May 22, 2013
Grain markets traded higher today as a bullish ethanol report and interest in exports have the market moving. Demand for corn seems to be picking up for both new crop and old crop as planting continues behind normal pace and emergence remains well off typical. Wheat harvest is set to get underway in the South and early reports of yield should be coming in soon with low numbers expected after the drought of 2012 and 2013.
Stocks moved higher on news from Fed Chairman Ben Bernanke that there was no timeline for ending the bond purchasing QE program that the market has become accustomed to. He told Congress that slowing bond purchases or raising interest rates could derail the economic recovery. The National Association of Realtors' April data showed existing home sales increased by 0.6%, in line with expectations. The major stock indexes were trading from 0.1% to 0.3% higher at the commodity close.
The dollar index bounced back above Friday's nearly three year high as gold and oil both moved lower. Crude oil was off more than $1 in today's trade, leading both heating oil and gasoline lower. Crude oil inventories were down slightly, but gasoline inventories were up as higher prices begin to have an impact.
Corn traded higher today as new crop prices were higher overnight and old crop prices fell in line after the weekly petroleum status report. Ethanol production increased 18,000 barrels per day to 875,000 in this week's report, while inventories dropped another 200,000 barrels to 16.2 million barrels. Production continues to increase as inventories drop, showing that demand exceeds daily production at this time. July futures remain below $7 and gasoline prices have moved sharply higher in the past month, allowing ethanol producers to pick up the pace with better margins.
Slow emergence and ongoing concern that as many as 1.5 million acres will be shifted from corn have continued to hold December futures at better than expected levels considering the 41.8 million acres USDA says were planted last week. Rains are expected to hit the Ohio River Valley this afternoon before moving on eastward, giving farmers a few days before the next round of showers heads east off the Rockies this weekend.
Another export sale of corn was announced by USDA this morning with 14.17 million bushels going to China and 7.09 million bushels moving to unknown destinations. This is at least a preliminary sign that $5.20 on December futures is attractive to export buyers.
July corn futures were up 18.50 to $6.585. December corn was up 10.25 on the day to close at $5.305.
Bottom line: Exceptional planting progress has brought the crop closer to normal, but emergence is still well behind as additional rains move across the Corn Belt. Reduction of corn acres from 0.5 million to 1.5 million acres is rumored, helping to hold December futures above $5 for the time being.
Ethanol production continues to ramp up as inventories shrink, suggesting an accelerated demand for the product. This week brought the highest production level since last June when the ongoing drought began to ration use. Inventories have reached the lowest level since November 2010, as demand continues to exceed production.
Soybeans traded higher today as tight supplies continue to support a run toward $15 for July futures. Planting progress was slowed yesterday across the country from Oklahoma down through the Delta as the strong storms of this week chose that path for more rain. November futures moved back over the 50 –day moving average today, looking to run above the $12.50 level on the charts. Soybeans seem to be caught in the middle of late planting issues and the chance that significant acres will be coming from corn, leaving the November contract trading in a narrow range above the $12 mark
July soybeans closed up 16 today at $14.9425. The November soybean contract was up 18 to close at $12.3875.
Bottom line: Tight supplies and planting issues are playing into soybean prices. New crop soybeans continue to hold above $12, and may strengthen as corn planting progress is over 70%. Old crop soybeans have moved above $14.50, presenting cash opportunity to move beans near $16 in many locations as basis slips a little but remains strong.
Wheat markets traded mostly higher today as dry weather returns to the Plains and harvest is set to begin in the South. Look for yield reports to begin coming in at any time to give the market a better feel for the yield of this crop. Japan is in the market with a 4.5 million bushel tender for wheat with a large share of it specified to be U.S. crop. Better weather in the Northern Plains looks to get farmers back in the fields to try finishing up seeding. Stats Canada raised their wheat projection to 29.4 million metric tons, above the 29 MMT that USDA has in their most recent estimate.
July wheat on the Chicago board was up 8 to close at $6.885. The July 2014 contract closed the day up 7.25 to finish at $7.3775.
July KC wheat was up 4.75 to close at $7.4325. The July 2014 winter wheat contract was up 7 to finish at $7.845.
July Minneapolis wheat was down 5.75 today to close at $8.0775. The September contract was up 0.25 to close at $7.9725.
Bottom line: Wheat markets are pricing weather and export sales into the spring as new crop wheat is on the horizon. Opportunities for more wheat sales may come as harvest moves north and wheat yields are reported.
The FSU winter wheat belt had showers in northern Ukraine and northern Russia this week. Much of the Ukraine and northern Russia will see additional rains this week, but drier weather is coming next week. Most of the winter wheat area should have adequate moisture for jointing going into June and the extended models show good chances of rain in early June.
Want to receive market commentary by e-mail twice each day? This service includes added information, charts and graphs to explain market trends, and more. Sign up for the FREE service today - just click HERE.
This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to the accuracy, and is not to be construed as representation. The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Mr. Burgener does not currently maintain interest in the commodities mentioned within this report.
THERE IS RISK ASSOCIATED WITH TRADING FUTURES AND OPTIONS. ANYONE ACTING ON OUR INFORMATION IS DOING SO AT HIS/HER OWN RISK. CONSULT YOUR FUTURES AND OPTIONS RISK DISCLOSURE STATEMENTS BEFORE TRADING.