Sep 23, 2014
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May 2014 Archive for Current Marketing Thoughts

RSS By: Kevin Van Trump, AgWeb.com

Kevin Van Trump has over 20 years of experience in the grain and livestock industry.

The market is racing and Corn needs a tune up!

May 30, 2014

corn sprint midget 

The "demand" pistons are firing but we're simply not getting any bullish combustion out of the "production" side of the engine. The "technicians" are worried if we continue to run this race with massive misfires we may do more permanent damage to the charts.

In other words we need to hold the new-crop DEC14 contract above the $4.50 to $4.60 area if we have any nearby hopes of an early summer weather rally. As for the old-crop JUL14 contract, yesterday's "inside" day on the charts and recent consolidation has a few traders looking for a brief breakout in one direction or the other within the next few sessions.  Strong weekly export sales may give us a little knee-jerk reaction to the upside, but it feels to me like the "demand" story is old news and the trade is more interested in nearly ideal weather and thoughts of a record US yield reaching 169 to perhaps 170 bushels per acre.  
 
The eastern part of the Corn Belt had a terrific production year last year, while the western portion of the belt had fouled out here and there.  From what I am hearing, there is starting to be a stronger chance that both the Eastern and Western producers could end up firing on all cylinders for the first time in a long time... Certainly something to consider!
 

To find out my diagnosis

For managing risk in the corn market race

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Wheat traders are talking about a lack of "headlines"

May 29, 2014

The bulls may have finally ran out of "rabbits" to pull from their hat. 

From a production standpoint, there is a tendency for the US crop to get bit large between the May and June USDA report.  There is also a belief inside the trade that the worst production "headlines" are behind us.
 
Yes, the HRW wheat crop has run into a few production hiccups, and yes, some areas in the Southern Plains have been devastated, but it seems as if the trade is comfortable with a crop of around 750 million vs. what many had been thinking could drop to sub-700 million just a few weeks back.
 
Point is the US "production" story looks like it has ran its course.  
On the flip side the "demand" story isn't anything to write home about either.  
 
As I have said the past few weeks’ wheat is simply priced too high in relationship to corn to gain much feed attention. And now that things have calmed down a bit, or should I say the trade has become more callused and comfortable with the situation in the Black Sea, US wheat exports aren't gaining as much interest. 
 
Let’s also not forget EU and Russian wheat has seen improving weather conditions as of late and Canada is still sitting on a massive record wheat harvest from last year.  
 
Bottom-line, without the "buzz" of geopolitical risk and some type of NEW production concern or headline in regard to a major global provider.
We just don't have enough horsepower to pull ourselves back up the hill.
 
 

Producers weren't too excited about planting more corn acres.

May 28, 2014

Say you assume between 8-10 million acres that have not yet been planted and further assume there are about 1.5 million of those unplanted acres in MN; another 1.3 million in WI; 1.2 million in MI; 1.1 million in OH; 750,000 in ND; and 500,000 in SD you can start to draw your conclusions.

From my perspective if you want to argue from the bullish side of the fence, you could take a stab and say that perhaps 1 million of these acres don't go in the ground as corn. On the flip-side however, I can easily argue that more corn acres than what the USDA has originally estimated from their prevue’s survey were actually planted.  Remember, just a few weeks before the USDA took their big acreage survey new-crop corn prices had been trading down around their lows. Since that time however I have heard more and more producers talking about giving the corn another go.  
 
Moral of the story, I suspect any of the acres you lose to the north or the east will be offset by what I consider a conservative early acreage estimate.  My hunch is as long as the "weather" plays itself out like the maps below indicate, it will be tough to rally corn in any extended fashion.  
 
Strong demand has to be the saving grace and it's hard for me to see that happening. Keep in mind "exports" have been one of the most surprised blessings and there is now talk surfacing that Argentine corn is being sold at a discount to US corn. There are also reports of Brazilian corn being cheaper than the US corn out past October. 
 
In other words the US might have a tough time winning many additional shipments of corn out past October... Meaning the demand story for US corn might not have much sizzle remaining. This means producers may have to hunker down and remain patient through what could be a more bearish storm than some had anticipated. 
 
