By Carrie Muehling
NORMAL – Grain markets will likely see more consolidation and sideways trade heading into year end, unless some new news surfaces.
Most traders are already positioned for the end of the year, but there are a few things that could move markets one way or another. One is the fiscal cliff situation. Asian bean demand is another factor to watch, and the South American weather forecast remains of interest to the trade. If the world supply balance sheet gets smaller because of problems with the South American crop, it would put more emphasis on new crop production in the U.S. for 2013.
The Mississippi River situation is another concern, as a large percentage of agriculture exports go through the Gulf. But the grain will likely find a way to its destination one way or another.
“As far as basis, that grain is going to go where it needs to go, whether it is by barge, rail or truck. That’s why you see basis levels fluctuate, to encourage the movement of grain to a location to fulfill those needs,” said Curt Kimmel, commodity broker with Bates Commodities in Normal.
Much of the grain bound for Asia will go west via rail and ship out the Pacific Northwest ports. Kimmel called corn exports are a disaster in 2012, with numbers at 50 percent of where they were last year.
“Right now there is no encouragement to buy U.S. corn at the moment. We’re seeing a situation where the end user has gone to alternative sources,” said Kimmel. “They’ve moved their rations to include a little bit more wheat, and we’ve seen situations where feeders in the southeast have actually gone through the process of importing corn. So that tells the trade that the end user rejected $8 and has gone to alternative sources or else is taking some down time.”
The United States actually has the cheapest wheat on world market right now. Draw down in other areas, especially Black Sea region, has caused those prices to move higher and the U.S. is now competitive. Dry conditions are a major concern especially in western states like Kansas, Nebraska, and Oklahoma.
“They’ve got to talk to their great-great grandfathers to really get a handle on how dry it is,” said Kimmel.
It will be critical for farmers there to receive some timely rains, and the wheat crop will be affected first. Kimmel believes there is enough moisture locally to get the 2013 crop planted and emerged, but area farmers will need rain during the key part of the growing season to realize a large crop.
Carrie Muehling can be reached at email@example.com.