Floor Talk January 18

[marketeye]

At the close:

The March corn futures closed 10 1/2 cents lower at $5.93 1/2. The March soybean contract closed unchanged at $11.83 1/2. The March wheat futures settled 12 1/2 cents lower at $5.92 1/2. The March soymeal futures closed $1.50 per short ton higher at $312.00. 
In the outside markets, the NYMEX crude oil is $0.14 per barrel lower, the dollar is lower and the Dow Jones Industrials are up 72 points.

Mike

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At 1pm:

Everything is trading lower. One analyst is saying, ""The market is dropping on some reports of increased rains for Argentina and Brazil.  Best showers to come this weekend, but the situation in Brazil seems to be a bit more stable and might get there in Argentina," he says.
Meanwhile, spec-selling, in light volumes, with commercial types the best buyers, put pressure on today's grain trade, he says. "Although my specs are covering as well.  Not an exciting day, but we are at areas where demand is starting to show. So, the downside might be limited from here," he says.

Mike

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At mid-session:

At mid-session, the March corn futures trade 8 cents lower at $5.96. The March soybean contract is 9 cents lower at $11.74 1/4. The March wheat futures are trading 10 1/4 cents lower at $5.94 1/2. The March soymeal futures are trading $0.23 per short ton lower at $308.20. The March soyoil futures are trading $0.38 lower at $50.39.
In the outside markets, the NYMEX crude oil is $0.54 per barrel lower, the dollar is lower and the Dow Jones Industrials are up 41 points.

Mike

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At 10:55am:

Oil World has dropped its 2011/12 soybean production estimate for Brazil and Argentina by 3.8 million metric tons. It also sees South America's exports falling and pressure on te U.S. to produce more soybeans this year.

What say you?

Mike

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At 9:45am:

For the record: Above normal temps and drier than normal precip is seen for the next seven days in most of Argentina. This weather pattern could stretch into southern Brazil, according to Wxrisk.com, the weather site.

Mike

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At the open:

At the open, the March corn futures trade 3 cents lower at $6.01. The March soybean contract opened 4 1/4 cents lower at $11.79 1/4. The March wheat futures opened 4 3/4 cents lower at $6.00. The March soymeal futures opened $1.30 per short ton lower at $309.10. The March soyoil futures opened lower.
In the outside markets, the NYMEX crude oil is $0.04 per barrel higher, the dollar is lower and the Dow Jones Industrials are up 66 points.

Mike

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At 9:25am;

With a number of big companies set to report earnings, yet this week, Goldman Sachs reported better-than-expected earnings today. The Stock market likes it and is ticking higher.

Mike

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At 8:30am:

USDA announces Wednesday that Egypt bought 120,000 mt of U.S. corn.

Mike

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At 6:55am:

News & Notes:

--Japan seeks 209,000 mt of feed wheat and barley. Japan buys from Canada, U.S., Australia, and France.

--W. Australia's wheat harvest is being reported as record-large, according to the Dow Jones Newswire. So, even more wheat for the export market.

--China's 2012 grain consumption seen rising over 2%, meaning the Asian country will need to continue importing grain.

--In November, Mainland China imported nearly the same amount of U.S. pork as Japan (the U.S.'a No.1 pork customer), according to the Foreign Ag Service. Mainland China bought almost four times as much it did a year ago and 4 1/2 times as much over a year's time.

Mike

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At 6:35am:

Early calls: Corn 4-6 cents lower, soybeans 8-10 cents lower, and wheat 4-6 cents lower.

Trackers:
Overnight grain, soybean markets=Trading lower.
Crude Oil=$0.39 per barrel higher.
Dollar=Lower.
Wall Street=Seen trading higher with a lot of company earnings reported today. Also, Yahoo is eyed, due to its co-founder quitting.

World Markets=Mixed.

More in a minute,

Mike

[docharing]

Mike,

Not much discussion here today. I appreciate your hard work.  I don't comment often but I read this site every hour all day long.

Most of the talk in Ohio concerning risk, corn is too cheap and inputs too high to expand acreage. We will follow our normal rotation which will favor beans this year.

[marketeye]

docharing,

Thanks for your loyalty. Funny you should mention this idea that corn is too cheap and inputs too high to expand acreage. I just heard that moments ago from an analyst in Indiana. That must be the talk in the eastern Corn Belt?

