Futures Daily for Feb 14, 2013

Look at natural gas today! I don't think I've ever seen any commodity move nearly 4.5% in a single day before! Wheat, sugar, hogs, and silver are also big movers today! There is plenty of volatility!

Drought, Heat Destroying Food Crops

Fired by fresh worries about drought, corn powered up 34 cents per bushel on the Chicago Board of Trade to $7.08, above $7 per bushel for the first time in a year.
Soybeans climbed 53 cents per bushel to an all-time high of $15.27.
The gains in Iowa’s mainstay crops have been breathtaking as farmers and traders factor in their fears that the heat and drought in Iowa and elsewhere in the corn belt will take yields down far below expectations.
As recently as June 1, corn traded for $5.20 per bushel and soybean at $12.50 per bushel on expectations of big crops that would increase U.S. domestic stocks and also moderate what has been a two-year record run of corn and soybean prices.
The U.S. Department of Agriculture has forecast a national corn yield of 166 bushels per acre and a soybean yield of 44 bushels per acre. Iowa’s yields historically are about ten percent above the national averages.
But private forecasters have cut their yield predictions for corn to as low as 148 bushels per acre and soybeans below the USDA projections.
Corn

 Soybeans -- new all-time record high

 Wheat

Corn Limit Up; Beans, Wheat Follow

Beans up 60 cents. Wheat up 50 cents. Food is going to cost more!

Grains Skyrocket in Anticipation of USDA Report, News of Russian Grain Export Limits

from the Demoines Register:
With a crucial U.S. Department of Agriculture report looming tomorrow morning, corn prices have shot up unexpectedly by 34 cents per bushel this morning on the Chicago Board of Trade to $6.39 per bushel for the December contract.
Soybeans are up 48 cents per bushel to $12.26.

from Agrimoney:

Grain prices spiked after Russia revived plans for grain export duties amid fears that its surging pace of shipments would deplete inventories.

Viktor Zubkov, the Russian deputy prime minister who in June voiced proposals for a levy, said on Tuesday that the government was considering reviving the plan to prevent its grain stocks falling below 15m-16m tonnes.

While Russia has seen a sharp revival in its grains production from last year's drought-affected levels of 61m tonnes - with Mr Zubkov pegging the harvest at 90m-92m tonnes and Prime Minister Vladimir Putin last week estimating the crop at 95m tonnes – keen prices have seen a surge in supplies leaving the country.

Grains, Cotton Plunge on USDA Report

Corn is limit down

Cotton is near limit down

Soybeans plunged

Wheat plunged, near limit down also

Grains Skyrocket Across the Board

More costly food! All the grains show parabolic rises today.

Corn Limit Down on USDA Report

from Arlan:
Grains hit hard at open, but bargain hunters emerging; prices well off their lows; corn dn 22, beans dn 9, wht dn 16 to dn

Grains Show Weakness Despite Bullish USDA Planting Data

from Arlan:

re:corn
13% US corn planted vs 40% 5-yr avg; Progress at - IL 10%, IN 2%, IA 8%, MN 1%, MO 32%, NE 15%, ND 0%, OH 1%, SD 2% WI 1%

re:wheat
10% US spring wheat planted vs 43% 5-yr avg; ID 51%, MN 3%, MT 7%, ND 1%, SD 22%, WA 60%

Grain Prices Grow Skyward

After spending more of the past year rising rapidly, grain prices blasted even higher today across the board. This one is for wheat. Inflation is coming, and it is going to be serious!

Ag Commodity Inflation Is Here and Going to Get Worse

from Along the Watchtower blog:

Longtime readers will recall that we've had several conversations here regarding the impact that the Fed's quantitative easing policy is having on the costs of everyday food items. Soaring prices of agricultural commodities are going to continue to have a devastating effect on the purchasing power of average Americans and consumers around the globe. Since prices have now recovered some from the selloffs after the Japanese earthquake and tsunami and since there is no end in sight to QE, I thought it was time to once again take a look at out favorite commodities and assess where their prices may be headed over the spring and summer.

