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Palouser
Senior Advisor

Pending grain issues that will determine market direction

For wheat the issues will be whether or not China's northern drought will break significantly in the medium term and/or how well they can cope with it - and the conditions in the US Southern Plains. Opinions seem to be that the current percip activity in China is not a drought breaker unless they continue for some time, and that some potential has already been lost (it is largely irrigated). Beyond that it is hard to say, but China is continuing spending billions for the project of reversing rivers flow to go north to insure future production in wheat country. The numbers in regards to crop conditions in the Southern Plains are pretty bad, worst since the mid 90's. Again, there are plenty of opinions that potential has been lost. I have heard of fairly good looking fields that are on the edge.

 

The first hump for corn and soybeans will be spring planting conditions. I have no perspective on whether there can be solid opinions on the outlook this early. Some rumors that domestic end users are investing in corn stocks to insure against price rises as supply competition increases before this year's harvest.

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Canuck_2
Senior Contributor

Re: Pending grain issues that will determine market direction

What about Russia? Are they out of the woods or are they a factor too? I thought there was talk they would be out of the market even with good crops to rebuild inventory.

 

Another factor might be the Canadian Prairies and maybe the Dakotas. I have heard concerns from western Canada about how wet their soils were in the fall and now they have a lot of snow to melt. Southern Manitoba is preparing for a lot of flooding and all the wet and water will make for a delayed planting. That is often not good for the best yields.

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GoredHusker
Senior Contributor

Re: Pending grain issues that will determine market direction

There must be little concern with regards to corn stocks unless the trade is making some bigger bets.  The September contract is trading at a 85+ cent deficit to the July.  The trade must be assuming we'll have an extremely early harvest.  The December contract is trading at nearly $1.35 deficit to the July.  The trade must be assuming one of two things.  One, we'll have a huge crop this year so there's no need for any weather premium at all.  Two, there's some huge changes coming with regards to use. 

 

With regards to wheat, I'd be interested in seeing whether or not feeders have switched rations to soft wheat as it appears it definitely pencils in to do so.  I'd venture to guess struggling wheat acres in Texas with any kind of spring moisture are in jeapardy of being lost to cotton.  Texas on average grazes out and abandons half their wheat acres annually, so I don't know if there will be more acres than normal abandoned.  Spring moisture will determine a lot.      

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nwobcw
Advisor

Re: Pending grain issues that will determine market direction

  Today on the local market corn closed at $7.09 and wheat at $7.28.  Only a 29 cent difference.  This is the closest corn and wheat have been in price in recent memory.  Why raise wheat?

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Artifice
Senior Contributor

Re: Pending grain issues that will determine market direction

China "reversing rivers flow to go north to insure future production in wheat country."  ??  opinions    don't matter what is, is. mo nature breaks droughts , not opinions.  reversion to the mean is the norm.

 

Corn beans, opinions on spring planding? who how or why try? crops get planted it is march 1.

 

Wheat acreage is higher, S plains will lose some, more than normal. 

 

World needs US wheat, exports will be high, we have it.

 

US 700 ish ES is suitable especially vs 8-9$ wheat.

 

SRW  opinions? ES come July 1, might there be too much?

 

Artifice

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Artifice
Senior Contributor

Re: Pending grain issues that will determine market direction

good point gored.

 

in NC etc, amnd Delmarva Penn,

SRW is bieng rationed in vs C. 

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Canuck_2
Senior Contributor

Re: corn & wheat spread


@nwobcw wrote:

  Today on the local market corn closed at $7.09 and wheat at $7.28.  Only a 29 cent difference.  This is the closest corn and wheat have been in price in recent memory.  Why raise wheat?


So here in Ontario it is even worse but I  do not know what difference is historically.

Spot corn $255.20/t        Spot wheat $250.59/t

2011 corn $204.32/t         2011 wheat $230.38/t

2012 corn $165.64/t         2012 wheat $237.46/t

 

It does switch back going forward but am not sure what 'normal' ratio would be.

 

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Palouser
Senior Advisor

Re: corn & wheat spread

The wheat/corn ratio tells me that if I'm in Kansas and have a wheat crop under pivot I'm tearing it out and planting corn. The fertility should still be there.

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GoredHusker
Senior Contributor

Re: corn & wheat spread

You're exactly right Pal.  While I'm not in Kansas, I highly doubt any irrigated wheat planted here in Nebraska can survive roundup.  If we get good spring moisture, I'm not sure how much dryland what will survive roundup.  I would think eventually spread traders would take note.  Most of the irrigated wheat planted here was behind soybeans.  The nitrogen credits will still be available to corn.  A lot of the early phos will still be there as long as guys don't wait until the very last minute to destroy the wheat.  The biggest problem we have locally with regards to wheat is that almost all of the 2010 crop is still here.  Here we are into March, and we still have very large outside piles of wheat under tarp that have been untouched.  Even if there are a lot of acres abandoned, the local basis will still be extremely wide because of the carry in from the 2010 crop. 

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Artifice
Senior Contributor

Re: Pending grain issues that will determine market direction

as well, its not as if the mkt doesn't know S Pains has trouble nd prt of China is in drought,

for the moment.

 

Chi may futures, for CBT went fm 832 to 805 in 1 hr just now.

 

Who wants to be holding ES of HRW or SRm come late may?

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