Wheat Prices and Commodity Report

Tanner Sheahan
CPS Tangent

Wheat has been over $8 for several days now.  Right now it's $8.05-$8.15 with a big dip in July down to $7.85.  I'd say they don't want wheat delivered in July...Futures for next year are a respectable $7.55.  Here's a couple of the last commodity reports from Dan Steiner of Pendleton Grain Growers.


Biggest news from the USDA reports was that they did NOT reduce corn carryouts as expected. Traders were thinking corn carryouts would be as low as 586 myn bu…USDA simply left them unchanged. Wheat carryouts were reduced marginally. All in all it was a pretty benign report. With Corn, feed usage was reduced by 50 myn bu, but ethanol was increased by the same amount, other than that it looks pretty much like last months report. The only changes to the US wheat S&D’s were a slight increase in wheat for ‘seed’ usage. See attached S&D’s. World carryout numbers were increased incrementally. COT report had some value this am, as it confirms price action from last 10 days: Specs were ACTIVE buying 50 myn bu of Chic wheat, 42 myn bu of HRW, and 180 myn bu of corn. Funds are holding pat. Spec position on Chic Wheat is only 120 myn bu so it is not ‘burdensome’. Their corn position is actually getting big enough to warrant watching at 1.6 byn bu. (they spent 13 of the last 18 weeks with positions as large as 2.0 byn.
               Weather man sez S. plains rec’d light precip, but now it will be dry the rest of the week, with another ‘freeze’ warning out for this weekend. Red River crested, and there have been tractor sightings as far north as Minnie. Northern tier states are expected to be cold/ wet. Down south cold/ dry.
               Euro Central Bank raised interest 1/4 %, China also continues to ratchet up their rates, and there is rumor that the Fed will do the same after they get done with QE2 in June on concerns of inflation. Bank of Eng and Japan will leave their rates unch’d. Timing of these changes can really impact the value of the $.
             China will auction off 18 myn bu of poor ‘Q’ feed wheat this week and COFCO says that they expect Chinese crushers may cancel some bean purchases later this year as margins are very slim.

***Didja Know: “Do not squander time, for that is the stuff life is made of” Benjamin Franklin. Superstitious? On the back of the $1, there are 13 steps on the pyramid, 13 stars on the eagles head, 13 arrows, and 13 leaves on the olive branch. All months that start on Sunday will have a Friday the 13th (next month). Some ‘numerologists’ say 13 gets a bum rap because of all the associations with 12: Months in a year, signs of the zodiac, gods of Olympus, 12 apostles of Christ (referring to the original 12) New Testament lists many more. 12 tribes of Israel, 12 eggs in a dozen etc. Mark Twain once was the 13th guest to arrive at a dinner…he said it was ‘bad luck’, because there was only enough food for 12.
7 April 2011

