4/19/13 week ending Grain comment

  • Posted on: April 19, 2013

Corn: May corn settled up 7 ½ cents at $6.52. December settled up 5 ¾ cents at $5.47. For the week however, May lost 6 ½ cents and December lost 3 cents. Generally a quiet news day for the grains aside from continued talk of cold, wet weather delaying planting. Some stories of farmers in the Delta throwing in the towel on planting corn were supportive. Funds bought 4K contracts today. Focus remains on the weather. Here in Chicago we went from flooded streets to snow flurries as Mother Nature can’t seem to make up her mind. Planting progress will be released on Monday. The average progress for April 22 is 18% planted. For comparison, the slowest year on record was 4% in the 1993 flood year. Another storm system is heading into the Plains next week. Farmers will continue to wait for it to warm up. Bulls who had been talking drought are now talking delayed plantings. Technically, May has resistance up at the 6.79 to 6.95 gap. December corn is still below its 34 month old trend line. The intersection point for that trend line this week is $5.60. December would have to take out major resistance at $5.73 to really get things turned around for the bulls

Wheat: May wheat settled up 6 ¼ cents at $7.09. July settled up 4 ¾ cents a $7.11 ½. For the week, May dropped 5 ¾ cents while July dropped 8 cents. Funds bought 1,600 contracts of wheat but maintain a very large short position. That’s important because if there is real frost damage either here or in Europe, you could have a rush to the exits on these short positions. If that happens, the shorts would be their own worst enemy as their panic buying would be met by fewer and fewer willing sellers. Monday will give us fresh export inspections as well as crop progress. Only a settlement above $7.40 would indicate that we have a real change in the trend Hedgers: No change in recommendations. Protect your unpriced bushels with WN 7.00 puts for 26 cents. Remember, we paid 30 cents for WN 8.00 puts which are now worth 96 cents. At that time, I had countless farmers tell me , “no way could wheat go lower”.

Soybeans: SK settled down 2 ¼ cents at $14.28 ¼. New crop SX settled down 10 ½ cents at $12.13. For the week SK gained 15 ¼ cents , while SX dropped 18 ¾ cents. This stat graphically depicts the fact that traders are buying old crop and selling new crop. Stories of farmers in the Delta turning their corn seed back in have become more common. The inability to plant corn due to wet conditions has traders betting they will naturally plant more bean acres and therefore have a greater supply come harvest. A lot of traders follow the July/November spread. In the past 10 days this spread widened from a low of $1.10 to over $1.73 at one point today. A move above $1.85 could open the door for another 30 cent higher jump in that spread. In September of 2012, this spread traded to $2.14. Today, the funds sold 4,000 contracts of beans, 2,100 contracts of meal and 3,200 contracts of soy oil. SX once again settled below its 32 month old trend line. This is not a sign of strength. A settlement below $12.00 opens the door for a test of $11.42. .

This Friday finds us at the end of a tumultuous week. World events both here and abroad shook the markets. The US farmer has always had a difficult task in marketing. It seems as history progresses, that job can get more and more daunting. No one could have foreseen the events that transpired this week. No one has any real idea what the future holds this year as we head into planting season. Will we have a freeze? Will we have delayed plantings? Will worldwide markets continue to feel shock waves ? Will the bird flu issue in China get better, or is it possible that it could morph into something that no one sees coming? All we can do as risk managers is use the tools at our disposal to stay balanced. Staying balanced means having calls in place for bushels already sold or under contract. It also means having a floor for your unpriced bushels until you sell them. Disciplined risk management demands that we tap you on the shoulder and remind you this fact. Have a great and safe weekend.