Let's start with the grains because rising grain prices cause all sorts of inflation. Not only are grains the raw input to countless consumer goods, grains are also the primary foodstuff for cattle ranchers and hog finishers as they prepare their herds for slaughter. Let's start with wheat, which is being influenced not just by the falling dollar. Price is also feeling the impact of the ongoing drought in the "winter wheat zone" of the high plains of Kansas, Oklahoma and Texas.
http://www.bloomberg.com/news/2011-03-24/worst-texas-drought-in-44-years-eroding-wheat-beef-supply-as-food-rallies.html
Now take a look at the chart. Long-term support held at $7.50 and wheat looks almost certain to catapult higher very soon.

OK, so how about corn? Corn is extremely important in food production as it is used not only as a primary ingredient but as a sweetener, as well. First, let's look at the chart. Support was found, as expected in the area around $6.50. I have no doubt that corn will soon resume its upward move along its primary trendline from last summer.

Now here's the deal with corn...it's expensive to grow! The primary fertilizer that Midwestern corn farmers utilize is anhydrous ammonia. Last year, anhydrous ammonia cost your average farmer about $425/ton. This year, the cost has almost doubled to $750-800/ton. So, while it might be tempting to seed a lot of acres with corn to capitalize on the high price, the input and production costs are so high that many farmers will choose to plant soybeans, instead. Less acres of corn planted lead directly to less production. Less production leads directly to even higher prices. (Remember that below when we get to cattle.)

So what about soybeans? Soybeans are the one grain that I don't expect to rise in price. They will, most likely, stay rangebound through the summer. Why? Besides the fertilizer costs affecting plantings, soybeans get extra acreage for another reason: Weather. Because soybeans have a shorter growing season, they are a "fall back plan" for many farmers who struggled to get corn planted due to overly wet spring conditions.
http://www.galesburg.com/news/x1777821638/Galesburgs-spring-outlook-cool-and-wet
If the upper Midwest spring turns out cool and wet, many farmers will forego corn planting and turn, instead, to soybeans. Extra supply = Lower cost.

Now, let's get back to corn. Have you ever heard the term "corn-fed beef"? Most of the best steakhouses proudly champion corn-fed beef because, frankly, its tastes a helluva lot better than grass-fed. The high sugar content of the corn gets converted into fat. The fat makes its way into the muscle and you, Mr. Steakeater, get yourself a beautiful, marbled "prime" steak. Fat cows are also desirable at slaughter because, well, they weigh more and cattle are sold by the pound. OK, so now, pretend for a moment that you're a cattle rancher. As your cattle are growing and being prepared for market (the term is "finished"), you want to feed them as much corn as they'll eat and you can afford. Corn at $7.00/bushel really cramps your business plan. Your first reaction is to control costs by thinning your herd, i.e. you sell some prematurely, before they are "finished". You might also simply want to sell some of your herd to take advantage of today's high prices.
http://www.saljournal.com/news/story/Cattle-prices-32411
Either way, this extra supply in the short term has actually worked to keep cattle prices from soaring at the same rate as the grains. But this is temporary. By this summer, supply will decrease as cattle that would have been coming to market just then have already been slaughtered. Are we already beginning to see this play out on the chart? Well, take a look:

Many of the same dynamics are in play in the pig market. Note the similar chart pattern of a recent breakout to new highs.

So what does all this mean? It means you'd better prepare. Maybe you're comfortable and you have all the disposable income you need. Great, but what about your sister, trying to raise her three kids on 50 grand a year? What about your neighbor or your best friend who is trying simply to make ends meet after losing a job? What can you do to help them?

You start by warning them about the coming surge in food costs brought about by quantitative easing. All of the factors discussed above, combined with soaring fuel costs, will most certainly lead to a much higher "cost of living" in the near future. The time to act is now.

Grains All Limit Up

Corn, soybeans, soybean oil, soybean meal, wheat, and oats all opened limit up today. I have never seen this occur before!

