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Standard Grain

RSS By: Joe Vaclavik

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.

 

Ag Markets to Start Friday Lower...

May 11, 2012

 

·         Grains traded sharply lower overnight; Beans led the way down despite a friendly report from the USDA report yesterday; Follow-through selling in corn after yesterday’s bearish report
·         Corn traders were left scratching their heads after seeing an upward revision in old crop corn stocks yesterday; Many had anticipated demand increases; USDA’s only revision a 50mil/bu drop in feed usage
·         New crop corn balance sheets seen as being very bearish; New crop corn yield pegged at 166.0bpa with the crop seen at 14.79bil/bu; New crop carryout projected at 1.881bil/bu
·         Soybean numbers were mostly friendly; New crop carryout at 145mil/bu is very tight, especially this early in the year; Traders noting huge inverse from Nov ’12 to July ’13 as an indicator of assumed new crop tightness
·         Old crop soybean carryout lowered to a snug 210mil/bu in increased in both crushings and exports
·         Brazil gov’t raising their soybean crop estimate to 66.7mmt vs. previous 65.6mmt; Also raised corn production number to 65.9mmt from 65.1mmt
·         Outside markets mostly negative today; JP Morgan reporting 2 billion dollars (some estimates as high as 4 billion) in trading losses, which has spooked the stock market early today
·         Crude oil prices continue to trading well below the $100 mark; CRB index taking major hit in recent weeks as gold, crude and ag commodities have dropped sharply
 
The fact that the USDA is estimating a record corn crop in ’12 should not be a surprise. The market has been touting big acreage for several months, while weather conditions have been obvious. As of now, a very significant amount of bearish data has been priced into the market. A short-lived weather scare would be the best chance that farmers will see to price grain ahead of June 29th, when the USDA will release final acreage numbers as well as quarterly stocks estimates. The March stocks numbers sent corn limit-up in old crop contracts, and many expect that a similar reaction is possible on bullish numbers. 
The trade will focus mainly on weather from here on out. The better the weather, the lower the corn goes. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438
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