Weather Maps
 
 
 
 

 

Why You Should Care About the Narrow Trading Range

May 27, 2014

During the past decade, within the final 12-months of the DEC contract expiration, the price range from high to low has averaged around $2.20 per bushel.  As of right now the range in the final 12-months of the DEC14 contract is just $0.82 cents.  This from the low at $4.35 set back on Jan 10th, 2014, to the high of $5.17 set on April 9th, 2014.  

Based on past history this would be an extremely "narrow" trading range for the DEC contract. My hunch is there are more extremes to come during the remaining few months of the contract.  

Example: A $2.20 cent trading range could be something like a low of $3.90 (possibly coming up during the next few weeks on near optimal growing conditions or a down move closer to harvest), followed by a high of $6.10 (perhaps on news of an early freeze, severe flooding or production hiccups in China).

Remember, back in 2012 we posted our lowest close in over a year at around $5.50, the last week in May, only to turn it around and trade above $8.40 by early-Aug.  Point is we seem to be in a very tight trading range in comparison to what we have seen the past few years.

I am willing to bet we see the range widen extensively during the next six-months.

As you get busy with Spring and Summer The Van Trump Report keeps you up to date. Try it for free Here.

 

 

Wheat has the most significant rain event of the year for the US southern plains and it’s bullish!

May 23, 2014

 On the surface this appears to be bearish but now I am hearing more talk and "buzz" regarding the possibility of serious hail damage accompanying this front of moisture.

So now we have the initial debate of if the rains are coming in too late? Along with a secondary debate regarding the extent of crop damage caused by heavy hail and severe thunderstorms, Maybe this weekend will produce the added spark the bulls have been looking for...

More negative production headlines out of the US and more political complications and violence out of Ukraine???

Where are you setting on your wheat bushels? Find out what we are doing. Click and fill out a little bit of information here. And we will send it all free.

Remember, markets are closed on Monday, May 26 for Memorial Day. That will also delay USDA weekly Crop Progress until Tuesday, May 27.

Extremely High Prices! Global Ending Stocks look nothing like the years when prices pushed up

May 22, 2014

Take A Good Long Look: I had our in-house research team throw together a one piece info-graphic depicting the USDA's current world ending stock projections for Corn (yellow); Soybeans (green); and Wheat (brown). As you can see soybeans are currently projected at their highest level in the past 30-years.  Corn is also being projected at extremely high levels, better than we've seen in the past 15 years. Wheat stocks are actually projected to be a bit higher than they have been the past couple of years as well, but actually a touch below levels seen in 2009, 2010 and 20111. 20 year world ending stocks The reason I bring this to your attention is because soybeans made their run to $18 in 2012; corn made it's first run to $8.00 in 2011; and wheat went to over $13.00 in the very early stages of 2008, following record short supplies in 2007.  My point is, form a fundamental perspective, global ending stocks look nothing like they were in years where we pushed to extremely high prices. As a producer we just have to be careful getting overly greedy in this type of environment (ample world stocks). I have learned sometimes you just have to take what the market gives you and feel blessed! For more Free infographs and Charts Click Here and fill out the Basic information Now 

Can Soybean Meal Lead Prices Higher?

May 14, 2014

Soybeans continue the recent pattern of two steps forward and two steps back. Even though the USDA has pushed soybean imports to 90 million bushels and new-crop ending stocks to 330 million on "paper," the bulls act as if they want to actually see the solution solved before they throw in the towel. You can talk or project a +45 bushel yield and estimate soybean acreage at 5 million higher than our previous record, but if it actually happens or not is an entirely different perspective.  Keep your eye on the NOPA crush data scheduled for release tomorrow at 11:00am CST, this will give the trade another round of insight regarding current supplies. As a producer I remain optimistic, feel good about our current sales and will be looking for higher prices later in the growing season to reduce more risk.                                     CLICK HERE for my daily report..

Chinese Selling Soybean Reserves: Insiders are reporting that the Chinese government set a floor price for yesterday's reserve soybean auction at 3,920 yuan/tonne or close to $17.40 per bushel. Reports following the auction show that close to 92% of the beans actually SOLD at an average price of over $18.00 per bushel.  This certainly doesn't feel as if "demand" is non existent like some of the bears want to argue.  In fact it appears to be a fairly good sale in my opinion. 

Goldman Stays Negative Longer-Term: There is talk circulating that Goldman has their six-month price forecast for soybeans at $10.50 and corn at $4.00. Obviously this comes with the disclaimer of near "normal" weather conditions.  CLICK HERE for my daily report....

