Opening Comments - USDA Report projections 7-9-2013
Markets are called better this a.m. behind a firmer
overnight session.
When the overnight session ended corn was up 10-12 cents, KC
wheat was up 13, MPLS wheat was up 11, CBOT wheat was higher by 14, and
soybeans were higher by 21-23 cents. The
outside markets at 8:10 have crude down 50 cents a barrel, gold up 12 bucks an
ounce, the US dollar up 120 tickets at 84.337 on the cash index, and the stock
market futures up about 50 points on the DOW mini futures.
A dead cat bounce or oversold market bounce that is
continuing? Or maybe some position
squaring ahead of the USDA report that is out on Thursday? As for headlines not much has changed from
Friday to today; perhaps the crop conditions didn’t improve quiet as much as
many expected and maybe with all the unknowns plenty of the shorts have got a
little ahead of themselves as you can find many agronomists and producers that
are much more cautious on production estimates then the trade seems to be.
Here is CHS Hedging recap for the CFTC Report. Notice the funds short a sizeable amount of
corn; which opens the door to the question are we just seeing short covering?
One positive our markets have going is the fact that many
are very bearish; are they bearish enough to call a bottom? Hindsight usually works best here.
Technically December corn is basically back to what was old
support and now new resistance. To me it
looks the charts are setting up perfectly for Thursday’s report to be a
catalyst that either turns us back down at this resistance point or push’s us
threw and maybe gives us a chance to rally back towards the top end of the
range we had previously had. 5.70 or so
on the December contract. Seems like a stretch
if we actually are going to have a 14 billion bushel corn crop; but only time
will tell.
As for the report on Thursday here are the carryout estimates
Marketing
year
2012-13
2013-14
Corn
Soybeans Wheat Corn
Soybeans
Average
trade estimate
0.725 0.121
0.632 1.896 0.263
Highest
trade estimate
0.800 0.135
0.690 2.338 0.329
Lowest
trade estimate
0.537 0.104
0.566 1.618 0.164
USDA
June
estimate
0.769 0.125
0.659 1.949 0.265
You can see not much for old crop changes; but slightly
tighter then last month based on the smaller stocks number at the end of
June. As for new crop also not much for
changes; but much wider ranges. The
bottom line here is the market is still looking the 2013/2014 carryout’s to
more than double from the present year.
As for other news out there we don’t have much; we have had
some decent demand for wheat coming from China and that keeps the smoking gun
open for the wheat market. But is it
enough for us to really rally if corn is just experiencing a small little
bounce before moving lower? Probably
not. We also have a slow SRW harvest;
but there again that’s probably not enough for us to have a super bull market.
Weather continues to be a big mixed bag. I did read something this a.m. that indicated
over 50% of the corn should pollinate in the last week of July or so. As we get closer to that time period the
weather forecasts will become very important and weather probably trumps what
the USDA has to say on Thursday or takes over the lead shortly after.
As for grain marketing; I think we need to realize a couple
things. If and it’s a big if we raise 14
billion bushels we don’t have a clue what fair price is. We could be there or near a “fair price” or
we might be a couple bucks too high. I
don’t want to say the sky is falling but we have to realize that if the crop is
as big as it has been talked about we have no real good idea what is fair
value. On the flip side with where crude
is at and the fact that we are at levels that are fairly cheap compared to the
past couple years; I don’t think getting super aggressive now is the right move
either; the right move is to be comfortable and that’s different for everyone.
I don’t want to sound wish-washy; but if I or others knew if
this thing was near a bottom we would all stick our money where our mouth is
and buy…buy….buy…..and if we knew it was near top…….we would sell……..sell…sell…… the only good recommendation is to point out
the risks and rewards; which are even hard to define; so at the end of the day
it goes back to what type of marketing position makes you comfortable with your
beliefs in the market place and then what type of grain marketing plain leaves
you comfortable should your beliefs end up being wrong.