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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.

My Thoughts About The Upcoming USDA Report

Nov 08, 2010

My Current Thoughts About Where Prices Are Headed

As far as short-term, who knows. Every major reporting agency out there simply gives us some poor excuse for a guess, not dare stepping too far away from the "mother ship" (the USDA). I get so tired of these people never taking a stance. As you very well know, the USDA could pull anything out of their deck of cards, but from my perspective, I see almost no possible way corn yields can end up higher than 151 bushels per acre. Will the USDA make the necessary cuts in this report or in the January report...who knows. I think we are going to be significantly lower in Illinois, Iowa, Indiana and several other states. In fact I might even go as far as to say that the only two states with higher yields this year will be Wisconsin and North Dakota. Considering the USDA had used more than 90% of their test-plot data in the October report I have to believe their will be more emphasis on farmer surveys. I continue to believe these farmer surveys will be lower than the USDA had originally anticipated. If it were me, I would make a cut to 151 or 152 this month and then drop it even further, possibly even below 150 in January. Unfortunately they did not ask me for any help this time around. Another thing they didn't ask me for was my opinion about China. I personally think China has the USDA so far off base with their corn estimates it is almost scary. I don't know what kind of deals our politicians have cut with China behind the scenes, or what promises were made for continuing to buy US debt, but something strange is obviously happening here. Maybe in exchange for them buying all of our government debt we agreed to help them try and keep a lid on commodity prices. None of it makes much sense to me. First off they want us to believe that Chinese Corn stocks are at or around 60 million tons. This is a joke, right...We know for a fact that China released some where in the ball park of 20 million tons of corn this past year from their reserves in order to help reduce demand, and to keep prices from rallying higher. That didn't even phase this market, we are now at over $8.60 per bushel in China and heading higher. If they actually had tons of corn don't you think more would have been released and prices would justify. I think they are getting in big trouble, and maybe I am just one of the only guys willing stand up and say it. In fact from very reliable sources I am hearing they could be down to 15 million tons or less in their current reserves. The numbers just don't jive. You have reports of soymeal demand in China growing by about 8 million tons a year, this has to mean corn for feed is growing by about 12 million tons a year. You also have reports showing us that industrial usage and human consumption is growing by 3-5 million tons per year. If these numbers are even close to correct, we are looking at China increasing their corn usage by more than 15 million tons a year. The USDA has them penciled in for an increase of 4 million tons. Come on...Does the USDA think that China is going to provide them with accurate data or numbers that indicate they are in a serious jam. No, China is much smarter than that. They obviously know if they tip their hand and the USDA or the other sources release the information corn prices will go through the roof. On the flip side, I am also a little nervous that the USDA could be in cahoots with China in the whole game. Why I say this is because I have heard rumors from the floor that there has been huge put selling in corn very similar to strategies the Chinese use in beans down below this market. If you read a little further into this, it tells me that China needs to buy corn in a big bad way. Will the USDA give them the break they need to get it bought...once again who knows, nothing would surprise me. So for now we will continue to play this game. Unfortunately I can not tell you when the cat will finally be let out of the bag, but I am willing to bet by late spring or early summer prices are much higher. Continue to get long, stay long, buy breaks, and do not get overextended.

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Be Patient Corn & Wheat Sales Will Be Coming Soon

I know many of you have been concerned about how our total exports for corn and wheat have struggled, like I have mentioned in past reports I truly believe it is only a matter of time before they begin to take off. I had heard from good sources in China that they were very concerned about our ability to logistically fulfill all of their purchase needs therefore they would start the process rolling with bean purchases since it is their most pressing need. They have supplies of corn and wheat that can carry them for some time. Why would they tip their hand to the market that they will need large quantities of corn and wheat before the US is actually in a position to make it happen. Do you realize our ports here in the US have been absolutely slammed trying to accommodate all of the soybean sales. China obviously knew this would be the case, along with other countries therefor corn and wheat purchases have been put on the back burner. If you read into some of the recent reports you will see we are setting new records for shipments. Last week alone I heard we shipped close to 25 million in Corn, 75 million in Soybeans and 23 million in Wheat. This is huge for the US, and very close to the max we can handle. I am told it is the most we have ever shipped. With this in mind you have to believe China is patiently waiting to flush out the soybeans before they move onto buying corn and or wheat. We may have not actually shipped that much corn, but as of late last week we had made commitments to export close to 800 million bushels of corn, one of the largest amounts we have ever committed to at this time of the year. You can't tell me China is flush with Corn as it continues to set new highs now trading at over $8.60 a bushel. Sure they want us to believe they have plenty, but if that were the case why would prices keep pushing higher. For more proof that countries are waiting just look at last week when Egypt backed off buying US wheat even though our prices were lower than those they ended up purchasing from. I heard they were just too concerned that the Gulf ports were too backed up with beans to make it happen. I am telling you now the soybeans exports have temporarily hurt the other two markets, look for this to change as China shifts more interest back to South America. 

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