Corn Bulls Look to Planting Progress and Production Issues...

May 13, 2014

Corn has fallen under "technical" pressure as of late. The JUL14 contract closed below the $5.00 level which could cause some psychological headwinds.  A close below $4.80 remains a more longer-term concern and a level that has not been breached since early March. With the tensions in Ukraine taking more of a backseat the trade is left to focus more exclusively on the US crop. As we found out from the USDA this past Friday, they are not yet concerned about yields or total acreage.  In other words "total" US corn production remains at lofty levels and new-crop ending stocks at a burdensome 1.726 billion bushels. Without the geopolitical tail risk story, it becomes more essential for weather and more worrisome crop production headlines to fill the void. Right now that's just not the case. Demand is defiantly strong and is playing a good lead roll, but it still needs a supporting cast of bullish characters to keep the facade alive.  Yes, the bulls can certainly argue there are some production areas in question, but on the flip side the bears can debate the argument by talking about more "total crop acres" needing to come into the equation and some areas seeing almost ideal early conditions.   As you can see from the map we included below, a large portion of US corn growers made some significant gains in planting last week.  The USDA now has 59% of the crop planted vs. most in the trade looking for a number closer to 55%.  CLICK HERE for my daily report...   

Lots of comparisons being made to the 2009 crop year:  There are many sources in the trade talking about the early similarities of this crop year and the 2009 crop year. In 2009 the USDA estimated on May 10th that 48% of the US cron crop had been planted and on May 17th 62% had been planted.  As you can see this is fairly close to this years pace.  The kicker is 2009 was the year we posted the record corn yield of nearly 165 bushels per acre. 

USDA's Corn Planting Pace Data:  

 

  • There is talk with the dry window in the forecast we could be at more than 80% planted by next Sunday's deadline. Which would basically be right in line with what the USDA likes to see.  
  • IA pours it on and gets 47% of their corn crop in the ground last week. Still has roughly 4 million acres left to plant. 
  • IN jumps from 23% planted to 61%; NE from 44% to 77%; OH from just 9% to 40%; IL from 43% toy 78%; CO from 35% to 64% 
  • ND was reported at just 3% planted. Could be a problem with "final" plant dates approaching towards the end of May. It is believe that ND still has a little over 2.5 million acres to plant. 
  • MN might be the most concerning with just 31% planted, meaning they still have around 5.9 million acres left to plant.   
  • Corn is now 18% emerged vs. just 5% emerged at this point last year. MN, ND and WI still showing 0% of the corn crop emerged. CLICK HERE for my daily report...

 

Will Bullish Bean Story be the Surprise in Today's Report?

May 09, 2014

Soybean traders seem to all be leaning over the bearish side of the boat in regard to new-crop soybeans. That is most are anticipating huge record acreage numbers, record yields, and ending stocks of over 300 million bushels. I certainly understand the argument, but tend to become extremely scared when everyone is on the same side of the boat. From where I sit, the real "surprise" or shocker would be to the bullish side. In other words if the USDA doesn't come out with extremely bearish new-crop data we will catch a large portion of the trade offsides and prices in turn could actually move higher, rather than lower like so many anticipate. With already having 60% of my new-crop priced, I am content on taking some risk and riding out the potential storm as I wait for higher prices.  Global meal demand still remains extremely strong and the Chinese hunger for beans seems to be reemerging as of late.   CLICK HERE for my daily report.....

Keep Your Eye On The Chinese Estimates: The trade is very curious as to what the USDA is going to say in regard to Chinese soy imports. will the USDA elect to leave their estimate of 69MMT's intact or will it be lowered a touch like many believe it should?  How high will they push their 14/15 Chinese import estimate...is 73-74MMT's out of the question?   CLICK HERE for my daily report...

Will the USDA Play its Bullish Cards?

