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.
Grain Higher, Spreads Rally...
Jan 23, 2012
· Grain sharply higher overnight lead by nearby contracts; Traders clearly not agreeing with USDA’s assessment of old crop corn production as old vs. new corn spreads shoot higher
· Rainfall and coverage amounts lower than expected over the weekend in drier areas of South American grain belt; Still a widespread event that should provide 1.00” of precip is slated for Tuesday
· Basis rallying in some areas of the country, again causing traders to believe that our old crop supply situation may not be as loose as USDA had indicated
· Outsides mostly supportive overnight , crude slightly higher and US$ .30-.40 lower
· Nearby soybeans trading back over the $12 mark after showing some sluggish behavior last week
· COT showing managed money cut their long corn position by 47k to 176k, cut their long soybean position by 11k to 33k and increased their wheat short by 14k to 50k
· Cattle on Feed seen as neutral to slightly bullish on Friday; On-Feed at 103% vs. 103.3% est, Placements 94% vs. 94.2% est, Marketings 98% vs. 97% estimate
· Corn exports from China during ’11 were up 7% from prior year, while corn imports in ’11 were up 11.5% to 1.7mmt according to customs data
· Informa releasing their ’12 Acreage Estimate on Friday:
o Corn 94.784mil vs. 94.389 last month
o Soybeans 78.568mil vs. 74.608 last month
o Cotton 13.838mil vs. 13.150 last month
Continue to watch old vs. new corn spreads for an indication of the market’s perception of our supply tightness. A continued move higher in the July/Dec corn spread would be a clear sign that the trade isn’t “buying” USDA’s recent increase in ’11 corn production. Seasonally, producers should be looking to make some ’12 sales at market peaks between now and the end of June. We have not yet advised any cash sales for the ’12 crop as our seasonal and technical parameters have not been met.
As always, call the office with questions or concerns. Look for a strong open today barring any negative move in outsides ahead of grain open. As always, call the office with questions or concerns.