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Current Marketing Thoughts

RSS By: Kevin Van Trump,

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

Corn, Bean & Wheat Price Direction

Dec 09, 2010

I have had some folks ask if I could post some comments prior to the open, so here goes...If you want to get my FREE information each day prior to the opening bell just follow the link below and get signed up.  There is No Cost & No Obligation.  Hope you enjoy today's comments.  Have a great trading day. 

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  • As I have been mentioning for several sessions, it looks like the Chinese Crush Margins turning negative are starting to slowly weigh on Chinese demand. 
  • In addition the math is starting to slightly favor Brazilian soybeans out into April and May. Bottom line, we are no longer the "low-cost" provider. It looks as if Brazilian beans at Paranagua has taken the title. I am sure there are those that will want to argue that the cheapest source of beans for China is Argentina, they would probably be correct in theory, but from what I hear offers in Argentina are tough to actually fill. 
  • It is refreshing to see the powers that be in Argentina actually lower their corn production estimates to 24 million tons. I personally think it could end up much lower, but at least they are starting to move in the right direction.
  • I have heard that US soybean crushing plants that have not already reduced their crush production are trying to crush as fast as they can on fears that the margins will slip even further into the first of the year. 
  • It was nice to see Iowa's Senator Chuck Grassley come out and say that he is almost certain the ethanol and biodiesel tax credits will get an extension at least through 2011. Remember, he serves and the "Committee of Finance" and could make some people's life a living hell if he gets the shaft on this deal. To me this has been the strongest indication yet of the incentives passing.  Maybe at a reduced rate, but still passing in some capacity. 
  • If your long the corn market you have to be a little concerned that Ethanol margins seem to be slipping more and more.  Reports are that margins in Iowa have fallen $0.05-$0.08 cents in just the past few days alone, and for many in the country are now hovering just slightly above break even. Obviously the fear of expiring tax incentives has the blenders massively concerned.
  • Remember the USDA will release their updated estimates for US and Global stocks on Friday morning at 7:30 CST.  I doubt we will see any type of production or acreage numbers until their "Final Report" issued in January. Traders will be looking for surprises though in ending stocks in both beans and wheat.  The corn market will be looking to see if they actually raise the Ethanol corn demand numbers. there is rumors that they could raise the number by as much as 100 million or higher...this will certainly be the wild card.  
  • Russian Grain Union chief Arkady Zlochevsky made it public knowledge today that Russia will start importing more corn from the Ukraine very quickly. He also mentioned that they may need to eventually import milling quality wheat from Kazakhstan and barley from the EU.
  • Cold weather continues to keep barge freight at higher levels. 
Consider a Basis Contract On Portion Of Your 2010 & 2011 
From what I continue to hear elevators are still trying to lock in corn for April-July.  Many I talk to have descent sales booked for Jan-March.  If farmers look to move grains in unison after the first of the year, the basis could certainly widen back out until supplies begin to tighten back up.  If your basis is at a good level you might track it for a few more days, then pull the trigger.  I just think after the first of the year you might see additional farmer selling.  If you actually need to make some sales make sure you consider a re-ownership strategy of some sort.  
Pay Close Attention To China's CPI #'s Released On Saturday.
I mentioned this in yesterday's report, but since many of you din't understand the implications I thought I would paint a more vivid picture for you today. China decided that they would change the date for releasing their upcoming CPI data. The data was scheduled to be released next Monday.  They changed the release date to December 11th.  Why is this so significant?  Just take a look at the calendar.  The 11th is this coming "Saturday".  You guessed it, their markets will be "closed" on the 11th.  I have been in this business a long time and when a country reschedules a significantly important financial report like the Consumer Price Index for the "weekend" it is not going to be a good thing. Obviously the data is going to show us that the economy has not yet cooled. We can already see that as loan data issued form China is showing that new loans topped the government’s forecast of 7.5 trillion yuan ($1.1 trillion) at the end of November. If the CPI is actually as strong as some suggest China is almost certain to implement further measures to cool their domestic economy. In anticipation that China will raise interest rates, instate stiffer personal property tax laws, the Chinese stock market has already fallen significantly during the past few sessions.  Pay attention to Sunday night's open. I am sure the initial reaction will be lower in the commodity markets. The last few times they have done this we have managed to fight our way back, lets hope we can continue the tradition.  
Were The Ethanol Grind Numbers Accurate Yesterday
The corn market found strength from the API report that showed the ethanol grind actually increased and set another new record at 939 billion barrels per day. Several of the larger insiders are discounting the numbers as a joke, claiming they are way off, especially after hard data shows margins rapidly falling.  I am not an expert in the area, but those I trust are telling me that there is a very good chance we will see some type of revision issued next week.
Are US Soybeans As Good As We Originally Thought?
The US Soybean Quality Survey was released by the American Soybean Association for the 2010 crop. The numbers kind of shocked me as I have been under the contention that our bean qualities are some of the best we have ever seen.  Guess I was least according to the ASA. To summarize their data, total protein content was just under 35%. We were higher than that last year.  The soyoil yield was basically the same as last year and not even close to the numbers the had reported in 2008.    
Kona Coffee Hit By A Destructive "Bug" 
I still follow and trade the coffee market from time to time, and I have been told by many of my followers that they enjoy reading my report to a cup each morning.  If prices are not already high enough wait until you read this info.  If you consider yourself a coffee connoisseur (which I am not), you probably know that "Kona" coffee grown off the Big Island in Hawaii is to coffee what Napa Valley in California is to wine. It is believed that the elevation of the beans combined with a moderate tropical climate and volcanic rock combines to produce some of the priciest and highest quality coffee beans in the world. Prices have been know to easily exceed $50 a pound.  I am hearing this year we could be double that if they can not get a crazy destructive bug known as the "coffee berry borer" out of the crop. The problem is this bug has never been eradicated anywhere in the world. All you can do is try and control it, killing it completely has been impossible. Some of the insiders are saying if this bug gains hold it has the potential to reduce the Kona coffee yields by a whopping 90%. If you thought prices were high before, wait until this hits the crop. 
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