Current Marketing Thoughts

 Corn bulls may be excited to hear that some big yielding acres in both IA and MN are still "unplanted." Several sources in the industry thinking some 850,000 plus corn acres in IA and some 540,000 acres in MN are still "unplanted."  Trade also looking at the fact 16% of the IA corn crop is already reported in "Poor-to-Very Poor" condition (CO 16%; IL & TX 11%; MO 10%; KS 8%). Also keep in mind, as of this past Sunday, there were still more than 5.5 million corn acres not yet "emerged" in parts of IA, IL, MN, ND, and WI . Moral of the story, lots of early "uncertainty" in new-crop corn still gives the bulls something to cheer about despite bearish balance sheet projections and improving overall "crop conditions" in several states.

As for the nearby JUL13 contract, which has gained close to $0.30 cents on the SEP13 contract in just the past 10-tading sessions, may continue to gain steam as export inspections came in stronger than anticipated. Keep in mind "First Notice Day" for the JUL13 corn contract is June 28th (same day as the big USDA Quarterly Stocks report), while "Last Trading Day" is set for July 12th. Many traders pointing out the fact the MAR13 contract went off the board at around $7.40, the MAY13 contract went off the board at around $7.20...trend crowd seems to be looking for JUL13 contract to go off the board around $7.00. Personally I am a little concerned, since I am hearing stories that spot basis bids in some areas are starting to fall. Actually there are reports  of some end-users already rolling bids to Sept and NOT offering anywhere close to the recent premium associated with the July contract??? As I continue to preach, be careful holding these old-crop bushels for too long. If nothing else try and get that big basis premium locked up. Click here to receive my daily report and I will send it directly to your email each day. Thanks 

Soybean traders debating the USDA's most recent "planting progress" estimates, bears are thinking the 85% is too low considering the improved weather window. Bull's on the other hand thinking the 85% estimate could still be too high. Hard to swallow the USDA's report of Michigan being 100% planted. When producers from the state called into the office saying they still have 20-40% to plant on top of several patches of "re-planting." Also interesting to note is the fact there is still thought to be over 26 million soybean acres not yet "emerged." Over 4 million in IA alone are not yet emerged, almost 4 million in the Dakota's, another 3 million plus in IL, close to 2.5 million in MN, another 4 million plus between MO and KS, etc... Same song and dance, with old-crop supplies so extremely tight the trade is apprehensive to take away the recent "weather premium" that has been added. Bulls want to actually see that the crop is planted and in good condition before giving up on another run above $13.50 in new-crop.  

I should also point out yesterday's NOPA crush numbers where much better than the trade had been looking for.  Most insiders thought the crush numbers were going to come down from April's 120.1 million bushel estimate, instead the May crush was reported at just over 122.6 million bushels. Mixed was the fact that meal exports actually fell from April's 506 million tons down to just under 426 million in May. On the flip side soy oil stocks actually dropped. Bean bids remain "unchanged," as there remain questions surrounding near-term export and domestic demand estimates. Producers can continue to hold final 5-10% of production, just make sure you keeping the basis locked and your price floor in place. Only real thing to speculate on is a price squeeze of some sort on the board. Bull-spreaders and product spreaders should proceed very cautiously, easy money is gone and game could change in a blink of an eye. Several respected sources continuing to eye better risk-to-reward ratios in being long NOV14 vs. short NOV13 contracts. Might not be a bad play for producers to consider as well (make sure you talk it over with your advisor and understand all of the associated risk with spread trading).

Make sure you understand, bearish traders are becoming more concerned about price appreciation in nearby soy contracts, because "meal" premiums in China are continuing to decrease as more and more South American supplies hit their shore. There is also some speculation that the USDA might come out and say US soy production last year was "understated" by 15 to 25 million bushels, essentially offsetting the thoughts of any increases in domestic crush estimates. The "crush" number looks to be one the USDA has no choice but to increase, how they choose to offset this number is the question...further lower exports or magically find more bushels??? Maybe both! For an inside look at what is driving the grain prices,CLICK HERE, for my full report.

