SunPrairie Grain Morning Comment
MINOT - Jun 20/14 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.
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Market Outlook as of 8:40 AM CDT:
Wheat is 4-7 lower, giving up some of yesterday's gains, ending the week on a lower note (Mpls July last trade 6.98 ¾, KC July 14.09 ¼)
Soybeans are down 7-12 cents, market focuses on new crop potential, not concerned about tight old crop supplies (July last trade 14.09)
Corn is 0-2 lower, nearly ideal growing conditions and lower wheat and soybean markets push prices lower (July last trade 4.49 ¼)
Sunflowers are down 5-10 cents, following a lower soybean complex and canola prices
Canola is down 10-20 cents, strong selling pressure, market knows acres went in, downward pressure led by soybeans
*Rail Performance Update*
Meetings and presentations with industry leaders have indicated that CP rail performance is not due to improve any time in the near future. This means that we could see slow railcar placements into and throughout harvest, giving us plenty of fresh challenges for making space for new crop grain. Rail placements did improve over the planting season and we were able to open up a lot of space. Currently, we have space available for grain and are offering free DP (as space allows on spring wheat and winter wheat) so that you are able to move your old crop grain out of the bin before harvest (without pricing it), enabling us to get it in and out of our system before harvest as well and keeping space available for new crop. The last thing we want is to be full two weeks into harvest and waiting weeks for railcars. Additionally, we will not be rushing to pile grain. As you are all well aware, grain does not have a long shelf life when it is subject to the elements in a pile. If we do not have consistent freight coming we will not pile grain that cannot get shipped in a timely manner. Long story short - if you're considering hauling grain before harvest please do so sooner rather than later so we have time to ship out old crop and are not sitting full before harvest starts. Please call with any questions. Thank you for your continued business and support!
Grain futures are pulling back today after posting gains in yesterday's session. It seems that there is not enough exciting, fresh fundamental news to pull prices higher and weekly export sales yesterday were not really indicative of strong demand. Weather has been pretty wet in areas recently and that has some concerned about the crop in those spots. However, the last week of June is expected to show weather drying up a bit. The US dollar is higher this morning and crude prices are up as well.
It was pointed out to me yesterday that I haven't talked about what's going in the durum market. It's easy for me to get caught up in talking about corn, soybeans and wheat and to neglect the many other commodities we grow in our area. If there's something you're curious about or if you have a question about the markets please contact me and I will be happy to cover it!
Milling durum prices have shot through the roof recently, gaining about $1.75 this past week. The durum market has been hand to mouth for awhile, with prices shooting up and then relaxing back to "normal" levels. Recently, though, the strength has been more consistent and that is due to railroad inconsistencies and flat out lack of delivery of railcars. As you may know, the Canadian government mandated that the CP handle a certain amount of grain every week. In order to meet the mandate the CP has been sending shuttles to elevators, shipping them as a unit to destination (mostly export markets) and then returning them as a unit to elevators. While this has worked well for shuttle loading commodities, it has not worked so well for our single car commodities or destinations south of the Canadian border. This has resulted in US mills not receiving the Canadian durum they were relying on receiving this year. Additionally, US logistics are a mess as the CP focuses on meeting this Canadian mandate and dealing with weather issues (latest excuse: tracks are too soft due to wet weather so they can't deliver cars to elevators). Mills are willing to pay up substantially to encourage elevators to load durum when they do in fact get cars. This has resulted in us being able to pay more for durum. There is by no means a lack of durum supply, just a lack of supply being able to move to end users right now. I think this is a good pricing opportunity if you are hanging onto some old crop durum.
Recent rainy weather continuing across many of the US winter wheat growing areas has spurred concerns about VOM in the soft red winter wheat crop. Of course, we won't know until harvest starts, but quality issues could help to keep prices supported. However, overall harvest pressure and a weak export market for US wheat will keep prices lower. Falling corn prices do not really help things out either. It looks like the US has a pretty good spring wheat crop coming. It seems that this year's prices from a supply standpoint are pointed towards going lower. However, rail issues and physically moving the crop to destination could work to keep basis values supported as we move through harvest.
The soybean market really does not seem at all concerned about old crop supplies being historically tight. Old crop soybean contracts are showing double digit losses while new crop are down only a couple of cents. Funds are reportedly holding a fairly small long position which makes one wonder if they are moving to a net short position in the futures market - meaning they could be putting downward pressure on futures as they sell off contracts. Soybean oil and meal are lower this morning. Canola is falling as well, which means we will probably end the week on a lower note in all the oilseed markets this morning.
I read an article regarding "greenhouse" growing conditions and how the potential for a record large corn crop could work to push futures down to the $3.50 mark. That's about $1 lower than they are right now, which would put cash corn prices closer to the $2.50 mark with a -$1.00 basis number. Here's the link to the article for your reading pleasure:
http://www.agweb.com/article/greenhouse_effect_could_push_corn_to_3.50_NAA_Fran_Howard/?smartid=FCZZZZGZ11Z2221D2ZZZZZZZG2000001242329ZZZZZZZZZZZZZ&spMailingID=46250902&spUserID=Nzc4Nzk0ODk5NTAS1&spJobID=462444914&spReportId=NDYyNDQ0OTE0S0
With the potential for lower corn prices come harvest, it may not be a bad idea to lock in some new crop corn if you're comfortable doing so. Funds bought up some corn contracts yesterday in what seemed like a technical correction after trading lower over the past couple weeks. Fundamentally it looks like corn prices will continue to trade lower. Chatter from China regarding excess corn stocks, auctions not going as well as planned and an increase in exports does not bode well for the US corn market. China does not make up a lot of our corn exports but they do count for a lot of our DDG (dried distillers grains - a byproduct of corn used for ethanol) exports (nearly 35% of that market). So none of this is really great news.
Anyway have a great weekend and let's hope for some warm, sunny weather!
Kayla Burkhart
Broker/Procurement
SunPrairie
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1800 13th St SE | Minot, ND 58701
P 701.857.9322 | F 701.839.5515 | C 701.720.4682
kayla.burkhart
To discuss this report further or for specific trade ideas please contact me
directly
Kayla Hoffman
SunPrairie Grain
Kayla.Hoffman@chsinc.com
Toll free: 800.735.4956
Local: 701.852.1429
Fax: 701.839.5515
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