Wheat Still Bouncing in the High $7's and a Couple Links

Tanner Sheahan
CPS Tangent

Welcome to March!  It's wet...

I thought I'd change up the title today since "Grain Market Report" is getting a little monotonous.

Wheat is knocking at the $8 door again.  Post harvest prices are $7.80-$7.90 and pre-harvest prompt is only slightly higher in May at $7.95.  Futures still seem fairly steady, and at a profitable level, at $7.59 for 2012.

Here is an interesting article that was forwarded in an email this morning; some unconventional nutrients mentioned here in relation to Boosting Grain Protein in wheat production.  While reading that article I saw this one, Global Fertilizer Needs, Production Expected to Grow, talking about some of the global trends and gives a little insight into why we are still riding the fertilizer roller-coaster.  The short version?  We aren't the biggest player in the market anymore.


Futures were called lower, and responded accordingly. With the volatility we’ve seen lately though, it actually seems like a pretty mild day. Corn is off 2-4, all wheat futures are off 8-10. The drama in the Mid East continues. Saudi is trying to keep inflation in check and doesn’t want the political problems of its neighbors. They booked 10 myn bu of US HRW and a cargo of wheat from Brazil. By now everyone knows that the corn supplies will be tight, VERY tight, and the market has had time to allow participants to adjust…but where to from here? Will S&D’s get tighter? Or will some event (USDA finding corn) lead to higher C/O’s and lower prices? We do know that Egypt (apparently some form of gov’t is still functioning) and Mexico are both in for corn and that ethanol margins predictably widened last week. COT report was interesting in that it confirmed what we were ‘feeling’. Specs sold 65 myn bu of Chic wheat, while the funds also sold 20 myn …result is what we saw in futures the last week or so. Corn has been more stable and in fact is trading at highs….COT also confirms that the specs sold 34 myn bu and the index funds bot 83 myn bu. Index funds position was down to 1.33 byn bu…the lowest they have been since 10/09.
           Argie’s gov’t has dissolved the  ONCCA.. This would be the Office of National Control of Commerce Agriculture (loose translation)…they were the ones in charge of grain exports. Apparently this will now be handled by the Economic Ministry. No one seems to know exactly what this means, but it is another layer of confusion. Business at least short term will NOT be as usual. Weather man says Argie will be HOT/ DRY the next 10-14 days. Rain and snow in China were sufficient to completely lift ‘severe drought’ ratings. They will need more precip as spring unfolds, just like any other year though. Chinese gov’t is also rumored to be looking at reducing import tariffs to zero…SK already went there last week.
           USDA says ‘high amalyse’ corn (specifically designed for ethanol prod) will not harm food mfg/ processors or exports. Controls are in place and if followed will be sufficient. This is like another ‘genie in a bottle’. Once out, it will not go back in. We would have to be na├»ve to think that eventually there won’t be pollination drift or contamination…eventually in the seed. The ‘purest’ NON GMO seed to can find today is 99.5%, which is not acceptable to many markets. The USDA did say perhaps ‘color markers’ would be helpful. Yeah, they would because otherwise it all looks the same.

Futures were called lower, and responded accordingly. Corn is off 3-4, wheats are down 8-10. Crude, gold and the $ are all higher. Most of the news this morning would be termed ‘friendly’. Yesterday’s export shipment report was ‘uninspiring’ with corn at 24 myn bu and wheat at 19 myn bu. Only 1.6 of it was SWW. YTD the US has shipped 862 myn bu vs. 625 (an increase of 6.5 myn mt) through this time last year. Very cold weather is set to hit the S. Plains. Crop scores released y’tdy pm were also ‘price friendly’: Tx crop scores improved 5% in the G-Ex to 18%, 56% is rated P-VP, OK dropped 2% in G-Ex to 19% with 42% P-VP, Ks dropped 2% to 25% G-EX with 40% P-VP, and Neb dropped 2% to 41% G-Ex with 13% P-VP. So Neb doesn’t look too bad, but the other ratings are very weak. EIA last week said that ethanol production set another new record at 1.195 byn gal. Exports are near 1.8 myn bbl, marking 14 straight months of ethanol exports…daily ethanol ‘grind’ works out to about 13-14 myn bu. CRC for corn ended up about $6/ bu vs. 3.99 last year…the corn bean ratio is neutral (futures are not offering any special deals to plant one vs. the other, acreage battle is toss up).
             ABS (Aussie Bureau of Stats) has rated the 2010 wheat crop at 56% milling quality and 44% feed quality…this would compare to 86/14 in a ‘normal’ year. Brazil’s summer (early) corn harvest is about 14% complete. Russian gov’t sold 12 myn bu of wheat to domestic markets from intervention stocks. Satelite images of the ‘Black Sea’ region show patchy snow cover. Russian gov’t is estimating that up to 10% crop damage could result from uncovered ground in cold weather (mostly Barley). They also are figuring that there will be some 76 myn acres of spring wheat planted yet this spring. There are a few glitches though: operating money is very tight, fertilizer supplies are erratic, and there is a question of availability of spring seed. These type of issues and spring weather will weigh HEAVILY on the markets as the spring unfolds.

***Didja Know: The Dept of Treasury says that China is holding $1.16 Trillion of US debt (about 30% more than they thought…re-assuring isn’t it)? Japan is number 2 and Britain is the #3 US debt holder (Japan/ Britain can get fuzzy since most of the Japanese trades are cleared through London).
“Watch how people spend their money, that is the best way to know what they believe” Anon.