02-09-2011 07:34 AM - edited 02-09-2011 03:10 PM
End of day notes:
* Corn prices topped $7/bushel for the first time in 31 months today, but gains didn't trade limit up as some traders expected. How much more upside? There are doubts, as Western Milling analyst Joel Karlin told Dow Jones: "Despite what the USDA says, we are starting to see some demand rationing."
* A Morgan Stanley advisory disagrees that rationing has kicked in: "....prices must hit $8 a bushel to start eroding demand," DJ reported.
* Soybeans hit a new 2 1/2 year high in line with corn. The trade is looking at soybeans as needing to compete with corn and cotton for acres this spring.
* Wheat futures rallied to their highest level in some 30 months. Chicago March wheat was up 2.4% higher at $8.86/bushel. Traders talked up the corn market, as well as the global demand situation, including China crop concerns.
* Cotton futures prices nailed a post-Civil War high on worries that rising prices for other commodities, like corn, may boost competition for acres this spring. See Jed's note below for a grassroots take on cotton.
Traders are seeing the USDA report this morning as bullish for corn, soybean and wheat futures. Early Call: corn up 20-30 cents, soybeans up 10-12 cents and wheat up 9-12 cents.
“It’s a bullish scenario,” Don Roose, an analyst with U.S. Commodities, told Agriculture.com this morning (read full story).
“What we did on this report is increase food use 20 million (bushels) and ethanol use 50 million,” Roose said. His firm is calling corn futures to be up 15 cents to the 30-cent limit today, with soybeans and wheat both up 10 to 15 cents “I’ve been telling people we’ll quickly go up to $7 on corn. It’s all about the need to ration corn and the acreage battle,” he says.
Ending corn stocks for 2010/11 are projected at 675 million bushels, according to USDA. Pre-report estimates were at average of 736 million bushels, according to the predictions of 17 analysts and traders in a Dow Jones Newswires survey earlier this week.
USDA is projecting a 2010/11 marketing-year average farm price at $5.05 to $5.75 per bushel, up from $4.90 to $5.70 last month.
USDA pegged soybean supply and use projections as unchanged this month: ending stocks at 140 million bushels. Season-average farm price is seen unchanged from last month: $11.20 to $12.20.
U.S. wheat supply, use, and ending stocks projections for 2010/11 are unchanged this month, USDA said. Market-year average wheat price is projected at $5.60 to $5.80 per bushel, up 10 cents from last month on the lower end of the range.
The 2010/11 U.S. cotton supply and demand estimates are unchanged from last month. USDA raised the forecast for the average price for producers of 79 to 84 cents per pound by a penny on the lower end and lowered it 2 cents on the upper end of the range.
Summary report is available: Click here
Some observers were expecting a quiet day on this report. What do you think?
02-09-2011 08:00 AM
"Ending corn stocks for 2010/11 are projected at 675 million bushels. This month’s projections
lower the stocks-to-use ratio to 5.0 percent, the same as in 1995/96—the last time ending
stocks fell to multi-year lows. Corn prices rose sharply in the spring and summer of 2006 to
ration usage ahead of the 2006 harvest. The 2010/11 marketing-year average farm price is
projected at $5.05 to $5.75 per bushel, up from $4.90 to $5.70 per bushel last month."
If this comparison is anywhere near being right on then where will this years prices go to when they 'rise sharply in the spring and summer' as it did in 2006? Anyone with a guess?
Conisder good planting and weather this summer,,,but then also consider another scenario with a 'drought' I keep hearing rumblings about.
02-09-2011 08:12 AM - edited 02-09-2011 08:17 AM
How about the part that talks about the wide spread between the prices the farmers are getting delivering the grain and current market bids.
Also interesting, the comments on HFCS, and how much is being shipped to Mexico.
The bean number is interesting. Basis improved over twenty cents in the last few days around here, have to see if it holds, or they were just wanting to buy inventory ahead of the report.
02-09-2011 08:30 AM
Hey JR..... I thought it was bearish............. Carry is still to high in both corn and beans......:~)...... We need to ration NOW or it will be (carry) lower yet...... IMHO...... We need to go to the 08 highs AT LEAST......p-oed
02-09-2011 09:19 AM
Jed: Good catch, sorry I missed cotton. I'm a little rusty on the markets beat.
USDA left its supply and demand estimate for cotton unchanged from last month. It raised predicted season-average price by a penny on the lower end and lowered it two cents on the high end, to 79 to 84 cents per pound.
Are cotton acres going to expand in your neighborhood?
02-09-2011 09:20 AM - edited 02-09-2011 09:30 AM
Things that make me shake my head.
Zero Hedge (the markets haven't opened yet)
Des Moines TV (corn has not hit seven yet)
Des Moines Register:
especially note :
For Iowa’s economy, the surge in the price of corn from $3.50 per bushel last summer to the current $6.75 level, and the rise of soybeans from $9 per bushel in June to $14.43 today has added an extra $7 billion in cash above the $13 billion farmers received for their corn and soybeans a year ago.
Didn't know all Iowa farmers were still holding on to all their 2010 crop...and will be smart enough to pick the top.