Grain futures in all exchanges traded higher overnite lending support for a strong start this morning. All grains were up initially in opening trade, but quickly gave in and are trading lower now. Corn is off a couple, while wheats are off 10 to 15 in all exchanges/ delivery periods. Overnite there was another 4 myn bu corn sale (unknown dest…China?). Didja KNOW: Corn has set 2 all time HIGHS already this week. Will we see a 3rd? Sales reports this morning were; Corn: trade expected something from 21.6-33.4 myn bu. We came in at the high end of 31.8 myn bu. 7 myn bu was n/c however. So sales remain ‘brisk’. Average trade guess for carryout stocks of corn tomorrow is only 595 myn bu (could easily be lower)…watch for a bullish number tomorrow. Wheat sales were also strong with 26.5 myn bu (trade was thinking 12.8 to 16.5 myn bu. 9.7 myn bu of it was n/c. Remember though that our sales are not the problem…it is actual shipments which are lagging, and if they don’t pick up, wheat carryout stocks will increase accordingly. Which brings us to tomorrow’s estimate of 861 myn bu c/o, which is about 5.6 myn mt higher than ‘average’.
               USDA is considering budget cuts that may result from whatever new budget is formed. So they are considering cutting the weekly crop reports. This would include; planting progress, crop development, harvest progress, crop condition etc. The market already does this on its own anyway, where USDA’s value was, they were seen as a 3rd party or independent analyst. Accuracy in any of these type of reports can be debated, so isn’t really an issue. So if it happens what’s next? It would put a premium on qualified/ quality reporting service or network. Obviously the large ‘spreadout’ multinationals would enjoy at least an initial advantage.
             A little more ‘detail’ from recent ‘prospective’ plantings report: So where did the big increases in acres come from? An area of concern: Minnie said they would increase corn acres 3%, ND 22% and SD 19%. If you have been paying attention, they will not be planting corn anytime soon. By the way La Nina finished March with an SOI of 18.6…in fact on 3/30 the SOI was 28.6. So it remains stubbornly in place.
***Didja Know: Russia USED to be the world’s #3 wheat exporter (before banning exports last year). PM Putin says Russia is eager to restore its credibility as a grain supplier to the world. There are so many people of ‘Scandinavian’ descent in Minnesota, that Scandinavia has a holiday called ‘Minnesota Day’ in August?       
 5 April 2011

Markets are taking a breather this morning. Not really any profit taking even though corn is up about $1 the last 3 days. This market looks like it will be well supported at least until more is known about the spring plantings world wide and we see solid evidence of rationing. We did get the first official USDA crop scores yesterday, and they didn’t disappoint. Overall 32% of the US crop is rated P-VP, and 37% G-Ex. As is usually the case, the devil is in the details. HRW: Kansas 34% P-VP/ 31% G-Ex/ G-Ex is down 38% vs. last year. OK 51% P-VP/ 16% G-Ex/ G-Ex is down 53% vs. lyr. Tx 61% P-VP/ 12% G-EX/ G-Ex down 48%. SRW showed VERY strong ratings: Ill 12% P-VP/ 55% G-Ex/ +26% vs. lyr. Indiana is 7% V-VP/ 61% G-EX. Ohio is 4% V-VP/ 64% G-Ex. SWW ratings: Or is 1% P-VP/ 67% G-Ex with G-Ex up 12% vs. lyr. WA is 2% P-VP/ 82% G-Ex, with G-EX up 9%. Id is 3% P-VP with an 82% G-Ex. The BAD news is in. The market we see today, reflects the premium from these scores. Any improvement (how much worse can they get?) will be price negative…to a degree depending on corn. Red River valley is still expected to challenge record flood levels. Snow pack will be gone from most areas of the US by the end of the week, but Canada will still have a layer of the white stuff.
               Shipment report showed a strong 44 myn bu of corn shipped and a decent 29.5 myn bu of wheat. USDA did report a sale of 4 myn bu of corn to ‘unknown’ this morning. Ethanol, DDG’s and corn export prices all seem pretty well supported this morning. Argie is working on a protocol to ship up to 2 myn mt of corn to China. Whether China buys corn from Argie or US origin doesn’t change the world S&D’s its bullish either way. With carryouts now estimated lower than 500 myn bu, you have to wonder just how close to zero you can get. One thing about it, it ought to give the market a great opportunity to do inventory!
               No major weather updates from yesterday. Argie is gonna git great weather. Aussie needs rain, especially in the west. They will get some showers, but from what I read it won’t be enough to do much to alleviate the drought. Snow cover will leave most of the CIS, but more heavy weather will cover up large areas from the Black Sea region to the Caspian (the ‘Stans’). Ukraine Ag Minister says they expect grain production of 44.7 myn mt up 5.5 myn mt from last year…wheat will be about 20.5 myn mt up 3.3 vs. last year.

***Didja Know: Albert Einstein had an IQ of 160. Korean Kim Ung-Yong has the record for  the highest recorded IQ of 210. American bank robber ‘Pretty Boy Floyd’ started by robbing a grocery store at the age of 14.