I'm asking these questions and hoping the "experts" in this forum will respond.

--One analyst told me once that if you could tell him where the corn market was going to be, he could tell you where the wheat market will go. Meaning that wheat is normally much higher than corn, I suppose. Is that rule of thumb outdated? Can you use the wheat market as a guidepost to track corn anymore?

--Is the corn market stuck until the wheat market takes off?

Mike

[Pupdaddy]

I think buying corn acres is going to take substantially higher prices. With Argentina's and Brazil's problems..and the possibility that soybean prices will take off..you're not going to get people in Ohio to alter their rotations. Anhydrous is waaaay too expensive right now. On the other hand..I happen to be rotating to a higher corn acreage this year...seeing as how my wheat acres are going to be put in corn. If you have guys doing a lot of that...you may see a few extra acres of corn. But I talked to my field rep from the popcorn company yesterday...and they were going to try and grow 27,000 acres of popcorn in Ohio this year..where they only had 9,000 harvested last year. So far they haven't got enough acres to meet their objective.

[Hobbyfarmer]

I visited with a regional fert/chem broker Monday, the gist of the visit was that with corn under $6 there isn't enough profit to switch many acres to corn. He also didn't see a big raise in fert prices as sub $6 will not support it.

My belief after many hrs of reading and personally owning ground on the "margin" (NW Ks) The acreage shift they are predicting either will not happen or if some happens it will be on the marginal ground scattered on the periphery of the corn belt and therefore trendline yields will not happen as many of those acres are 50bu ground. Those acres still take some fert and at least as much herbicide and sometimes just as much fuel to farm as 200 bu ground.

The one thing that has thrown the whole thing out of whack in a traditional sense is Fed crop ins. Without it most of the western high plains would go back to a every other year wheat rotaton. In many of those areas corn and soybeans are now king. 25 years ago it was wheat and cattle.

There is just no way more acres of marginal ground will make trend line yields. Threrefore the forcasters and others useing flawed data will get a flawed prediction. In the meantime we are victims of our own devices (USDA reports etc).

[vandenplas]

Trendline yields from added acres for next year are irrelevant.   You add 2 million acres of 50 bu/acre corn, and you've added 100 million bushels to the production. 

[roarintiger1]

The problem is, the folks at USDA will count those acres as making whatever the national yield ends up being......not 50 bpa.

[marketeye]

Pupdaddy,

I was speaking to a commodities analyst today, regarding the corn vs. wheat price. Though he didn't offer any price calls, he did feel that wheat will soon be trading at a premium to corn. He says, "This week’s corn markets are still adjusting to the mismatch between the very bullish USDA corn report the trade had been expecting last week and the somewhat neutral corn report that the USDA actually delivered. Wheat in the physical markets is more competitive than corn from a feeding perspective, but this is unlikely to last, because at some point the availability of price competitive FSU wheat supplies will be depleted, and buyers around the globe will once again turn to other sources of origin, including the U.S."

What say you?

Mike

[rightone]

Cash wheat should be in the $4.80 to $5.20 range SW plains this season.

Respectable looking crop, so should be a decent sized crop too.

Do know that wheat in 010 was ALOT better deal than corn was.

The down trend seems obvious for corn to be somewhat competitive with the other grains.

Alot of E use in some areas. 

Could be those can hold corn price levels at higher cash levels ( say 70 cents to $1 over the W ) as comped to other areas.

If they don't grow corn in the E cornbelt for $6, then they'll grow something else ( likely be beans ).

[Pupdaddy]

Marketeye,

I was pondering all kinds of replies to your question...and yes it seems that if the FSU really is running out of exportable wheat...that we could see a shift of demand to our shores. On the other hand...I was thinking with the onset of Australia's harvest, which appears to be a record large one...that demand may go to their shore and we'll be left holding the bag again. So here's the question I want you to ask the trader you talked to tomorrow. Did he mean that he thinks wheat will be trading higher than corn again...because the wheat has to go up in price?...Or because corn has come "down" in price? See..if the neutral report we got doesn't excite the funds...then maybe the wheat will stay the same and corn will just go down to achieve his prediction. I'm still willing to believe..that long term market cycles are going to be able to be traded this winter. A January low in corn is a real possibility again this year....and if it happens...maybe we ought to be using the wheat market to go long...as most certainly it will eventually end up higher than the corn market.