Sep 21, 2014
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September 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.

Should Corn Hedges be Scaled Back?

Sep 19, 2014

Corn continues to tumble! Great weather forecast ahead, a surging US dollar, record yield reports coming across the wire every five minutes, record test weights and kernel size along with a "technically" devastating chart pattern makes a sustained rally next to impossible. Longer-term the bulls can argue the case of strong demand and reduced global acres, but as we have all learned in life, timing is everything.  Unfortunately those horses aren't going to run for several more races.  Despite the bearish headwinds I continue to be a fan of scaling back our 2014 and 2015 hedge positions on the deeper breaks in price.  Yes, I'm keeping my targeted low of $2.85 in place, but I also realize how difficult it is in today's marketplace to hit our targets.  When we get down to these levels, rather than shooting with a long-range rifle, I prefer using a sawed off shotgun. From my perspective accuracy becomes of little importance, when your simply trying to get out alive and unscathed. Remember, the price of corn has been tumbling lower for the past two-years (high was set in Aug of 2012), I suspect the low is posted within the next 90-days.  In other words the sun is close to setting so shot as many birds as you can in the final few moments. Load up the truck and head for home.  If I recall this is the same logic and terminology I used when prices exceeded $7.50 a bushel a few years back.  I told guys to get as much priced as they could as far out as they were comfortable pricing it. In other words shot as many birds as you can because the hunts was about to end. Like I said, maybe there's another -$0.50 to -$0.75 cents of downside... I just don't need to get that close to find out.  As always, I prefer to shoot early and often:)  CLICK HERE for my daily report...    

 Just How Much Better Are Corn Conditions This Year vs. Last YearAs you can see form the graphics we created below, several top-producing states are seeing HUGE improvements when compared to last year.  In fact the only state where the GD/EX ratings are below last years level is Ohio. Now we know why some analyst are pushing their US yield estimate north of 175 bushel per acre.  In fact I've heard a few 180 numbers thrown around the past few days??? 

     

Bean Acreage vs.Yields:Will the USDA Determine Soon?

Sep 18, 2014

Soybean bulls continue to argue the USDA's current acreage estimate is about 1 million too high.  On the flip side the bears believe the yield is still grossly understated and needs to move somewhere north of 47 bushels per acre.  My bet is both parties are somewhat correct in their thinking, but ending stocks will still end up being an extremely burdensome 500 million bushels plus. Don't forget the bears are also looking for the USDA to update their old-crop estimate (moving their production estimate higher) in the upcoming end-of-Sept "Quarterly Stocks" report. From a "technical" perspective, nearby upside resistance still appears at the $10.00 level, while short-term support is between the $9.65 and $9.70 area.  Longer-term many in the trade are still thinking there is a much better chance to see $8.50 than there is $11.00.         CLICK HERE for my daily report...       

Soybean Visual... Just How Much Better Is It??? I had the office put together a simple visual illustrating the current "Good-to-Excellent" rating compared to those reported last year at this time. As you can see form the image below ALL major production states are better than last year.  Surprising to some Iowa is leading the rally with 74% rated GD/EX this year vs. 33% last year.

Have All the Bearish Cards Been Played in the Corn Market?

Sep 17, 2014
Must Read...Are We Missing Something? I realize this might sound a little nuts, especially in light of all the bearish commentary, but I'm starting to get the feeling we should be lightening the load and start banking the hedge profits we have realized on the short side.  There are a few things I've learned through the years about the markets.  The first is the fact the wheels tend turn the fastest towards the bottom of the hill.  Next is the famous line by Mark Twain, "Whenever you find yourself on the side of the majority, it is time to pause and reflect."  And of course, one of my all-time favorites..."Every loser in Vegas always leaves the casino thinking he could have done just a little bit better." I'm not saying the bottom is in place or that we are even within sniffing distance, I'm simply not that good to predict the exact low.  Our original plan was to protect against a fall in price to the $3.50 level and that's exactly what we've done.  The Chinese announcing a new economic stimulus package on the heels of the EU stimulus announcement a couple of weeks back has me wondering if I'm missing something much bigger...  As I sit here today I personally don't see any major risk or headline that would drive prices dramatically higher for an extended period of time, but then again, GOOD "risk-management" is more about what we DON'T know or see coming our direction than what we do know. In fact that's truly what we are trying to protect against!  With this being said, I believe the greatest "unknown" has now shifted to the upside...not the down. In other words most ALL of the bearish cards are in clear view and on the table. Therefore I'm making the move to start lightening the load and unwinding the hedges.  I suspect the absolute lows come at some point between now and year-end.  In other words the low comes within the next 45-65 trading days.  As I mentioned above, I'm not nearly good enough to pick the exact day for the exact low, so I'm starting my scale-out process now. Those who are keeping an extremely close eye on their short positions might be able to count to "10 Mississippi" before starting the scale-out process, just don't get overly greedy! Keep in mind this does NOT mean I'm going long or have become bullish the market, nor does it mean we are exiting ALL of our short hedges.  I just think its time to start more aggressively banking your profits and moving to the sideline.  CLICK HERE for my daily report...

