Current Marketing Thoughts
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Markets Flip-Floppin' More than a Politician
Dec 14, 2011
The Ag markets are trying their best to unshackle the chains of the "outside" markets, but they are finding it to be extremely difficult. As I sit here this morning, the trade is trying to juggle thoughts of South American weather, Index Fund Rebalancing, Australian rains, Ukraine droughts, Chinese demand, the Jan 12th "End-Of-Year" USDA Report, the EU Debt Crisis, and Middle-Eastern drama. As you can imagine, the juggling act has become quite daunting. Because of this, I feel the trade has become extremely tired, essentially finding itself stuck in that proverbial "rut." Just as we have been taught to "let a sleeping dog lie," I would suggest doing the same when the markets begin to lull you to sleep. Remember, making the decision NOT to trade is a trading decision...often times a very good trading decision! In my opinion, the markets are not acting like a "bull," nor a "bear," but acting exactly like a "Chameleon"...changing colors as the wind blows. I would suspect it will continue to act in this regard through the holiday season, "TRADE" it accordingly!
It seems the soybean market is thoroughly confused, and can't decide if it should go higher on dry weather conditions mounting in South America (where it is now believed about 50% of the Argentine crop is experiencing some type of drought type condition), or lower on fears that widening spreads and increasing stock levels are certainly NOT bullish indicators. Both sides obviously have a valid case and easy argument, but I doubt we will see soybean prices fall under any real extreme pressure, until the bears get a better gauge of the weather. Bottom-line, as long there continues to be a lack of moisture in the forecast the soybean market is going to try and hold it's ground. If the rain comes, I would suspect new lows may follow.
Keep in mind, this is a major part of our marketing plan each year, we need to be pricing bushels on South American "weather-premium" when it is being added into the market. Just remember, as with any "weather market," the ride is most often fast and furious, so don't blink or you might just miss it. My point is you need to have your finger on the trigger, have a game-plan, have a price, know how many bushels you are going to sell at each price target...and when the market moves take your shot! Do NOT hesitate, do NOT reevaluate, and do NOT procrastinate...simply pull the trigger and take some risk off the board!
I did hear an interesting "bullish" corn thought last night from one of our producers. He told me that due to a lack of funding FEMA was only going to be able to repair a small portion of the busted and or destroyed levees up and down the Missouri River. He learned at a recent meeting that only 11 of the 75 levee repair projects would actually have the funding necessary to be repaired in 2012. This makes it highly unlikely that many producers in these areas will want to risk $600-$700 per acre planting corn on these grounds. I have also heard talk that additional funding will NOT be paid out in these areas should it flood again and the levee was not repaired. I did some digging of my own and found that my producer was 100% correct, and that FEMA and the Corp have broken the levees out into three unique groups: Group #1: those levee repairs that have received all, or a portion of, needed funding and are underway ($68,270,000); Group #2: those approved for repair, but awaiting funding ($133,295,000); and Group #3: those that pose a lower risk to "LIFE" safety and not scheduled to be repaired at this time ($121,314,000). Here is a link to the complete listing of the projects: Missouri River Levee Rehab Projects ... Remember the Missouri River flows through the states of Nebraska, Montana, Iowa, South Dakota, North Dakota, Wyoming, Kansas and Missouri, so this could affect a large number of acres.
With no clear direction, I look for the grain and soy markets to "flip-flop" more than a politician running for office. There are just too many "what-if's" flying around right now to provide any clear direction. The smart money seems to be content with limiting their exposure. I would suggest following suit, take a pit stop while we race under the "yellow" flag, and enjoy the holiday season.
*For those of you who didn't catch my comments yesterday afternoon about the recent Egyptian wheat purchases, I included the "FOB Offers" and details below:
- Argentine Price @ 226.19 vs $219.70 last week (up $6.49)
- French Price @ $240.50 vs $244.75 last week (down $4.25)
- Russian Price @ $243.93 vs $245.90 last week (down $1.97)
- Ukraine Price @ $249.90 vs $252.50 last week (down $2.60)
- US (SRW) Price @ $255.64
As you can see Argentine price have actually strengthened, but they still remain the cheapest on the block. French, Russian and Ukraine prices however crept lower...The US still remains out of the race. As you can imagine Egypt booked offers from Argentina, Russia and France.
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