USDA Cuts Wheat, Corn Harvest Forecasts

* USDA cuts world wheat forecast for fourth month in a row

* U.S. corn stocks/use ratio lowest in 15 years-USDA

* Rise in corn futures buoys wheat, soy down 1.4 percent

* USDA sees record-high farm-gate corn price in 2010/11

* Higher costs likely for meatpackers and foodmakers
 (Rise in corn also boosts wheat futures, adds closing prices)

By Charles Abbott

WASHINGTON, Sept 10 (Reuters) - U.S. corn supply will
shrink to its tightest in 15 years next year due to strong
global demand and a smaller-than-expected crop hit by hot, dry
weather, the Agriculture Department said on Friday in forecasts
that stoked corn prices but tempered wheat.

While painting an unexpectedly tight picture for a corn
market that has already surged more than 40 percent since late
June, the USDA cut its wheat supply forecasts by less than
expected, allaying fears that the world was headed for a repeat
of the 2008 food-fear crisis.

The USDA cut its forecast for the U.S. corn stockpiles to
1.116 billion bushels (28.4 million tonnes) by the end of
2010/11, down 15 percent from its report a month ago and a
nearly 20 percent decline on the year.

That put the stocks-to-use ratio at 8.3 percent, or about
the equivalent of one month's consumption, the smallest since
1995/96. [ID:N07254444]

With the fall harvest under way, USDA cut its U.S. corn
crop forecast by 2 percent to 13.16 billion bushels (334
million tonnes) -- a bit below forecasts for 13.2 billion
bushels -- due to hot, dry late-summer weather that helped
prices rise by nearly 17 percent since August.

USDA cut its forecast of the world wheat crop for the
fourth month in a row, but its forecast of 643 million tonnes
was not as low as expected. USDA lowered its forecasts for
Russia's wheat harvest by 2.5 million tonnes from August and
the European Union's by 2.4 million tonnes. [ID:N10224730]

USDA lifted its forecast for the U.S. soybean crop by 1
percent from its August estimate.

The world wheat crop would be the smallest in three years,
since fears of a food shortage were rampant.

But supplies are far larger than in 2008 and USDA raised
its forecast of 2010/11 wheat end stocks by nearly 2 percent,
to 177.79 million tonnes, due to larger supplies in Canada.

U.S. farmers "are in an economic sweet spot" of large crops
and high prices "and we think this will persist well into
2011," said analyst Mark McMinimy of Washington Research Group.
"Downstream users, however, such as meat processors and baking
companies and food manufacturers will likely labor under higher
input costs."

CBOT December corn futures CZ0 settled up 7-1/2 cents at
$4.78-1/4 on Friday, with the tighter supply forecast buffered
by a lower-than-expected weekly export sales total.

December wheat WZ0 settled 1-1/4 cents at $7.36 and 3/4 a
bushel. November soybeans SX0 ended lower 15 cents at $10.31
a bushel. While USDA forecast larger supplies than traders
expected, export sales for wheat and soybeans were above
expectations.

Wheat Limit Down

After hitting limit up yesterday, the price of wheat is limit down today. We are close to yesterday's low also! We were close to limit up again over night! Wow! I thought this was feeling a bit "bubbly"! Today has been a mad rush for the exits in the wheat market. But the market hasn't closed yet, so anything could happen!

Beans are still up for the day! (beans went negative after I posted this)

I remember one other occasion when soybean prices hit limit up, then limit down, the limit up a second time the same day!

Wheat Sells Off 90 Cents

From a top last night about $8.40, wheat has sold off to $7.50. I don't know how to interpret this.Is this the top? The fundamentals don't seem to have changed much. Corn is down, but only modestly. Beans are modestly higher.

• It could be a top and exhaustion. 
• It might me liquidation of trades before the weekend. There is often a liquidation before a weekend, since many traders don't want to hold positions over a two-day period when the weather may change dramatically. 
• It could be longs taking profits.
• It might be just sell stops being hit.

Wheat Limit Up, Other Grains Following

Wheat went limit up, rising nearly 60 cents in one hour!

