May 24, 2013

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October 2010 Archive for MGEX Research

RSS By: Joe Victor, AgWeb.com

Joe Victor is a Business Development Specialist with Minneapolis Grain Exchange, Inc., where he monitors cash grain activity and cash grain opportunities. He provides marketing advice through this blog.

Wheat Conditions

Oct 27, 2010

MGEX is looking at initial 2010/11 winter wheat condition ratings which were released by USDA on October 25^th, 2010. The trade talks about the good to excellent ratings even though USDA does publish additional ratings of fair, poor and very poor.

Be certain to understand winter wheat condition ratings in the fall are carried over into the following harvest. It is important to follow the ratings on a week by week basis going into the harvest as it may have a profound impact on futures as well as its spreads.

The initial 2010/11 USDA ratings of 47%

good to excellent are the weakest dating back to 2003. MGEX analyzed the initial ratings and then analyzed again just before the following year’s winter wheat harvest. The good to excellent conditions drop into harvest vs initial condition ratings five out of seven years, with one year higher and one year unchanged.

Of the five years down the worst drop was 29% just before the 2006 harvest and the smallest drop of 8% just before the 2008 harvest. The average drop in the five years was 19.4%. As to how these conditions drop and its impact on yield the direct answer is less than correlated.

Even though conditions may have dropped in five of the years from its initial to early harvest, the yield drop during the condition drop was higher than the previous year in three of the years. Even though the futures trade may pay particular attention to the weekly condition reports they do not have a high correlation to yield performance.

Pay particular attention to the fact since 2003 the yield drop year on year has been four of the last seven years. In the weak good to excellent condition years the perception is to have new crop futures to outperform the old crop futures.

In conclusion be aware of the weather developments for weekly crop conditions but do not rely upon these same condition reports as the roadmap to yield performance.

MGEX welcomes your questions.........Joe Victor

www.mgex.com

130 Grain Exchange Building 400 South 4th Street Minneapolis, MN 55415-1413

jvictor@mgex.com 800.827.4746 612.321.7164 Fax: 612.339.1155 equal opportunity employer

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Look to the Southern Hemisphere

Oct 20, 2010

MGEX is looking at weather developments within the Southern Hemisphere wheat, principally Argentina and Australia. Even though Australia may sit two places behind the US in production, it ranks as the number four global exporter. You can not rule out the world’s 12^th largest producer of wheat in Argentina as they sit only one place behind Australia as a wheat exporter.

Be aware there are dry weather problems within the number one producing state of Western Australia as it is in the midst of the key heading phase just before it enters harvest. There is talk Western Australia may lose 28% of its production because of the dry weather and nationally ranks as a top exporting region.

Thus far Argentina is doing well as it is in the midst of its key head phase. When the MGEX looks at both top and subsoil soil moisture, the main growing region is doing well but west and north of an important area are dry weather stressed.

As long as these two key producers of wheat are dealing with its wheat related problems, look for world importers to buy insurance from good quality exporters such as the United States, Canada and France.

MGEX is aware how the traders within the world may want to focus on corn and then soybean planting in Argentina as well as Brazil but do not lose sight as to the key producers and exporters in the Southern Hemisphere for wheat.

In conclusion be aware of the weather developments not only during the key heading phase within the Southern Hemisphere but for winter wheat planting and emergence in the Northern Hemisphere.

MGEX welcome your questions.........Joe Victor

www.mgex.com

130 Grain Exchange Building 400 South 4th Street Minneapolis, MN 55415-1413

jvictor@mgex.com 800.827.4746 612.321.7164 Fax: 612.339.1155 equal opportunity employer

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Several Surprises within the Starches

Oct 13, 2010

MGEX takes a look at the day supply or "cushion" which various national and international commodities are experiencing. Upon exploring the "starches" consisting of corn, rice and wheat we discovered several surprises.

The first surprise comes within the corn as USDA WASDE October estimates have record low level of day’s cushion of 24. This record level low surpasses the previous record set in the 2003/04 marketing year of 34 days. Within the present marketing year for corn there has never been a market year since 1999/00 where corn has lost 24 days from the previous marketing year as the previous record was 18 days lost in 2002/03. International corn also has set a record low day’s cushion of 52 days beating the old record of 54 days set in 2006/07.

Yet another surprise is held within the wheat as USDA WASDE October estimates has trimmed 50 days to this marketing years 127 days cushion from the previous market year. The previous record days trimmed was 41 days in the 2002/03 market year vs the previous market year. To witness this present days lost may be a surprising as the US’s day to day usage climb to a level of 6.68 bushels vs that of last marketing year’s 5.53 bushel per day.

The present 127 days supply of wheat represents less than 5 months or 35% of one full year. Make certain you are aware of the potential fall and spring wheat seedings for the 2011 harvest for national and international price reaction. International day’s cushion is now 81, off 10 days from the previous marketing year and compares to a five year average of 80 days.

The 20 day increase in rice for the present marketing year vs the previous market year is not a record. The 25 day record increase belongs to the 2004/05 marketing year. What may be a surprise maybe the production and ultimately end stocks dropped by 20% from The Sept to October WASDE.

In conclusion be aware of the tightness in the corn supply and restricting in wheat as well as growth within rice. You also need to be cognizant of the intentional field of play when referencing starches, all vegoils as well as soybeans.

MGEX welcome your questions.........Joe Victor

www.mgex.com

130 Grain Exchange Building 400 South 4th Street Minneapolis, MN 55415-1413

jvictor@mgex.com 800.827.4746 612.321.7164 Fax: 612.339.1155 equal opportunity employer

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A Major Surprise

Oct 04, 2010

The Minneapolis Grain Exchange takes a hard look at the day supply or "cushion" which various national and international commodities have. Upon exploring the "starches" consisting of corn, rice and wheat we find a major surprise in the making. The surprise is within the corn as the days supply is at record level lows dating back to the 1999/00 marketing year. Presently the corn cushion is approximately one month (30 days) taking out the previous record of 2003/04’s 34 day supply. Both the producer and end user needs to be aware of the tightness in corn supply and at the same time keep an ear pinned to the EPA floor. EPA is expected to make a mid-October announcement on whether to increase the national blend rate of ethanol into gasoline from 10% to as high as 15%.

It is refreshing to see the wheat supply come down from the previous year of 146 days to 135 days as the present trend is tightening but well away from the tightness of the 48 days of the 2007/08 marketing year. The present 135 days supply of wheat represents just less than 5 months or 37% of one full year. Make certain you are aware of the potential fall and spring wheat seedings for the 2011 harvest. The present status of wheat supply looks eerily similar to the 1999/00 into the 2000/01 marketing year and the international days supply tells a completely different story. Look at the present futures spreads to see if it pays to store on your farm or within the country elevator sectors.

If there is a thorn in the USA days supply of starches it rest with the rice market. For four consecutive years we have experienced the days supply growing for rice to a present level of 97 days a record unto itself vs last years previous record of 85 days vs the previous record of 67 days within the 2005/06 level. However it is refreshing to see how the Nov futures maintain trend line support since late July of 2010.

We welcome your questions.........Joe Victor

MGEX welcomes any questions you may have by calling 612-321-7164 or

e-mail jvictor@mgex.com

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