Will Next Acreage Report be Positive for Grains?

Sep 15, 2014

Corn market continues to tumble as the USDA confirms a tsunami of corn is headed our direction. The USDA's Aug to Sept yield jump of +4.3 bushels may have came as a surprise to many of the bulls, but most ALL of the bears are calling for additional yield increases coming in the Oct and Nov reports. As I sit here this morning, it feels as if we are now trading a yield somewhere between 173 and 175. The problem for the bull is the fact growth in "demand" simply can't keep pace with the continuing growth of the crop. For this reason my targeted low of $2.85 still remains in play, and I suspect we start seeing the sub-$3.00 handles at some point within the next 90-days. From a money-flow perspective, it appears the "managed money" crowd is surprisingly still net long about 80,000 contracts.  I would hate to see what happens to the price of corn if these guys ever decide to get wildly bearish and shift to a large net short position???If your looking for a couple of longer-term bullish headlines to grasp onto, I warn you now they are far and few between. In fact several analyst are now thinking prices will remain sub-$4.00 for an extended period of time (perhaps 2-3 years). I'm not in this camp, but certainly understand their argument and reasons for concern. Lets just keep in mind then Chinese are in a major transitionary phase. My hunch is one morning we wake up to headlines reading they were major buyers of US corn.  I'm also thinking  there is going to be a more drastic reduction in global corn acres than most in the trade are currently anticipating. Not only will South American producers be cutting back corn acres in the coming weeks, but my guess is so will the producers in Ukraine as well as here in the US.   CLICK HERE for my daily report...   

What About Tomorrow's FSA Acreage Data? There continues to be a bit of a "buzz" from the bulls about current USDA acreage for both corn and soybeans being too high.  Be careful here...as this can often be a costly and painful learning experience.  Remember, the FSA had some recent budget cuts and in turn may still be trying to adjust to the overburdening work load with fewer staff.  I'm just afraid at first glance the FSA numbers may appear to show significantly fewer planted acres, but realistically there are simply so many "unknowns" and moving parts associated with data it's extremely tough to predict the accuracy or influence it will have on the USDA numbers.  I don't want to burst anyones bubble, but on the flip side of this argument the bears are saying they actually have satellite imagery data that confirms the current USDA estimates and perhaps even shows the current USDA estimates to be a bit light???    We should know for sure what the USDA is thinking in the upcoming Oct 10th report... Point being, even though the trade my flinch a bit, don't get yourself overly excited about tomorrows FSA numbers!  CLICK HERE for my daily report...

Marketing Rules 101....

Sep 12, 2014

 

Marketing Rules 101 -Marketing a crop is NOT a "team sport," it's entirely up to you to pull the trigger and reduce your own risk. The herd mentality tends to NOT pay big dividends! Continually talking about a USDA conspiracy does NOT pay big dividends! Remember, you build a marketing plan for the "bad years"...not the "good years." Anybody can market $7.00 and $8.00 corn. Please do not simply stick your head in the ground and think the problem is going to take care of itself. You have to "execute." That can mean a lot of different things for each farm operation but not doing anything, in these market climates, can be extreme.  We are reducing risk not only for the 2014 crop but also looking out into the 2015 crop year.  Believe it or not there are still marketing strategies that you can use to protect thing going forward.                  CLICK HERE for my daily report....

All Eyes on the USDA....

