.m. behind a two sided
overnight session.
When the overnight session paused July corn was unchanged as
was December corn, KC wheat was up a penny, MPLS wheat was off a penny, CBOT
wheat was off 2, old crop soybeans were up 6 cents a bushel, and November
soybeans were down a penny a bushel.
Outside markets are also fairly choppy with the US dollar up slightly
with the cash index at 81.99, crude is off 50 cents, gold is off 10 bucks an
ounce, and equity futures are pointing towards an unchanged start.
We had export sales out this a.m. and tomorrow we will have the
May USDA Supply and Demand report.
Otherwise we seem to be in a weather market and one that seems to be
controlled more by money flow then anything. It hasn’t seem to matter if producers or
buyers are interested in a given day for some time.
As for export sales kind of a non-event this a.m. Corn sales were below expectations as well as
the needed levels to hit the USDA present projections. Will they be lowered on Friday? Old crop wheat sales were also below the
needed levels. Soybeans sales were above
needed level and positive for the first time in 3 weeks but nothing great. Soybean meal sales continue to be positive;
but also continue to slow down from the super strong pace we have had.
Last week we had super strong new crop sales for the big
three grains; but that wasn’t the case this a.m. New crop wheat sales came in at 8.3 million
bushels; which is less then ½ of last week, corn sales for new crop came in
only at 6.7 million bushels which was about ¼ of the previous week, and new
crop soybeans sales came in at 14.4 million bushels also about 1/3 to ¼ of last
week’s new crop sales.
The big thing that stands out for new crop sales is the fact
that wheat is well ahead of where it was a year ago and corn and beans are well
behind were they were at a year ago. If
you look at present balance sheet projections or thoughts. (The actual first new crop USDA balance sheets
will be out tomorrow Friday May 10th) One would think that we need to increase our
corn and soybean exports versus this year or have massive carryout numbers
simply based on the increased acres and fact that odds favor a little better
yield versus last year’s drought impacted crops. While our wheat ideas today are that the crop
is smaller year over year and thus we will have less to export. Bottom line is it could mean less wheat
business as we go forward and hopefully it means more corn and soybean business
as we go forward.
Weather still looks to be neutral for our markets; with the
deferred slots still fairly open in the major parts of the corn belt. Time however keeps going by and field work is
slow in the corn belt; much got hit with a small amount of moisture yesterday;
maybe not enough to push things back several days but probably enough to slow
things down or halt things for a day or maybe two? Next week’s crop progress report will be very
important; but so will the deferred forecasts.
Tomorrow we have USDA report…….below is recap of trade
estimates. Typically I like taking a
little risk off ahead of the USDA reports.
Not sure if that is the right move or not; really depends on how comfortable
one is in the present marketing plan. I
would point out that there could be some huge risk; very un-likely and I still
think we could and should see a weather rally at some point for the row
crops.
But here is the risk that I see and it is in regards to new
crop corn primarily and remember corn seems to be king; so that risk could be transferred
on to the other grains fairly easily.
The risk is that our new crop carryout number comes in much higher than
the 2 billion bushels; maybe add to that a favorable forecast Sunday night
along with planting progress better than expected and we could see extreme
pressure and how knows how low the funds could drive us. Now I think it is unlikely that the USDA does
that and I think our old crop tightness is for real and that should keep some
support for new crop but if we want to look just at the demand side you can
make some big arguments that the USDA pencils our new crop corn carryout
200-500 million bushels above the 2 billion.
For one we seem to have an ethanol blend wall; secondly as
mentioned above we are well behind last year’s new crop corn exports; but more
than that is we seem to have some talk of big crops in other places in the
world. Can we really just turn on a
light switch and gain the exports back because now we need them? How about feed demand how fast can that
actually increase? Then we have the
production side of things; the USDA has had a history of overstating
production; while will they not do that once again tomorrow?
If we look at the big picture we need to realize that a
decent crop at all can leave us with a 2 billion bushel plus carryout while
still needing to increase demand more year over year then we have EVER done in
HISTORY. That is scary and so is the
fact that this is a USDA report as the logic they use should tell us as
marketers that there is no guaranteed what they will print; right or
wrong. Bottom line is we could have
plenty of risk and if you are not comfortable with it maybe do something about
it?
What would one do?
That is a big struggle as I don’t really like making sales at present
levels; nor do I like spending tons of money to buy the put options. Perhaps the short dated new crop options are
a move but who knows.
Please give us a call if there is anything we can do for
you.
As mentioned here is the USDA estimates.
The below is coming from the Van Trump Report.
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Jeremey Frost
Grain Merchandiser
Midwest Cooperatives
800-658-5535
800-658-3670