Joseph Vaclavik is the president at Standard Grain in Chicago. Standard Grain provides futures and options brokerage to farms, feedlots, elevators, processors, end-users and traders. Visit www.standardgrain.com for more information.
Wednesday Morning Grain Market Update...
Aug 15, 2012
The grain markets are higher across the board this morning, led by soybeans. Forecasters are looking for less rain than previously forecasted in some areas while temperatures remain cool. Early corn yields continue to be extremely disappointing. Some technicians are looking for a bounce from oversold levels in the grain markets after December corn tested key support in the mid 780s yesterday. Wheat futures continue to be the weak leg of the grain complex, but will likely need to stay competitively priced relative to corn.
Pro Farmer will kick off their 2012 Midwest Crop Tour on Monday. The tour begins in western Ohio and moves through Indiana, Illinois, Iowa, S. Minnesota, E. Nebraska and S. South Dakota. The group will provide yield estimates for each state and a final yield number at week’s end.
China’s CNGOIC is now calling for a 197mmt corn crop, down from the previous estimate of 197.5mmt. Infestation of armyworms in much of the crop is to blame for the cut. Governors of two more states, Arkansas and North Carolina, sent letters to the EPA calling for temporary suspension of the ethanol mandate. Governors of several other states have done the same during the past few weeks.
There have been reports of southern corn barges being moved north to supply ethanol plants. Although these may be isolated incidences, it certainly speaks to the lack of old crop availability in the Corn Belt. We maintain the belief that USDA’s current old crop carryout estimate of 1.021bil/bu is far too high.
Outside markets are mostly quiet this morning. Crude oil is marginally lower, but still trending higher for the most part. The euro is lower along with equities, metals and bonds. Today is a slow news day. Export sales will be released tomorrow morning and crop progress again on Monday afternoon.
“End-users will buy breaks” has been the battle cry of the grain bulls this week. Although we agree with the logic, the confidence in which many analysts have forecasted this “virtual floor” in the grain markets is of concern. Overconfidence is not a quality possessed by successful traders, and we believe that ruling out more downside in the markets after trading to new all-time highs in both corn and soybeans is unreasonable.
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