Opening Grain Market Comments 8-13-13

Markets are called better this a.m. on follow threw from yesterday’s report and a firmer overnight session.

In the overnight session corn was up 3-4 cents, KC wheat was 3 higher, MPLS wheat was up 3, CBOT wheat was up 4-5 cents, and soybeans were up 8-10.  At 8:10 outside markets have the US Dollar up 400 points at 81.7 on the cash index, crude is about unchanged at 106 on the September contract, gold is down 2 bucks an ounce, and the equity futures are pointing towards a positive start of about 35 points for the DOW.

Today it seems to be about the USDA report we had out yesterday and how weather will allow the crop to finish off.  Below are some CHS Hedging links, the first one is a good recap of the USDA report, the second is a video of the report, and the last is the crop condition update.

https://www.chshedging.com/UserFiles/Documents/2013/Research/Fundamental%20Summary%20and%20Price%20Expectations/Fundamental%20Summary%20Aug13video.pdf

http://www.youtube.com/watch?v=xTcV2RL7WLE&feature=youtu.be

http://chshedging.com/UserFiles/Documents/2013/Research/Commodity%20Comments/Crop%20Progress%20081213.pdf

As for the report it came out friendly and bullish versus the trade estimates.  But I don’t know that the actual headlines are so friendly that we need to go screaming higher for an extended period of time.  We should continue to see a little short covering bounce, but the big headlines for our corn and soybean carryout’s are still bearish versus the present year and versus the past several years.  Now if mother nature makes the crops smaller things could get tighter and right now mother nature looks to be dry in many key soybean growing areas.

But the big headline of a corn carryout of 1.8 billion bushels is not exactly super bullish; so if this wasn’t an extreme game changing report perhaps we have some risk that this is just a short covering rally.  They say short covering rallies are short lived.  I also read and listened to a lot of info since the USDA report came out and many thoughts are that the corn yield goes up from here.

This is from Lasalle wire last night…………… “Ear counts in the 10 objective yield states were the 3rd highest ever…but the USDA derived ear-weight is the 3rd lowest in the last 10 years. This is leading many to believe that this is the lowest crop estimate for the year / upcoming crop estimates will be larger. We lean in that direction, too…however, for stats purposes, we will use the USDA crop estimate for now. It still leads to plenty of carryover stocks for 2013-14.”

Bottom line is I think for saying that a bottom is in purposes I would have rather seen a more bearish report; so the market could say now what.  But what the USDA gave us was a report that is leaving many in the trade thinking the crop gets bigger.

Technically what the corn market does in the next few days and how it finishes off the week will be rather important.  If we can hold and bounce just a hair higher we can leave a lot of buy signals on some of the charts.

As for the soybean market I think we are in the stage were our crop will be made or not made.  So weather will be very important over the next few days and weeks.  We have potential to add back to our soybean yield or continue to take it lower depending on how mother nature shakes things out.

As for wheat I thought the report was good; but we also need to remember that plenty of our competitors had their crops raised.  Yes our wheat carryout is as low as it has been in years but one other headline is record world production.  Record production is not a bullish headline.

Overall for risk management purposes I think we need to be cautious thinking that we have this super rally coming; I just don’t see fundamentals at this point telling me to buy buy buy………… now maybe down the road things will change if crops get smaller.  But we need to keep in mind that we didn’t exactly lose carryout one for one as we did production.  So in the future if we do lose more production look for the USDA do use their magic pen again and simply drop demand to partially offset any production loses.

I think for risk management purposes one needs to keep eyes open and realize that yes the report yesterday was a step in the right direction; but in the very near future there is no guarantee we will be higher than we were before the USDA report; so find a way to make comfortable marketing decisions.

As for what we really need to go higher.  I think it is simply a catalyst that helps turn the charts and gets the funds back closer even.  Now I don’t know what that catalyst is; I hoped it was going to be yesterdays report; but as I sit right now I question that the report was enough.  Bottom line is we need something to turn around the sell momentum that the funds seem to have.