Current Marketing Thoughts
Kevin Van Trump
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Great Opportunities Ahead in the Markets: Are You Ready?
Apr 20, 2011
Today was a wild ride with both wheat and corn, up for the better part of the session before ending with July Wheat down a about penny, July Corn down 16 and a half cents and New Crop Corn ending down 20 cents. I wanted to include the first half of this morning’s report as I feel we have a fairly good handle on these markets. These are difficult markets to be in, whether you are all cash or trading. There are a few possible scenarios that could present some great opportunities in the coming weeks. If you aren’t already signed up for the free full report, you should go ahead and give us a shot, I think you’ll find the advice very timely....
....Be careful buying into the fact that we will not have a good corn crop. Personally, I still believe it is too early. Remember back in 2009 we only had 30% planted by May 1st (historical average 40%) and ended up with huge yields, a national average of 164 plus if I recall correctly. I totally agree that we have very little room for error, I am just thinking we may be a little premature with the additional premiums. Obviously the further the trade thinks we will be pushed back into May the higher prices will go. I remember talking to several producers back last August telling them that I thought corn could go to $8 based on the way demand was setting up and the lower US yields that were being projected. Well, that is exactly where we are headed, beyond that point I am fairly suspect. I feel as if this entire time we have been in a tremendous "demand" driven market. All of a sudden global demand has to be questioned to a degree with the possibilities of higher fuel prices, raging inflation, and higher interest rates potentially strangling out global economic growth. I have never wavered this entire "bull-run" from my convictions, but for the first time I am starting to question how much higher we can go without wishing for doom and gloom on our crop. For the first time there are signs of demand being questioned. The poultry industry seems to be suspect and China is trying to alter uses for corn. Yes, the hog, cattle and ethanol trade are still eager for supplies. All I am saying is that for the first time I am seeing a few signs that make me question demand and whether or not we can sustain our current global economic growth pattern. We may in fact be better off if we are to take a few steps back in the coming months, build a more stable base then push higher, rather than going straight up. All I know is the last time fuel prices surged to these level there was a short delay before it actually hit global consumers right between the eyes. Understanding that thousands of jobs have been lost since those days and not regained, and that home equity lines have been depleted and buffers are no longer accessible, and that wages and bonuses have not risen, I highly doubt consumers will be able to play the game as long as they did the last go around. In a nutshell, I think demand runs it course at the $8 to $8.50 range, from there on out its a crap shoot...anyones guess. If the weather cooperates...we break, if the global economies buckle under the pressure of inflation, rising interest rates and higher fuel cost...we break substantially. If the weather throws us a few serious curve balls that we can not hit...prices could skyrocket. If you are looking to gamble you have stepped up to the right table. Right now these markets are truly at the mercy of the weather. I don't know about you but I have never had much luck betting on weather, I will defer this feat to the guys that count tree rings, measure the ocean tides, and the phases of the moon. I do know these are phenomenal prices and you have to take advantage of them at this level. If I would have told you 12 months ago you could sell $7 or $8 corn you would have told me to sell you out for the next three years, now many of those very same producers don't want to get themselves 50% sold...I have a tough time understanding that logic. I believe in carefully mapping out a plan and when the plan plays it self out just the way you predicted then you have to take action. Not get emotional and change your mind. That is why I am going to make more cash sales on the rallies until I get myself at least 70% sold. Playing the game on the board could be a lot less costly once you get to this level. I like gambling some myself but remember you have a business to run and a family that depends on it. Take some profits off the board when an opportunity like this presents itself is only prudent. The corn market has added over $1.50 in just the past 25 trading days following the Tsunami lows. Yes, we could go higher, so keep some gun powder dry and be ready to take some additional shots on the rally. I hope you are smart and use up to 70% of your ammo between here and the $8.50 price target. Take advantage of the weather rally that presents itself during the next couple of weeks it should be a great opportunity!
* The outside markets are going to give us a huge push today higher, lets hope the rally can be sustained, the markets have tried to sell into the rallies late in the day the past couple of sessions so be heads up towards the close. The long extended weekend should keep the "bears" on the sideline as I highly doubt many want to go into a three day break short with anything being possible in today's highly volatile weather market.
*Check that soybean basis, many areas are reporting significant gains in the old crop.
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