Wheat: More "Turmoil" or "Unwarranted"?

from Agrimoney.com:

The United Nations warned over the world's dependence on "erratic" Black Sea wheat as it cut its forecast for the world crop by 15m tonnes, injecting extra zest into the grain's renewed rally.
Wheat for November delivery closed at two-year highs in both Paris, where it finished up 2.3% at E209.00 a tonne, and London, where it ended 2.3% higher at £151.50 a tonne.
Chicago wheat for September hit $7.30 a bushel, a fresh 22-month high for a spot contract.
The rises reflected continuing concerns about Russian wheat exports, and followed a cut to 651m tonnes in the UN Food and Agriculture Organisation's forecast for the global crop.
The FAO attributed the revision to the "devastating drought" in Russia, and lower harvest forecasts expected for its Black Sea neighbours Kazakhstan and Ukraine, adding that the shortfalls "raise the likelihood of higher wheat prices compared to the previous season".
Furthermore, the drought threatened problems for winter grain plantings, "with potentially serious implications for world wheat supplies in 2011-12". Russian farmers usually begin sowings for next year's harvest in the last half of August.Indeed, the "turmoil" in wheat markets caused by the woes of the former Soviet Union trio illustrated the perils to importers of depending so heavily on the region.
"The turmoil… is evidence of the growing dependence on the Black Sea region, an area renowned for erratic yields, as a major supplier of wheat to world markets," the FAO said.
The US Department of Agriculture describes Kazakhstan and Russia's Volga Valley, which has been particularly badly hit by drought, as zones of "risky agriculture". Kazakhstan is prone to droughts two out of every five years.

Tender results
The UN's warning came as Russia won its second tender in a week to supply wheat to Egypt, the world's biggest importer of the grain, and is set to supply 180,000 tonnes at prices of $252-270 a tonne, excluding freight.

Jordan also bought 50,000 tonnes of Black Sea wheat, at $297.92 a tonne, including freight.

However, analysts have warned against interpreting tender victories early in 2010-11 as a sign that Russia's wheat supplies are deeper than had been feared, saying they may just reflect long held stockpiles, and the relatively strong, and early, harvest in southern areas nearer to ports.

Latest data from Russia's farm ministry showed the grain harvest falling behind last year's at this time, even thought an extra 2.4m hectares has been harvested.

The average yield was 2.22 tonnes per hectare, lower than the 2.32 tonnes per hectare reported as of July 29, as combines swept into areas worse affected by drought. The year-ago figure was 2.78 tonnes per hectare.

'Fears unwarranted'

The FAO added that, despite the production problems in the Black Sea and Canada, where farms received too much rain, the wheat market was "far more balanced" than in the run up to the last price spike, in 2007-08.

Furthermore, the booming global economic conditions, and bottlenecks in supplies of other crops, such as rice, which fostered price rises then were "not posing a threat so far".

"Fears of a global food crisis are unwarranted at this stage," the organisation said.

Wheat Up Nearly 50 Cents Today

The other grains were also up sharply! This is beginning to feel like a bubble!

Fastest Rise In Wheat Prices in 50 Years

Wheat prices have staged the most drastic rise in more than 50 years, as a drought in Russia fuels growing worries that it could lead to a global shortage of the grain.
Harsh heat and a lack of rain in Russia have killed half of the crop in some hard-hit areas. The slump in production in one of the world's most fertile breadbaskets has pushed prices up 62% since early June, and last month saw the biggest and fastest increase since 1959.

Wheat Continues Rally Due to Russian Drought

Wheat prices continued its rally from last Friday. Future contracts rose by more than 5% to reach a 14-month high of $6.61/bushel, setting the largest monthly gain since at least 1959, Barclays Capital said.
The jump was fuelled by concerns over possible wheat export controls in the Black Sea states, which continue to suffer from their worst drought in over a century. Russia produces about 8% of wheat world output.
Still, Egypt, the world's largest wheat importer, recently stroke an import agreement with Russia on Saturday.
Other wheat producing regions in India and Pakistan are also suffering from heavy rain and floods, BarCap said.

Wheat Up 25 Cents Today

I read analysis yesterday that is predicting $10 wheat. We are at $6.50 right now, a 50% increase in a matter of a few weeks!