Sep 11, 2014

All eyes are on the USDA! The big numbers to watch are obviously the US corn and soybean yield and total production numbers. A lot of the so called "smart money" is thinking the USDA will be somewhat conservative with their corn yield, adjusting only slightly higher.  The larger gains will more than likely come in the OCT/NOV reports, once the NASS has a chance to better gauge ear weights and actual harvest data.  Moral of the story, don't get all excited if the USDA elects to leave the yields at sub-170 for a bit longer.  Unfortunately, this will leave the trade in a very precarious situation and allow the bears to keep their foot squarely on the throat of the market.  In other words, regardless of what the USDA has to say this afternoon, the bears have already pre-sold the trade on the fact the next two USDA reports will more than likely show even higher yields.  Same type of story for soybeans. The trade appears uncertain about today's move by the USDA, but seems confident the yield is ultimately moving much higher, perhaps 2-3 bushels higher.  There's not really expected to be any change to acreage in this report (more than likely coming in the Oct or Nov report), that's why most traders are eagerly waiting to see next weeks updated FSA acreage number.  The bulls are wanting to believe the USDA overstated corn acres by 1-2 million and total planted soybean acres perhaps by a similar amount. I would be extremely cautious buying into this bullish rhetoric, or thinking this data could prompt some type of major longer-term turn around...regardless of what the FSA data shows.  Also keep in mind today's numbers should show a jump in 2014/15 ending stocks for corn, wheat and soybeans. Bottom-line, it clearly appears that everyone is leaning over the same side of the boat, with very few traders looking for bullish data from the USDA.  I hate going along with the crowd, but I'm just not seeing many alternatives right now. Producers should continue to keep hedges in place!  CLICK HERE for my daily report....

A "Technical Perspective" on Beans Prices

Sep 10, 2014

Soybeans trade below $10.00 for the first time in over 4-years as traders continue to digest thoughts of record US acreage accompanied by record US yields. The USDA is currently estimating the yield at 45.4 bushels per acre, well above the previous record yield of 44.0 bushels per acre. The problem is most sources inside the trade are thinking this number could work itself much higher, possibly ending up somewhere between 46.5 and 48.0 bushels per acre by the year end report. With harvested acres somewhere between 84.0 and 85.0 million, it doesn't take a rocket scientist to project we may soon be swimming in soybeans.  Not only is there strong talk of soybean ending stocks pushing north of 500 million bushels, but now there is some rumblings that we could exceed 600 million.  If that scenario ends up playing itself out, don't be surprised if you see soybeans eventually end up somewhere between $8.00 and $9.00 per bushel.  Keep in mind Brazil is now gearing up to plant another record crop as well.  I've been preach that we must prepare for an extended bearish storm. Similar to corn, use any unexpected weather related rallies to help reduce additional risk.   CLICK HERE for my daily report....

From a "Technical" Perspective... If you consider in 2008 soybeans fell from a high of $16.36 to a low of $7.76, you could conclude that a similar 0.52568% retracement from the high set in 2012 at $17.89 would create a projected low of $8.49. The first level of nearby support should be around $9.84 followed by more solid support in the $9.40 range.

Can the Corn Market Gain Some Longer Term Momentum?

Sep 09, 2014

Corn continues to slide as harvest reports become more inundated with "better-than-expected" yields. The USDA is out with their latest yield estimates on Thursday and the trade is bracing for higher numbers. In fact most ALL of the producers I have spoken with lately are pulling much better than expected yields out of the field. Yes, moisture levels are a bit higher than some would like to see and the cooler than normal temps aren't helping the situation, but regardless the yield monitors are showing huge numbers.  Keep in mind the longer the corn sits in the field under cool conditions it gives the kernels more time to "fill," ultimately meaning higher test-weights.  The bulls are hoping to skate by Thursday's USDA report without sustaining much damaging, then hoping to see the FSA (next Monday Sept 15th) show fewer planted corn acres. Just keep in mind the USDA more than likely wouldn't use this data or make any adjustments until their October report. Obviously the bulls are also cheering for the cold front to dip further South creating more deeper concerns about an early-freeze. Unfortunately I just don't see this gaining much credence or creating any tip elf sustained longer-term rally.  There is some talk that South America may drastically reduce their corn acres this next season, which could help us gain some longer-term momentum.  I'm just afraid that's too far out on the time horizon to create much bullish enthusiasm.  Form a "technical" perspective the charts remain extremely ugly, with the bears now eyeballing the lows made last Thurs at $3.43^6 in the DEC14 contract. I hate to sound like a broken record, but from they will have their sites sets on the $4.20 range.  Producers should continue to keep all hedges in place.  CLICK HERE for my daily report....  

