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June 2012 Archive for From the Editor

RSS By: Brian Grete, Pro Farmer

Pro Farmer Editor Brian Grete takes time to talk with Pro Farmer Members about some of the key issues in each week's Pro Farmer newsletter.

Corn planted acres up, harvested acres down.

Jun 29, 2012

Chip Flory

From The Editor

June 29, 2012

Hello Pro Farmer Members!

It's not very often the June Acreage Report from USDA can add 2.315 million acres to expected soybean harvested acres and the market can close higher. Planted soybean acres were about 500,000 above the average pre-report trade estimate, so the harvested acreage number blew-away trade expectations, as well.

Nonetheless, soybean futures charged higher again today. Without stress-relieving rains in the near-term, the contract high in November soybeans set earlier this week will likely get pushed aside next week.

The counter to the bigger-than-expected increase in soybean acres is a declining yield estimate. In this week's Pro Farmer, we stayed conservative with our national average soybean yield assumption and put it at 43 bu. per acre. That's down 0.9 bu. from USDA's projection in the June S&D Report, but it's above many crop-watchers' yield peg. One of those lower estimates is reportedly coming from Informa Economics. Source familiar with the firm's work told us this morning that Informa will put the national average soybean yield at 42.7 bu. per acre, down 1.8 bu. from its earlier expectations.

Even with the increase in USDA's harvested soybean acreage peg, downside pressure on the national average soybean yield will partially offset the impact on the crop. The acreage increase combined with a lower yield should limit the increase in crop size to less than 50 million bu. in the July 11 S&D Report.

That is if USDA decides to adjust its soybean yield projection of 43.9 bu. per acre. Obviously, we think they should. But honestly, I don't know if they will for the July 11 S&D report. That's because corn and soybean yields in the July 11 S&D Report will still be projections. USDA's first survey-based estimate of corn and soybean yields will be the highlight of the August 10 Crop Production Report and that estimate (from NASS) will be included in the World Board's S&D Report released that same day.

A Reuters' poll of traders this week generated an national average corn yield guess of 157 bu. per acre. We're also told Informa is looking for a national average corn yield of 154.9 bu. per acre. Our yield assumption right now is in the middle of that at 156 bu. per acre. And did you notice that while USDA's planted corn acreage estimate is up about 540,000 acres from March intentions its harvested acreage estimate is now about 250,000 acres below the harvested acreage projection in the June S&D Report.

If our yield assumption is close to right, the combination of a lower yield and lower harvested acres would generate a crop estimate of about 13.86 billion bu. -- about 930 million bu. below USDA's crop projection in the June S&D Report.

So while this week's trade was exciting, this market may just be warming up for wilder price action in the weeks ahead.

That's it for now...

... have a great weekend!

To join Pro Farmer, click here!

It's July 4th and introducing Inputs Monitor

Jun 22, 2012

Chip Flory

From The Editor

June 15, 2012

Hello Pro Farmer Members!

It's the Fourth of July. I don't care what the calendar says... it IS the Fourth of July. The corn crop looks like it's the 4th; the markets are acting like it's the 4th; the weather is kind of acting like it's the 4th. Therefore... it's the Fourth of July. And that makes this weekend critical to this summer's performance in the grain markets. If you haven't read the lead item in this week's Pro Farmer, here it is again:

Weather markets heating up — Corn and soybean futures are knocking on the door to a weather market. If June 24 weather updates don’t hold a chance for rain in the eastern Corn Belt, corn and soybean futures will knock down the door to that weather market. We’re on the edge — early planted corn fields in central Illinois are starting to tassel and silks will arrive by the end of this week. That’s when irreversible damage to corn yield potential is possible. Bean yields can still recover, but beans would be a willing participant in the rally and wheat futures would “tag along,” too. That’s especially true with what appears to be a “more stable” situation in Europe that should prevent a “risk-off” attitude in commodities this week. But — IF the pattern changes and surprise rains appear in the forecast, be ready to make aggressive 2012-crop sales. Another potential roadblock to a weather rally will be position-evening ahead of USDA’s June 29 Acreage and Quarterly Grain Stocks Reports.

