Grain Market Report 24Mar2011

Tanner Sheahan
CPS Tangent

Wheat is making a bit of a rally this week, slowly.  Dan's report shows prices between $7.15 and $7.35 from now through harvest.  The end of the year is a little better at $7.50.  New crop for 2012 is at least over seven bucks sitting at $7.19 right now.

Lots of ‘behind the scenes market stuff happening’. Futures were unch’d early this morning, but an hour in, wheat found strength (weather?) and is up 20. Next weather system MAY provide up to ½” of precip to W. Kansas (this would be significant). TX is still very dry and now posting worst conditions in 44 years. One weather service is saying that a another cold system will move through Monday nite and temps could get to low 20’s for 4+ hours. Colorado is in as bad/ worse shape as Kansas, but they run a little later, so have a little more time. US wheat conditions are important, but I get sense world trade is more focused on the Black Sea/ FSU region, which is still pretty dry, but at least conditions are favorable to get LOTS of field work/ planting done. S. Africa is still dry, but is not a major concern at this time. China’s Yangtze valley received very good precip, but this system did nothing for the NCP (Northern Chinese Provinces), where the very dry/ very cold continues (see article at the end of report). China did book 4.2 myn bu of wheat. Mostly DNS, but some SWW and SRW. Export Sales reports: Corn was 35.2 myn bu which was dead center mid range of expectations, while wheat was 24.2 myn bu, also dead center.
             Portugal’s PM offers to resign after Parliament refuses his budget with its austerity cuts. The Parliament is counting on a bailout from the EU (this estimated at $99 byn). Portugal believes they will be treated more favorably by EU than Ireland or Greece because their situation is ‘less dire’…hmmm. Back home the temp budget band aid is coming loose on the US budget and not much progress being seen. The CFTC is expected to make a ruling on spec limits on or by the 28th. This could have HUGE market implications, but most of the industry is expecting more of what we have gotten in the past…not much to nothing. Even if existing position limits were enforced we would have HUGE market movement, let alone new ‘tighter’ restrictions. It just feels today like there is a large lack of interest in dealing with the whole thing.
             Ethanol: Ethanol groups have been quietly working behind the scenes to save/ salvage what they can of the blenders credits/ tax subsidies. Current policy is NOT favored by current Congress and is expected to cost tax payers $5.6 byn. Ethanol groups are willing (as if it is their choice) to give up tax credits, but favor a gradual reduction over the next 4 years. They would also like to see the savings rolled into variable tax rates, have the money spent on variable ‘blender’ pumps or to mandate higher blends (which would not save $ from the budget but re-direct back to E industry). By the way, Ethanol margins remain strong, and the US is on pace to produce 14 byn gallons and use 5 byn bu of corn doing it (another 50 myn bu more than USDA is projecting). According to EIA ethanol inventories are up 1% and 8% of current production is being exported.
             Here is a link to an interesting article regarding China’s grain production/ usage needs: