Chip's Chore Time
Chore time for me isn't what it used to be when I was growing up on our eastern Iowa farm. In fact... I don't even have horse chores to do any more!
Bears Grab Momentum in the Grains
Jul 07, 2008
Chore time for me isn't what it used to be when I was growing up on our eastern Iowa farm, but taking care of two horses in the morning before I head in for work gives me a little time to think about the day ahead. Each morning, stop at this spot to get a feeling for the "tone of the day" - and some attitude about agriculture and the markets.
I was thinking…
... well -- it's certainly been an interesting week in the grain markets. We're limit down this morning on the promise of some rain in the Midwest after we saw prices run up last week on the threat of hot and dry conditions. Sounds like a pretty typical July Fourth holiday weekend, doesn't it?
And speaking of the Fourth... I trust everybody had a safe and happy celebration. I know I did -- even slipped in a major family reunion over the weekend in my home town of Oxford Junction, Iowa. Like many river towns in Iowa (the "Oxford" part of the name is there because this is where ox-drawn wagons could ford the Wapsipinicon River), "OJ" didn't escape the flood damage. The south-side of the railroad tracks (that's where the "Junction" part comes in) got hammered and the highway leading south out of town got washed out. Literally... and the closest detour to the south side of the river also got washed out. Some of my cousins in OJ that live just south of town made a "long trip" to get to the Legionnaire Ballroom at the park for the reunion.
Here's a shot (taken by my mom) of what the road heading south out of OJ looks like. They hope to have it fixed by the end of September. What happened was the water from the Wapsi River ran over the road for so long that it undercut the pavement on the down-current side of the road.
So... why make such a big deal out of this one road? Well... it's not just "one road." There are many roads like this across Iowa that farmers use to move product around the state to ethanol facilities, feed mills, corn processors, soybean crushers and to export facilities along the Mississippi. There are ways around these roads and all the end-users are getting what they need... but it takes "extra miles" to get corn and soybean stocks moved around the country -- and all those extra miles are being covered with high-priced diesel.
And these road washouts are making it tough (more expensive) to get product back into flood areas, too. So... more expense to get product to market and more expense to get inputs into position are both taking another bite out of profit potential.
Okay... back to the market. I know we're limit down today and that's "hard to take" with so much of the Midwest corn and soybean crops struggling to regain as much of their yield potential as they can. But, keep in mind that new-crop corn and soybeans still haven't tested support at last week's lows. That will probably happen -- probably tomorrow -- on the promise of some rain moving back into the Midwest.
Oh... and there are plenty of other factors "grain bears" and banking on this week. Crude oil is lower this morning and the dollar is higher. If crude oil recovers and the dollar retreats, both would bring support back into corn and soybean prices just as fast as a "weather scare."
And don't forget about the pressure Washington could bring to the corn and soybean markets this week. We've got two -- NO, THREE! -- potential "major" happenings we've got to watch this week. First, we expect USDA to announce a penalty-free early out from SOME Conservation Reserve Program (CRP) contracts "soon." The announcement will probably come this week -- but USDA may decide to wait until after Friday's Supply & Demand updates before making the final decision. We fully expect USDA to "open up" the CRP, but to a limited "universe" of acres. Just how big that universe is will determine if the market gives the move a bullish or bearish read.
The second thing we're watching is the Texas request for a 50% waiver of the Renewable Fuels Standard (RFS). The decision isn't due until July 27, but the EPA could sneak a decision out early. That's not likely to happen, but we're keeping an eye on it.
Finally, Legislators will be getting back into town this week and some Senators and Representatives want to push "trading legislation" through as quickly as possible. They'll force this onto the market's radar screen -- and any momentum behind the push to limit activity of speculators will be viewed as a negative for prices.
This all means one thing -- corn and soybean markets are facing a lot of price-negative "stuff" this week. It'll take some time to get this all factored into the market and to "clear the slate" so traders can once again focus on corn and soybean production potential. Once the focus moves back to the crops, I still think there's potential for prices to at least retest resistance at contract (and all-time) highs.