There are too many acres on "the edge." They're on the edge of severe stress and on the edge of pollination at the same time. That's going to lump a bunch of acres into downtrending yield potential by the end of next week if soil moisture levels aren't recharged soon. That's why this weekend feels like the Fourth of July. The "edge" of stress and pollination is normally reserved for that pivotal time period. But we've still got a full week left in June... so the risk to the crop is very real.

As we said in the newsletter, supply-scare (or weather) rallies are normally furious and short-lived. That's why you've got to be ready to pull the trigger on 2012-crop sales in the week ahead.

And we're proud to announce... Pro Farmer's new Inputs Monitor

When fertilizer prices exploded in the fall of 2008, risk on the input side of your business blew up along with those crop costs. At that time, fertilizer dealers were caught holding huge amounts of high-priced inventory just as farmers backed away from the market. That changed the market forever.

Most fertilizer dealers now don’t hold inventory — they send orders to suppliers only when customers place orders (and pay ahead). That change in how fertilizer retailers manage their inventory changed the structure of the market, adding volatility to prices.

And with volatility comes opportunity. On one hand, you now have more opportunity to lock in attractive prices and delivery periods — but you also have more opportunities to make purchases at exactly the wrong time.

After watching the new structure of the fertilizer markets the past few years, many Pro Farmer Members have asked for help in identifying “good” and “bad” pricing opportunities. And now we’ve got the product and the process to help.

Bringing transparency to the market —

You told us you want and need clarity in the crop input markets and to do that we’ve enlisted the help of hundreds of ag-retailers throughout the Midwest. They’re helping Pro Farmer shine a light on fertilizer and fuel prices. We have a team surveying retailers each business day to gather and update as many fertilizer and fuel prices as possible. The results are published online in a way that provides both buyers and sellers with an anonymous method to check high, low and average prices for key inputs.

The price-discovery system of Inputs Monitor is very easy to navigate. Just click on your crop district on the map and it will take you to a page displaying the high, low and average price of the nine crop inputs we update each week.

This is timely and locally relevant information — all price quotes expire after 30 days and each table summarizes your selected crop district and state. And if Nebraska corn growers are curious about Ohio growers’ fertilizer and fuel costs, they can check that out, too.

Our Inputs Monitor price survey already includes more than 300 retailers in 12 Midwest states. As the information gains density and more history, we will start offering charts and graphs for your local input costs in much the same way that we currently show graphs for economic trends and the futures markets for agriculture commodities.

We’re enlisting plenty of help to analyze trends in the fertilizer and fuel markets, and we’ll summarize that analysis in easy-to-follow (and specific) buying advice. It’s tough to break the analysis down to regional advice, but if we see regional opportunities, we’ll bring those to your attention, as well.

We’ll treat the advice for inputs the same as Pro Farmer handles ag market risk advice: We’ll give you all the information, analysis and perspective you need to make a good decision on your own, and then add our advice and back it up with fundamental and technical arguments.

It will be your spot for fertilizer industry news —

Only the important “stuff.” Your time is valuable... we know that. That’s why PF newsletter includes only the news, information and analysis we think is important. We’re a “human filter” for the mountains of news that hits the grain and livestock markets every week.

We’ll do exactly the same in Inputs Monitor. Don’t expect a huge volume of fertilizer industry news when you come to the site, but you should expect to see the news that really matters.

Grain market coverage (with a twist) —

Most fertilizer analysts realize the price of key crop inputs like nitrogen, potash and phosphorus follow the price of corn. More specifically, these input prices follow revenue potential from corn. There is a short lag as fertilizer prices follow corn revenue higher... and a much longer lag following corn revenue lower.

Grain market coverage in our Inputs Monitor will feature revenue charts for each of the major corn-growing states. That will bring some perspective as to what price regional markets will accept without disrupting overall demand for these key products.

Check it out now... for free!

Pro Farmer’s Inputs Monitor service will be free for Members during the next six weeks. Visit us online at to try the service. This new transparency in the marketplace — coupled with Pro Farmer-style news, analysis and advice — will help you manage the huge risks associated with today’s input costs.


That's it for now...

... have a great weekend!

To join Pro Farmer, click here!

Cash-corn lessons from 1995-96

Jun 15, 2012

Chip Flory

From The Editor

June 15, 2012

Hello Pro Farmer Members!

