Opening Grain Market Comments 6-10-2013 - USDA report estimates

Markets are called lower this a.m. behind a lower overnight session.  Less rain then expected was the main headline.  Realistically any rain in some areas stopped progress or continued to keep progress stopped; but the main headline on the wires as to the weakness in the overnight session was less rain then expected in many areas and some warmer days ahead.

In the overnight session old crop corn was off 7 cents, new crop corn was 9 cents a bushel lower, KC wheat was down 3 ½, CBOT wheat was down 5 ½ cents, MPLS July was up ½ of a cent, MPLS September wheat was down 2 ¾ of a cent, July soybeans were off 16 cents a bushel, and November soybeans were down 10 cents a bushel.  Outside markets at 8:15 have the US dollar firmer by a couple hundred points with the cash index at 81.96, crude oil is down 40 cents a barrel, gold is off 2 bucks an ounce, and the equity futures are pointing towards a firmer start of about 50-60 points in the DOW.

We will have some key news items this week; so we might be in a wait and see market.  First off this a.m. we will have export shipments; that isn’t major and likely doesn’t shift our market one way or another at least not tremendously.  But the trend as of late has been very soft corn and soybean sales as well as shipments.  Will that trend continue and enough so that the USDA has some merit to lower export numbers on the report later this week.

This afternoon we will have crop progress numbers as well as crop conditions.  Corn is expected to be nearly planted with estimates at 95%.  It is early to really put much stock into the conditions; but the trend of the corn crop conditions will be important.  Has the crop improved or got worse in the last week.  Keep in mind that the guys that trade this market and really move this market are not producers and they most certainly are not agronomists; so they look at what the USDA says.  Right or wrong.  The trend and were the crop will be rated a month or two from now will be very important.

Soybean planting is pegged at 70-75% and spring wheat planting up to about 85%.

Weather will continue to be very important; but weather won’t exactly be easy to say bearish or bullish.  How the funds and the traders perceive weather will be important.  Keep in mind that both the market as well as the USDA have a history of being late to the game when it comes to weather stories.  I didn’t trade and wasn’t around in 1993; but from what I hear the acknowledgement of the too wet weather didn’t come until months down the road.  Last year I would say the same thing that the trade didn’t respond to the drought until we had been in it for some time. 

The other big news this week will be the USDA updated supply and demand report.  Which will be out on Wednesday at 11:00 central time. 

Ideas are for old crop corn, wheat, and soybean balance sheets to be left about unchanged.  You can see arguments out there for a decrease in exports; but also increase in soybean crush, and ethanol usage.  With a strong basis and the inverted board I don’t think we have a huge downside risk in the old crop balance sheet changing on this report.  Now at the end of June; who knows.  But we shouldn’t see a major change in the old crop balance sheets on this report. 

The bigger thing the market will be looking at is balance sheet and production changes for the new crop.  Ideas are for lower carryout for all three of the major grains. 

Here is a rundown of both the US and world numbers.

                        Ending                        Ending           

                        Stocks                        Stocks           

                        2012/13                       2013/14          

                         Wheat    Corn  Soybeans          Wheat   Corn  Soybeans

Average trade           0.733   0.759     0.121          0.640  1.795     0.268

estimate                                                               

 Highest trade           0.751   0.919     0.140          0.713  2.200     0.344

estimate                                                              

 Lowest trade estimate   0.715   0.684     0.080          0.501  1.175     0.185

USDA May                0.731   0.759     0.125          0.670  2.004     0.265

                    Global Ending                  Global            

                    Stocks                         Ending            

                                                   Stocks            

                    2012/13                        2013/14                   

                    Wheat    Corn     Soybeans     Wheat     Corn     Soybeans

Average trade      180.395  125.975    62.105      185.144  149.571    73.512

estimate                                                            

 Highest trade      181.550  128.200    63.000      188.500  155.200    76.000

estimate                                                             

 Lowest trade       179.800  124.500    60.500      179.800  141.510    68.200

estimate                                                            

 USDA May           180.170  125.430    62.460      186.380  154.630    74.960

The big thing that stands out above is the fact that despite the idea that we have lost a few million acres of corn; carryout ideas are still big. 

I read something today from the Van Trump report that mentioned that even with a yield drop of a couple bushels an acre and the loss of a couple million acres we still have a record corn crop on deck. Until that changes or the market acknowledges that it has changed rallies are probably simply just pricing opportunities.   Keep in mind that last year we only used a little over 11 billion bushels; from what I can tell most in the trade thing production is now today closer to 13.5 to 13.8 billion bushels. 

Other news out there include harvest down south. I haven’t seen much for updates; I seen a few cars of new crop winter wheat on the spot floor last week but not enough to say better or worse than expected yield results.

I did notice a few of the spring wheat cars on the spot floor got bid against the September futures on Friday; we could see that market try to roll bids early.  So maybe be a little cautious on old crop spring wheat.  It seems that we have a lot to move before new crop harvest.

The sunflower market felt strong going home late last week; a “seller’s” market.  So have your offers out there. 

The one thing to keep in mind with all of these markets is the fact that we have rallied over the past month isn’t due to super strong demand.  It is a supply concern rally; supply concern rallies can be here and then be gone in a flash.  Demand lead rallies are the ones that tend to stick around.  For me that tells me to be ready to make some sales or at least have a grain marketing plan that leaves me comfortable at the end of the day.  If you are comfortable that eventually the market and USDA will have to respond to our current conditions then doing nothing might work for some.   But if you think that a rally from too much moisture is not a good reason for a rally then perhaps making sales or getting some protection in place that might be the move for you.

Please give us a call if there is anything we can do for you.