June 19, 2013
News of export buyers in the market, ongoing planting issues in the Northern Plains and Midwest, and some unwinding of commercial short positions in the wheat markets have grain prices higher across the board today. On a day when most are focused on the Fed and their plans for monetary policy, the commodity markets took advantage of an opportunity to move higher while the stock markets were standing still. Early speculation about planted acres is starting to float around the trading floor with everyone trying to get their best guess out there. The first few numbers have come in all over the board with reductions in corn acres ranging from 1.5 to 3 million.
Stocks traded slightly lower on Fed day as traders are unwilling to make big moves until some news comes out of today's Federal Reserve Open Market Committee meeting. Early news suggests unemployment falling to 6.5% in 2014, but the first rate increase is not likely until 2015. The markets are waiting to see what other news might come from the meeting. The major stock indexes were from 0.1% to 0.3% lower at the commodity close.
The dollar index was up sharply late in the day as the dollar weakened after the Fed announced that interest rates are not likely to rise until 2015. Crude oil traded down slightly after an increase in inventory was reported in the weekly petroleum status report with expectations for a reduction.
Corn traded higher today as speculation on next week's planted acre report continues to circulate. Ethanol production dropped back from last week's 884,000 barrels per day to 873,000 this week. The reduction in production came along with an increase in inventory from 16.0 to 16.5 million barrels, according to the weekly petroleum status report. December corn futures move back above the 100-day moving average, closing at the highest level since just before the March planting intentions report. South Korea was in the market for nearly 5 million bushels of corn for fall delivery this morning.
July corn futures were up 9 to $6.8225. December corn was up 20 on the day to close at $5.705.
Bottom line: Rain and cool temperatures delayed corn planting and have created further issues with flooding and need to replant some early planted acres. Anticipated reduction of corn acres and possible lower yield potential has held December futures above $5.50.
This week brought disappointing news from the weekly petroleum status report as ethanol production dropped and inventory increased. The production drop comes off near market year high production levels, leaving the 873,000 barrels per day as a strong number given the short 2012 crop and high prices. Corn purchases in the Midwest for ethanol production have been active and well priced, forcing buyers at the port to strengthen basis recently.
Soybeans traded higher today following wheat and corn prices higher late in the day. Discussion on where the abandoned corn acres are headed or if they will be planted without or with reduced insurance has the bean market a little jittery. New crop prices led the soybean market higher, with 11.5 million acres remaining to be seeded according to the latest crop progress report.
July soybeans closed up 12.25 today at $15.23. The November soybean contract was up 21 to close at $13.1075.
Bottom line: Tight supplies and planting issues are playing into soybean prices. New crop soybeans are holding near $13 as planting delays and more sales to China offer support. Prices may strengthen if export sales continue and later planting impacts yield expectations. Old crop soybeans remain above $15, presenting cash opportunity to move beans near $16 in many locations as basis remains strong.
Wheat prices traded higher today, leading the grain markets up on the day. Digging a little deeper beyond the crop progress reports, reveals higher than normal abandonment of winter wheat acres in the Southern Plains with news from Colorado officials that their state will be one with high abandonment rates. Japan is looking for 2.4 million bushels of U.S. wheat, while Taiwan is tendering for mixed classes of wheat for delivery in late July. Taiwan has specified that the wheat cannot originate in Oregon, a result of the recent GM wheat issue. Scattered showers in the Southern Plains are delaying harvest in some areas as the already challenged crop dodges hail storms.
July wheat on the Chicago board was up 19.5 to close at $7.07. The July 2014 contract closed the day up 18.50 to finish at $7.5725.
July KC wheat was up 20.50 to close at $7.3975. The July 2014 winter wheat contract was up 17.25 to finish at $7.7975.
July Minneapolis wheat was up 14.50 today to close at $8.135. The September contract was up 14.50 to close at $7.9475.
Bottom line: Wheat markets are pricing weather and export sales as the 2013 crop is beginning harvest in the South. Look for opportunities to complete more wheat sales as harvest moves north and wheat yields are reported.
Rains in Europe were confined to western France yesterday, but look to move across much of the continent over the next five days. Showers will be helpful for corn and sunflower growth, but will continue to create concerns for wheat harvest in the north. FSU winter wheat got some much needed showers in southern Russia and northern Ukraine yesterday, but about one-quarter of the wheat belt remains stressed. Light showers again this weekend will be unlikely to alleviate dry weather issues.
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.