August 16, 2011
By: Craig Haugaard, Grain Origination Manager
The dollar is higher and crude oil is lower as I write this. Should that remain the case today it could put some pressure on our markets.
CORN: 7 lower
Here is an interesting little piece of trivia for you. At the present time South Dakota is the only state in the USA where the crop condition for corn is rated better than what is was last year. Overall, the national crop rating didn’t budge as it remained at 60% good to excellent in yesterdays report. The state that should the greatest decline was Iowa where the crop condition dropped 6% from the previous week. What makes this interesting is that the USDA is using a statewide average of 177 bu/acre for Iowa and last year the actual production was 165 bu/acre. The question that the trade may ask at some point is, “Can we have worse crop conditions and a much better yield?” That question probably sums up the general fear of the market. With the extremely hot night time temperatures that we experienced last month there is a nagging fear that we did major damage to the final yield and, although we probably won’t know for sure until the combines start rolling this fear should be supportive to the market in the coming days. Exports seem to be in line with expectations. Cumulative export loadings are currently running 4% behind last year with the USDA projecting that we will end the year down 5.7%. Longer term is still looks as if carry-outs will continue to tighten with one analyst that I spoke with telling me we need to attract another 2-3 million acres of corn next year to keep this market from moving sharply higher. Looks like the volatility will continue. My technical indicators are all bullish but as you can see on the following December futures chart we are banging against what has been the upper side of the trading range.
SOYBEANS: 9 lower
South Dakota and Iowa have the honor of the only states where the soybean crop conditions are rated better than they were last year although in South Dakota our crop conditions slipped 6% for the week. As a whole the crop conditions were unchanged at 61% good to excellent. The July crush numbers came out yesterday and they were higher than the trade was looking for. Exports also continue to run ahead of USDA projections and with the size of the Chinese hog herd continuing to set new records demand from that nation should continue. Toss in dry and stressful conditions in various parts of the USA soybean production area and we have the conditions for a firm market. Longer term concern over the return of La Nina to South America and the corn/bean acreage buying battle that would seem to be necessary this winter in the USA should keep pierces at pretty decent levels. Technically, two of my three indicators are bullish as the November futures trade at about the midpoint of their recent trading range.
WHEAT: HRS – 3 lower HRW – 8 lower
Probably the biggest story in wheat has nothing to do with the futures market but rather with the protein levels in this crop. Last year we saw very large protein premiums as the mills bid way up for high protein. This year, with high protein wheat seemingly everywhere that has disappeared and the strangest darn thing I have ever seen is happening. Yesterday, the report is that a train of 13.7% protein wheat traded for $0.20/bu more than a train of 16% protein wheat sold for. Folks, if this trend continues, don’t be surprised if we see protein discounts for high protein wheat at some point and wouldn’t that be a kick in the pants. In other news Saudi Arabia was a buyer of milling quality wheat from various nations around the world. Domestically, the HRS crop was rated as 66% good to excellent in yesterday’s report which is down sharply from the 82% good to excellent that the crop was rated at one year ago. The trade continues to keep an eye on the drought in much of HRW country. With planting only a few weeks away the fear is growing that we will see folks just to plant as many acres this year as the parched soil probably would allow the crop to get off to any kind of a start. If we see much acreage reduction and reduced yields we could find ourselves with nearly record tight supplies of HRW a year from now. Technically all three of my indicators are bullish for both HRW and HRS wheat.
The information contained above was taken from sources which Wheat Growers believe to be reliable, but is not guaranteed by Wheat Growers as to accuracy or completeness and is made available for information purposes only. There is a risk of loss when trading commodity futures and options.