With Yields Higher, Do I Market Extra Bushels Now?

Sep 08, 2014

Corn traders are eager to see the latest USDA crop report numbers (scheduled to be released this Thursday).  In fact many of the bears are talking about the possibility of a massive +5 to +7 bushel jump in yield.  The latest Bloomberg survey has the yield estimate moving higher by an average guess of +3.4 bushels per acre, up from the current 167.4 number to an estimated 170.7 bushels per acre. Keep in mind, during previous large crop years, the USDA tended to make smaller incremental adjustments higher through the September report, then pushed the numbers more aggressively in the Oct and Nov reports once they had better proof of the yields.  This has me worried that no matter what yield number is released on Thursday the bears will be looking for even higher adjustments in the next couple of reports.  The bulls are trying to offset this argument by saying the USDA will eventually need to reduce "acres" and in turn "total production" may end up being less than the market is anticipating. I certainly understand this argument, but I don't believe the timing is right, therefore I doubt it gains much credence inside the trade. If we move from the "supply" side of the argument over to the "demand" side, unfortunately the picture doesn't get much better.  Yes, demand has been good, but with the escalating US dollar more arguments are being being made that the current USDA export estimate, despite lower prices, could be too high. Don't forget South American and Ukraine corn are becoming more readily available as each day passes. From a "technical" perspective the bullish picture also appears bleak.  Many technical guru's are now calling for a break in price to the $3.20's, followed by more potential fund selling pressure which could ultimately push prices to sub-$3.00 levels by mid to late-harvest. Moral of the story, I'm afraid it could be 1-2-3 strikes were out if we don't get some type of major unforeseen bullish weather headline or hiccup to occur on the supply side of this formula.  CLICK HERE for my daily report...  

Are You Better Off Selling Earlier Rather Than Later This Year?  In other words I'm thinking you might be better off marketing or selling your planned "overage" (the amount you think you will produce but can not store) earlier rather than waiting until later.  I'm thinking that many elevators and end-users will be forced to bid up for the corn early on as most producers opt to hit the fields and store as much of their newly harvested crop as they can on the farm. This should could the basis fairly firm. The problem is once the commercial elevators start to fill up could be about the same time the harvest starts winding down for many producers. Meaning everybody and their brother will be looking to sell their overage right out of the field at or around the same time...hence the "basis" and "price" might take a final hit right when we least need it to happen.  Make sure your playing out all of the possibilities.  CLICK HERE for my daily report...

Are Weather and Disease Risk Bullish Cards, Still in the Deck?

Sep 05, 2014

Soybeans prices (NOV14) have fallen by about -$1.50 per bushel in just the past 60-days and are now about -$3.00 cheaper out of the field than they were last year for many producers. The question being asked is can we STOP the bleeding?  Those with bullish hope still remaining believe there is "weather risk" and unaccounted "disease risk" still in the deck. The majority of the trade however has been stripped of any bullish hope and has recently thrown in the towel.  My thoughts are that we hoover around this $10.00 level until the upcoming USDA report. Form there I suspect we trade in a range somewhere between $9.50 and $10.50.  Then once the trade can get a better understanding and more solid idea regarding South American weather we make our next move. If South American weather looks good, I suspect the range falls another -$1.00 lower and the bottom is set somewhere between $8.50 and $9.50.  On the flip side if the weather gets more extreme and creates some complications the $10.50 to $11.50 range could come back into play. As a producer I am going to remain patient and hope for bullish South American weather headlines in late-2014 and or early-2015.  Sorry, it's not a great plan...but it is a plan:)  CLICK HERE for my daily report...

How the Commodity Landscape May be Changing...

Sep 04, 2014

Why The Landscape Is Different and What It Means For Commodities: The ECB rate cut is significant because it signals to the trade that European Central Bankers and the US Fed are clearly moving in different directions. Rember, since the crash back in 2008, every move the ECB made to lower the value of the euro was trumped by a US Fed move to lower the value of the US dollar.  There is no debating the fact the lower US dollar helped fuel the commodity supper-cycle.  Now all of a sudden the ECB and the Fed are headed in opposite directions and the US dollar is surging higher. Many analyst believe this environment will make it extremely difficult if not impossible for commodities (as a whole) to attract NEW big money investors! Make certain you understand how the landscape is changing and what this might mean for your business and your investments.   CLICK HERE for my daily report....