It was a tough day for front-month corn futures. Despite the fact old-crop stocks remain exceptionally tight, the old-crop market is acting like it has done its job of making sure there will be plenty of corn left at the end of the current marketing year. And it probably has...

There was talk today that end-users of corn are doing business with each other. Some end-users have reportedly started to move their supply of corn to other end-users. There's only one reason they'd do that. Basis appreciation has to be enough that they can make more money by reselling the corn than they can from processing the corn into whatever it is they're processing.

Something similar happened in the summer of 1996 when the old-crop corn market was trying to find a way to hold onto the final 400 million bu. of supplies from the 1995 corn crop. Corn basis in the southeastern U.S. was screaming hot that year -- it traded as high at $1.85 over July futures and basis was in the range of 75 cents over the board in the Midwest. Then the price advance and basis strength suddenly stopped and prices started to retreat very quickly. It took a while to figure out what had happened, but the combination of price and basis strength meant the market had done its job -- it forced reallocation of existing stocks from one group of end-users to another.

If end-users really are reallocating supplies among themselves, then the market probably has done its job and price strength in the July contract will be difficult to sustain from this point forward. That doesn't mean trade in the old-crop contract would be boring... price volatility would likely remain very high, but the path of least resistance will likely be to the downside.

And it looks like we're going to import some Brazilian corn. There was also talk in the corn market today that feed processors in the Southeast U.S. are importing corn from Brazil. We'll wait for confirmation on that, but importing feed is something Southeast hog and poultry producers have done before. Most common are wheat imports from Europe, but if they can import corn from Brazil cheaper than they can "import" corn from the Midwest, they'll do it.

That's it for now...

Happy Father's Day to my dad, Dave Flory! And to my dad-in-law Terry Schneider -- and happy birthday to Terry, too! I hope all you dads have a great weekend!

... have a great weekend!

To join Pro Farmer, click here!

All rallies are not the same

Jun 01, 2012

Chip Flory

From The Editor

June 1, 2012

Hello Pro Farmer Members!

It was a short trading week that was long on market action -- and that typically means there was plenty of new "news" for traders to digest. We sum up the major market-movers of the week in the first story in this week's Pro Farmer. Simply put, traders had to balance the price-negatives of Midwest rain and ongoing macro-destruction of the global economy against the risk of a return of hot and dry weather next week.

One of the things that turned one-time big gains in corn and soybeans into a chart disaster by today's close was speculation the National Weather Service 6- to 10-day outlook would cool off a bit and maybe even bring some "good" rains into the southern portions of corn- and soybean-growing country. It didn't. The outlook for June 7-11 still calls for above- to much-above-normal temperatures and below-normal rains.

That doesn't mean the NWS is right. The private forecasters could be right and next week could be a warm, but not hot, with some chances for rain. In fact, I hope the NWS is wrong and the private weather prognosticators get this one right. The NWS 6- to 10-day outlook has been hot and dry most of the week and, while there were some relief from this week's rain, any extended period of hot and dry conditions will put the crops under some significant stress.

I realize some of you won't think that's such a bad thing at this time of the year... make the markets build in a high level of weather premium early in the growing season, then make sales ahead of the traditional pattern shift around July 1. Great plan... wish we could "make" that happen -- especially the part about making the weather pattern shift.

I've been very impressed at the level of demand for 2012-crop corn and soybeans that's already been booked. But, a sharp rally now could threaten the demand base for the year-ahead. It's a little premature to be thinking about the potential impact of a weather-scare corn and soybean rally on the demand base for 2012-13, but I've always been a demand-first kind of analyst. I've always had the attitude that we should grow every bushel of corn and soybeans we can and then find a way (and the price) to use it. That's one reason I'm an ethanol fan. That's one reason I'm a fan of the market-development efforts of the various commodity groups. That's one reason I'm a believer that grain should be held in the bin during a demand-led rally, but sold on a supply-scare rally.

There... that gets to the bottom of it... "sell a supply-scare rally." If you haven't already done so, get ready to do it on the next bump in corn and soybean prices to get caught up with our recommended risk-management positions.

That's it for now...

... have a great weekend!

To join Pro Farmer, click here!

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