May 08, 2014

Soybean bears have been taking large swings at old-crop beans, in return heavy bull-spread unwinding and more serious "technical" damage has taken place the past few days on talks of greater "imports." In fact the bears have peeled close to $0.70 cents off the JUL14 contract (from last week's high) in just the past 6-days. From what I hear imports are now most certainly going to end up being at or above 80 million. Not only are soy supplies coming in from Brazil and Argentina at a brisk pace, but as I indicated yesterday, there is talk that we could eventually see 35 to 40 million bushels of soy drifting down from our neighbors in Canada. The question now is HOW will the USDA elect to lay their cards on the table? Will they play only their bullish cards, like increased exports and or increased crush? Will they hold back some of their more bearish cards, like increased Brazilian production, decreased Chinese imports, increased US imports or underestimated old-crop production? In other words, will they lay ALL of their cards on the table or hold a few back until the next report in June?  Regardless of how they elect to play out their hand, I'm waiting to be a seller of additional new-crop beans. I continue to have my next sales target set on prices just north of $12.50 vs. the NOV14 contract.  It might take a bit more time to play out, but I continue to struggle with both a massive jump in acreage and the optimistic projection of a NEW record national yield.  It's just hard to imagine hitting such a massive soy home run with "Mother Nature" already throwing wild-pitch after wild-pitch...  

Better than expected Chinese data has given the soybean market a bit of a reprieve. Official customs data showed was soybean imports of 6.5 million tons last month up from 4.62 million tons in March.  It will be interesting to see if old-crop beans (JUL14) can stay above nearby support at $14.20 and if new-crop beans (NOV14) can keep their head above the $12.10 area. CLICK HERE for my daily report...

Will Exports Tighten the Corn Market in Fridays Report?

May 07, 2014

 Questions for the corn market before the USDA report.  

  • Total US Corn Production - This will ?be? the USDA's first official shot at production estimates for 2014/15. There are several sources thinking the USDA will cut their current yield estimate of 165.3 bushels per acre and or planted acreage estimate for corn currently 91.7 million) because of Spring weather complications and delays. As you know I am NOT yet in this camp. I think it's still a bit early and the USDA will want to see a few more cards turned over before making that move...perhaps they make those adjustments in the June report but NOT this time around. In fact it wouldn't surprise me to see a slightly higher corn acreage number...especially in theJune 30th survey report. As for yield, anything seems possible. I just doubt the USDA makes any type of big move this time around.

  • Corn Stocks - It seems most sources are expecting domestic US corn supplies to tighten on increasing demand. The USDA continues to push export estimates higher. Just this past month (?i?n the April report) they pushed exports from 1.625 billion to 1.750 billion bushels. Everyone said I was nuts several months back when I said exports were going to 1.8 billion, now look at us. Maybe they don't actually get all the way to 1.8 billion (because of the Chinese kicking US cargoes), but I have a hunch before it's all said and done the USDA will once again have to slightly raise their export estimates higher. The flip side of increasing US demand is that global corn ending stocks may actually rise, depending on how the USDA decides to serve up the data. I am looking for an old-crop ending stock number sub 1.3 billion and new-crop to be somewhere around 1.6 billion.   CLICK HERE for my daily report...

Will Beans Prices Find Support with Weather Delays?

May 06, 2014

Soybean bears are once again up to bat. Despite the pace of planting traders also continue to debate soybean "imports."  Not only do we have soy supplies coming in from Brazil and Argentina but also from our neighbors to the north, Canada. Technically, the JUL14 contract still hasn't closed below the highly monitored $14.60 level since April 11th.  I suspect a close below this level (which looks as if it may happen today) could bring on a larger wave of long liquidation.  The current pace of planting is starting off a bit slow with the USDA estimating  5% of the crop planted vs. the 5-year average of 11%, but thoughts are this starts to pick up as some of the southern states start to advance the ball.  The trade will continue to watch the forecast, but there is a ton of time left for beans and the trade appears far from concerned.          CLICK HERE for my daily report......  

 

  • Planted - LA 69%; MI 36%; AR 24%; NE 11%; TN 5%; KS & MO 4%; IL, IN, NC & OH 3%; KY 2%; IA, MI, SD & WI 1%; MN & ND 0%. 

 

Is the Old Crop Bean Puzzle Closer to Being Solved?