Hassan Rowhani surprise victory this weekend as the new Iranian President has the trade wondering what exactly this means moving forward. Rowhani, who was never considered a frontrunner ended up winning by a landslide. In fact just a week ago, Rowhani was seen as overshadowed by candidates with far deeper ties to the current power structure. Word is during his campaigns he talked about establishing a government in which he would save the country’s economy, end the current radicalism, and hire back moderate forces to help reconcile with the world and ease international sanctions over the nuclear program. Keep in mind "international sanctions" have pushed Iran's inflation to more than 30%, and caused their national currency, the rial, to  drop by more than 50%. While this appears to be a step in the right direction, it does not translate directly into power in Iran's Islamic system. The ruling clerics and their protectors, the Revolutionary Guard, still maintain control over all key decisions such as nuclear efforts, the military and foreign affairs. 

There is also some concern in the trade as news circulates that the US has  officially authorized weapons aid to Syria Rebels. The full scope of the assistance authorized by the White House is still unclear. But the administration could give the rebels a range of weapons, including small arms, assault rifles, shoulder-fired rocket-propelled grenades and other anti-tank missiles. Russia has stepped forward and criticized the US decision to arm Syrian opposition fighters. And in turn say they plan on following through with sale and delivery of $900 million in S-300 air-defense missiles that had been ordered by the Syrian government. With two heavy weights clearly lining up in opposite corners, the crude oil market has managed to push itself to new 9-month highs.

UPDATE: Iran recently annouced that they will be sending 4,000 Revolutionary troops to Syria to fight alongside Syrian President Bashar Assad's forces.   

To follow my daily report click the link below.  Click Here

For argument sake lets assume production is "moderately" tapered back from earlier estimates (say to 145-155 bpa). If this ends up being the case, then it will eventually become ALL about "DEMAND."  As we are aware, this could be where we struggle to gain traction.  My thoughts are it all hinges on "price." Most in the industry are currently questioning the USDA's demand estimates, believing they are overly optimistic, especially the 1.3 billion bushel export estimate (high by 200 to 400 million) and the feed usage estimate. I would agree with the bears, at our current "price" the estimates simply seem too high.

But if prices where to fall sub-$4.50 like many bears argue, then the USDA's "demand" estimates could be right on target. A lot will obviously hinge on China and whether or not they try and rebuild government surplus on the break.  My hunch is not only will China, but other importing nations will also try and increase supplies on any major price break sub-$4.50. Bottom-line, without some type of EXTREME production setback, you can shave 700 to 800 million bushels off "production" but still be left with a new-crop ending stocks number of over 1 billion bushels. With this being the case, prices well above $5.00 are still too high to attract enough demand to squeeze the balance sheet.  

To follow my daily recommendations click the link below.  

Click Here

Planting delays are NOT the only thing concerning producers in regard to "yield." Fertilizer, or lack there of, seems to be a concern in many growing regions. The problem is the small planting window created a huge demand for fertilizer in a very short time period. It is being estimated that US farmers planted about 42 million acres of corn in one week last month, almost twice as much as we would normally ever plant in one week. With many ag retailers forced to draw supplies out of the Gulf or Canada producers are seeing unusually long delays for key crop nutrients like urea and liquid nitrogen. The crop can hang on for a while without any fertilizer, but if producers are forced to wait too long the plant will certainly see some stress and top-end yields could be reduced. Believe it or not many inside the industry think it takes more than 60-days to get fertilizer from its origin into the farmers hands.

Point is, you might be seeing a jump in fertilizer prices, not due to lack of supply, but rather logistical constraints. Remember, our goal is to try and stay one step ahead of the crowd, make sure you are skating to where the puck is going to be and not where it is currently at.  

To receive my daily report click the link below.  

Click Here