Grain Market Commentary from Dan Steiner of PGG

Tanner Sheahan
CPS Tangent

Last week I contacted Dan Steiner from Pendleton Grain Growers to ask him if he would mind writing up a broad outlook commentary on our grain markets. I am subscribed to Dan's daily market analysis emails which contain similar commentary on very current market conditions and a nice summary table of current grain prices at major ports. Send him an email if you would like to subscribe as well. Dan has a pulse on the grain markets and his daily commentaries are a great way to keep up on the trends and how they might play out at the local, Pacific Northwest, level.

Dan Steiner
Pendleton Grain Growers 
US: Spring is finally showing up across the country. Lets start by focusing a bit just on US production….

Here is what we KNOW: In the last week the Southern plains have been as cold as low 30’s as hot as upper 90’s. HRW production looks like it will be similar to last years production. Throw out last falls condition reports…they were meaningless other than as a comparative guide when they came out. Dry fall, COLD spring, freezing temperatures mean a HRW crop around 750 myn bu and it won’t get BIGGER…but could still get smaller! Disease isn’t an issue because its been too dry. SRW crop will be about 110 myn bu smaller than last years crop. Because the corn was planted so late, meant a late harvest. Late harvest meant fewer SRW acres. The SRW crop is looking DANDY…but just a lot fewer acres. Too early to tell at this time about the DNS in the northern plains. SWW? Well lets just say this…the crop condition reports we mentioned earlier that were meaningless for HRW? Ditto for SWW. COLD / DRY / OPEN winter took its toll. I have seen reports that many parts of Washington look worse than they have the last 10 years. In Oregon we have small regions that look really good…but not good enough to offset the areas that will be below average. The SWW carryouts are tighter than the USDA is counting them, and this years production will be underwhelming. Corn acres will get planted, but there are questions regarding the size/ number of acres. Right now the estimate most commonly used is 91.7 myn acres. Spec position in Chicago Corn, wheat are VERY large. Today the market looks overbought. SRW today is about +$35/ mt (.90/ bu) vs. world markets. HRW is about +$85/ mt. ($2.30/ bu). At least to compete with Russia/ France and Ukraine.

Here is what we DON’T KNOW: Final production numbers on wheats/ corn are still very much a guess. The markets will react (sometimes violently) to the whims of politicians. A stroke of the political pen can make or wipe out fortunes. Long term ‘Summer weather’. When will rail logistics get straightened out? Long term impact of Ukrainian situation. Today, its more or less business as usual, but tighter credit, unsettled political issues etc are NOT conducive to big production. Look for Ukraine, even with good weather to be less competition than last year. Aussie has benefitted from nice late rains, but they are in winter now, and LOOONNG way from harvest.

Every grain company, market analyst, broker, trading house etc. has an opinion on what production might be, and what that would likely mean to price. USDA reports will sway those opinions to a certain degree, but at the end of the day ‘listening to what the market has to say’ is invaluable. Each year at grower meetings we poll growers to see what they ‘think’ the Average Aug Price of SWW might be…This year we had well over 60 guesses. Only 2 were higher than today’s prices. What is interesting to me…is 2015. You can sell Chic Sept 15 futures today at $7.50 and the Dec at near $7.60, which means with just an average basis, you can get better than $8 PORTLAND for next years SWW.
***Traders Rule of Thumb***When the market quits going up on positive news, the market is probably due for a correction…