Grain Market Chatter Closing Comments 02/03/2015

Craig’s Closing Grain Market Comments

February 03, 2015

I just read through my comments from last night and was reminded of an encounter I had on an airplane a few years ago.  I was seated next to a little girl who was traveling alone and I figured I would be a nice guy and try to make the flight go more quickly for her so I turned to her and said, "Do you want to talk? Flights go quicker if you strike up a conversation with your fellow passenger."

The little girl, who had just started to read her book, looked at me and said, "What would you want to talk about?"

"Oh, I don't know," I said. "How about the grain markets and why they go up and down.”

"Okay," she said. "Those could be interesting topics but let me ask you a question first. A horse, a cow, and a deer all eat the same stuff - grass. Yet a deer excretes little pellets, while a cow turns out a flat patty, but a horse produces clumps. Why do you suppose that is?"

The question kind of caught me off guard and finally I just said "Hmmm, I have no idea." To which the little girl replies, "Do you really feel qualified to discuss the markets when you don't know s**t?"

I am kind of feeling that way this afternoon.  I didn’t see today coming and it has left me feeling unqualified to discuss the markets, not that I will let it stop me from doing so.

Corn:

Outside markets and the funds were probably the key to the markets today.  We saw the dollar drop precipitously while crude oil shot up.  Both of these events were seen as positive for corn and as a result we saw the funds in buying heavily.  For the session they bought 15,000 contracts.

We also had Informa out today with their latest projections.  They are projecting that worldwide corn production in 2015 will come in at 968 MMT, down from 985 MMT last year.  The reason given for the decline is that they are using trend line yields versus the much better than trend line yields that some folks experienced in 2014.  They are projecting that the crop in China will be larger than last year’s crop and they put the Brazilian corn crop at 72.8 MMT and the Argentine corn crop at 23 MMT.

The next USDA report will be February 10 and we are already getting some folks gazing into their crystal ball trying to project the USDA numbers.  A Bloomberg’s survey of 26 analysts put corn stocks at 1.886 billion bushels; this would be a slight increase from the 1.877 billion bushels projected in the January report.

Technically speaking two of my three technical indicators have turned bullish. It is worth noting that we also closed above the 100 day moving average today.

Soybean:

The weak dollar and stronger crude oil also pushed beans higher today.  Lately, much attention has been focused on South America so it was interesting to see the USDA’s Foreign Agricultural Service come out with a report indicating that the Brazilian soybean crop has dropped to 93 MMT; The USDA pegged it at 95.5 MMT in its last report.  Informa also chimed in, placing Brazil’s production at 93.5 MMT while they placed Argentina at 57 MMT.  For Informa this was a 2 MMT reduction of Brazil’s production but a 2 MMT increase for Argentina’s production.

Funds were very active in today’s market as they were net buyers of 10,000 contracts of soybeans.

Heading into the Feb. 10^th report Bloomberg’s survey of 26 analysts put soybean stocks at 394 million bushels, down from the previous USDA estimate 2014 of 410 million.  If I remember correctly the average trade guess heading into the January report was 394 or 395 as well.

Two of my three technical indicators are bullish at the current time.

Wheat:

We had short covering in today's market which propelled the market to unexpected heights.  For the session the funds were buyers of 15,000 contracts.

Informa is projecting 2015 world production to come in at 720 MMT, virtually identical to the 722 MMT posted last year. 

In the past three days the Saudi’s bought 690 TMT of wheat, GASC bought 300 TMT of wheat and Japan is tendering for 120 TMT.  We believe that the USA will get 50.2 TMT of that which isn’t great but it is also expected that the Russian export tax will slow their exports and push more business our direction.

Bloomberg’s survey of 26 analysts put wheat stocks at 694 million bushels, up from the previous USDA estimate 2014 of 687 million bushels.

Two of my three technical indicators are currently bullish both the Minneapolis and Kansas City March futures.