Where Do Corn Prices Find Support?

Sep 03, 2014

Corn traders continue to digesting the best crop conditions we have seen in the past two decades. The USDA pushed this years crop to 74% rated "Good-to-Excellent" up by +1% compared to last week, but massively ahead of the 5-year 54% average and last years 56% "Good-to-Excellent" rating. Perhaps even more impressive is the fact only 7% of the entire crop is rated "Poor-to-Very Poor" compared to the 5-year average of 21%.  As I've been saying all along, there just aren't that many bad areas this year. Keep in mind when compared to last year the crop rating is much higher for many of the top-producing states in the US: MO is rated +45% better than last year; ND +38% better than last year; IA +37%; WI +26%; IL +25%; MN +19%; SD +13%; IN +8%; NE & MI +7%. In my opinion, the improvement in conditions now sets up the trade to test the August 12th low at $3.58 vs. the DEC14 contract. Once that level is breached, many technicians, including myself suspect the $3.20 area becomes the next downside target.  I hate to sound like a broken record or use an old cliché "big crop's tend to get bigger..." but it is what it is.  Keep in mind FC Stone yesterday (after the close) bumped their crop estimate to 14.595 billion on a yield of 174 bushels per acre! This is some 572 million bushels more than the most recent USDA estimate. I should also mention many producers I spoke with two to three weeks ago and were only expecting yields at or around their APH levels are now seeing corn come out of the field 20-30 bushels per acre higher than anticipated.  The harvest in the Delta and down South continues to roll: GA is now thought to be close to 75% harvested; LA 67% harvested; SC 63% complete; TX 55%; MS 42%; NC 22%; AL 21%; AR 19%; KY 7%.                             CLICK HERE for my daily report...  

Can Beans Move Higher as Yields Increase?

Sep 02, 2014

Soybean traders continue to balance and debate an old-crop ending stocks number that appears to be well "overstated" by the USDA (most sources believe it should be sub-100 million) and a new-crop ending stocks number that appears to be "understated" by the USDA (many sources thinking it could push closer to 600 million). The recent rounds of finishing rain have certainly helped producers and should be enough to basically insure a NEW record crop.  The question is how much higher is the USDA willing to take their production estimate.  Many of the bears are arguing the mid-45 range is simply too conservative for new-crop yield. They believe the national soybean yield should be raised to somewhere between 47-48 bushels per acre. Even though we may see temporary bounces, I'm looking for the soybean market to eventually continue it's downhill spiral.  As I mentioned the past couple of weeks, we might be range bound between $10.00 and $10.60 until more concise and accurate yield data can be verified.  Form there the market attention will shift to South America where yet another record crop is set to be planted. I suspect there will also be talk of record soybean planting again here in the US for 2015. Hence if weather cooperates, the trade will once again start to backpedal in late-2014 and early-2015.  Bottom-line, I believe there is still some additional downside price risk in soy. As you can read below, some respected sources in the industry are thinking just the opposite...Also, on the bullish side is more talk of SDS or white mold showing up across parts of the midwest.  It is not widespread as of now but hearing that small patches, are turning into whole fields, in a matter of days.  Something else to keep our eyes on....  CLICK HERE for my daily report... 

Rabobank Thinks Price Drop Is Limited: Even though the large bank has estimated both corn and soybeans production higher than the USDA, they seem to think there is limited downside price risk.  From what I have heard, Rabobank now has the US soybean crop pegged at 3.985 billion bushels on a yield of 46.5 bushel per acre. The current USDA forecast is for 3.816 billion bushels on a yield of 45.4 bushels per acre. Rabobank also thinks the current USDA corn yield of 167.4 is too conservative and could end up somewhere between 170-175. Interestingly however, they have only reduced slightly their forecast for average soybean futures prices in the 4th quarter of 2014 by -$0.20 a bushel to $10.00.  Even more surprising is the fact they are projecting a post-harvest rebound in prices, thinking we will average $10.60 a bushel in the 1st quarter of 2015 and $10.75 a bushel in the 2nd quarter of 2015. This is a bit opposite of where I'm currently at. Of course if there are weather complications then I understand the Rabobank argument, otherwise I have a tough time digesting these thoughts.  They took a similar approach towards corn, leaving prices unchanged, thinking they will average about $3.50 per bushel through year-end

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