Grain Market Report 20Jan2011

Tanner Sheahan
CPS Tangent

Some of you have asked me where I am getting the prices I summarize.  The short answer is "from Dan's report," but I thought I'd ask Dan for his official answer to that question.

Where do those prices come from? 
They are a ‘composite’ of what we believe to be ‘tradeable’ Portland bids. I say ‘tradeable’ because with the volatility, exporters values can vary widely. With the river being down, there are times when Portland is bidding enough premium to pay the difference on rail freight. Otherwise what some Co-ops are doing is taking the April bid and subtracting a nickel per month to cover storage and interest. SO if April is $8 March is 7.95, Feb is 7.90, Jan is 7.85. When Portland gets tight, the price goes up and if it goes up enough to cover the extra cost of rail…it goes rail.


Strange things can happen when grain prices hit these altitudes. Best to have a chute nearby. New crop wheat values can vary by as much as a $1 depending on point of delivery…I don’t see this changing soon, so call for updates. Lots of ‘tire kickers’ in checking out the wheat prices. Futures opened sharply higher on news that Algeria (food riots last week) bit the bullet and bot 22-27 myn bu of ‘optional origin’ wheat at what works out to about $9.80/ bu delivered. The market responded sharply to the heavy purch. Jordan, Syria, Japan (2 tenders) Egypt, Iraq, Indo, Malaysia etc are all in. Corn is also getting some close looks. It feels like we are 1 bad harvest someplace from repeating 2007. Argie farmers will begin their strike (price positive for us) against selling especially corn and wheat. French dock workers are also striking. Will slow/ stop shipments of everything but oil. The $$ is down vs. the Euro on news that Russia will buy up some Euro debt. ‘Rebalancing’ seems pretty well complete. If so, the funds have shed about 100 myn bu of Chic  wheat, and 300 myn bu of Chic corn. The funds were running about 25-27% of the OI in Chic corn that number as of the last COT report is now down to 15.1%.
           Int’l: Droughty conditions continue in China. 2.2 myn people are short of drinking water, and it has impacted the major grain (wheat) producing provinces in the Central/ North of Shandong and Henan. Precip levels are 20-90% LESS than last year and are impacting nearly 10 myn acres of wheat production. Floods continue in Aussie. Aussie Bureau of Meteorology says La Nina likely at a peak, but they expect it to hang around at least a couple more months. See pic attached…notice the grain bunker. Argie did get some decent rain over the weekend. Those close to the situation say they will be helpful to beans, but not do the corn much good (damage already done). SK gov’t says they have culled about 15% of the pig and cattle inventory to battle foot/ mouth disease. They are also dealing with bird flu in the poultry. Chinese gov’t is back to saying they WILL import corn. This has gone back and forth…the thing is, if you look at the numbers there simply is no way they can avoid it. Demand is simply much bigger than production. They need to continue to import to keep prices in check.

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Not a lot of market shaking news this morning. $$ is up this morning. Foreign gov’t seem to resigning themselves that things are what they are. It doesn’t look like Russia will open up wheat exports anytime soon. The Aussies have been hit with record floods. As you could see by the pictures that are being circulated, even some of the wheat that was harvested is now under threat/ or out right loss to floods. Latest guess I saw put the Aussie crop at 23.3 myn bu and 9.24 of it LESS than milling quality, with losses continuing to mount daily. Where will replacement stocks come from? Winter crops in the field through most of US don’t look good today. South plains are expecting to get 1-3" snow. Won’t amount to much in the way of precip, but may help with the next blast of arctic air.                  Our export shipments were down the last couple weeks corn shipments have been running about 20 to 22 myn bu, which is way behind the USDA numbers…but remember that China is ‘out there in the weeds’ and could if they turn to buyers the point is mute. Wheat numbers are still running fairly strong with 21.6 myn bu shipped last week: 5.5 HRW, 12.1 DNS then about 1.5 SWW. Turkey did buy 5.3 myn bu of HRW last night.
We know that corn has to go ‘too high’. Basis levels are starting show stress cracks and weaken. Chinese gov’t has ordered processors to stop buying corn from growers, they also booked 5.5 myn bu of Aussie feed wheat. On the red wheats, DNS basis levels are steady to strong as the pull for high quality DNS is strong, even with futures up. HRW basis levels have been steady, with futures doing most of the work. Informa will release their latest acreage estimates tomorrow.
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