May 05, 2014

Soybean traders continue to debate if the old-crop puzzle is closer to being solved. I continue to contend as each day passes we are RAPIDLY moving closer to solving the soy balance sheet, especially as I hear more talk about a heavy dose of SAM soybeans making their way further into the US interior (deep into there interior). Back in Dec and Jan I first talked about the US possibly running out of soybeans this summer, but who would have every thought we would be crushing South American soybeans in the middle of the Midwest during the month of May???  New-crop, in my opinion, is starting to become a bit more intriguing.  At first glance it appears to be a "bearish" no-brainer, especially with the USDA forecasting 81.493 million planted acres (basically 4 million more than the previous record). Let's just remember, the crop still needs to be grown... and with global demand pushing higher, we are going to need somewhere between a 3.35 and 3.40 billion bushel crop to keep ending supplies at 185 million plus. With that being said, the bulls can argue if harvested acres are 80 million we will need yields of 42 bushels per acre or higher. What I am trying to tell you is if "harvested acres" or "yields" start be more heavily debated the bulls will certainly find a way to justify the need for additional "risk premium."  On the flip side, if you believe more than 80 million acres are going to be harvested here in the US and the yields are going to be closer to trend-line at 44-45 bushels per acre, then you have no choice but to be a BIG BEAR and feel as if prices are currently $1.50 to $2.50 too high.  The line in the sand is starting to be drawn and the battle waged...the determining factor will obviously be the "weather." CLICK HERE for my daily report...

Will the USDA Repeat Itself on Corn Yields?

May 02, 2014

Corn traders continue to talk about the place of planting and just exactly how it will impact yields as well as total US production. Below are my thoughts: 

Will The USDA Cut Yield Estimate Next Week? There is starting to be some question in regard to if the USDA will make a downward revision to their current 165.3 trend-line yield estimate for corn in next week's May 9th report? If you recall they surprised a lot of traders last year by making an early reduction in this very same report. Personally, I don't see it happening this time around. The USDA has made it well know that they generally like to see 80% of the crop planted by around the third week in May. Keep in mind however the planting progress and weather data used is primarily for eight key corn-producing states: Iowa, Illinois, Indiana, Ohio, Missouri, Minnesota, South Dakota, and Nebraska. Those eight states typically rank in the top 10 corn-producing states in the US and account for an average of 76 percent of US corn production. You don't see North Dakota, Wisconsin or Michigan in the mix. Last year I think it was just more obvious. Especially when you consider the following:                        CLICK HERE for my daily report.....

>>> A Look at the BIG-8 <<<

April 27-29th Planting Pace Past Three Years

IA - 2014 (15%) planted; 2013 (2%); 2012 (50%)

IL - 2014 (32%) planted; 2013 (1%); 2012 (79%)

NE - 2014 (20%) planted; 2013 (3%); 2012 (44%)

MN - 2014 (4%) planted; 2013 (0%); 2012 (48%)

IN - 2014 (8%) planted; 2013 (1%); 2012 (70%)

OH - 2014 (4%) planted; 2013 (2%); 2012 (57%)

SD - 2014 (11%) planted; 2013 (0%); 2012 (31%)

MO - 2014 (47%) planted; 2013 (15%); 2012 (75%)

Bottom-line, from what I hear, if 90%percent or more of the corn crop were to be planted by mid-May the USDA would in turn tend to raise their expected corn yield by approximately 2.89 bushels per acre. Similarly if only 70% percent of the corn crop is planted they would more than likely reduce their yield expectations by 2.89 bushels.  With this being said and the evidence presented above, I expect the USDA to remain patient and let the month of May play out before cutting their current yield estimate. Maybe it happens in the June report, but only IF we are behind our traditional pace.      CLICK HERE for my daily report....

Corn Bulls Face Heavy Resistance...

May 01, 2014

Corn bears are talking about the healthy jump in ethanol stocks the past two weeks.  Believe it or not, ethanol stocks are now higher than they were last year.  Bulls on the other hand are now trying to build a case for more risk-premium on dryness concerns in Brazil. For the past few weeks I have heard nothing but talk about how good the safrhina (second-crop) corn in Brazil was looking, now all of a sudden there are a few more bullish headlines popping up. Before you get overly excited about the dry conditions in Brazil, keep in mind a large portion of the second-crop corn is already past the pollination phase, so I'm not real sure how much "damage" will actually be done.  My bet right now is it won't be enough to rally prices (still somewhere between 70-72MMTs) but it could help keep prices supported until more is known about the US crop.  Especially with the "uncertainties" still surrounding the pace of planting and total number of corn acres.  Technical traders continue to look for signs of a market top. Several thinking if we close below $5.00 in the JUL14 contract it could signal to the trade that a Spring "TOP" has been formed, in turn we may start to see more forced long liquidation. Until then I suspect "weather" will remain the main driving force... I'm thinking that might change next week as several areas see improvement.  Continue to monitor the forecasts.       CLICK HERE for my daily report....

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