Sep 17, 2014
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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.

Markets have turned me into a 'downer'

Nov 01, 2013

Hello Pro Farmer Members!

Each market day, I record a closing markets report for our friends at AgriTalk... just as I did today. After listening to the report, an AgriTalk producer sent back an e-mail that said something like, "Wow... you were a downer today!"

It was a tough week in the grain markets. Excellent demand for corn and soybeans was no longer rumored, it was confirmed. We also got confirmation of still-shrinking cattle feedlot inventories and there is ongoing concern over lower slaughter hog numbers in the weeks and maybe months ahead due to PEDV.

Still, all the ag markets closed lower except for fractional gains in soft red winter wheat futures and some good gains in soybean oil futures.

Unfortunately, even the markets that did post gains are signs of the overriding negative attitudes in the grain markets. There was some export demand for U.S. soybean oil confirmed this morning, but most of the strength in the soyoil market is likely tied to the liquidation of long-meal/short-oil spreads. Spreaders love to be long-meal and short-oil when there is a chance of a meal-led rally in the soy complex, but even spreaders seemed to have given up on the chance for stronger prices in the soy complex.

Similar spread action is typical in the wheat market... spreaders have been long hard red winter or hard red spring wheat futures against a hedged (short) position in soft red winter wheat. Today, soft red was slightly higher as spreaders exited those positions, as well.

There are fundamental reasons for the negative attitudes in the ag markets, and one of the biggest today was a sharp rally in the U.S. dollar index, making U.S. products more expensive for importers. Add in the likelihood that USDA will confirm a bulging supply of corn and soybeans in the Nov. 8 Crop Production Report... and it has been a long time since attitudes have been this bearish in the ag markets.

So... yeah... I probably do sound like a downer. That's what happens when everybody seems to be leaning hard on the bear side of the market. And I don't want to sound like I'm a disgruntled "perma-bull." Pro Farmer is, after all, 100% sold on 2013 soybeans in the cash market and heavily sold in wheat. We'd like to have more 2013-crop corn sold, but downside risk in beans and most of the downside risk in wheat is covered... so the negative attitude shouldn't turn me into a "downer."

The reason this week's price action in the grains kind of knocked the wind out of me is because I'm a bit confused why demand -- good demand -- is being ignored. That's especially true for soybeans that are at risk of ending the 2013-14 marketing year with a still-tight carryover. That risk, however, is being overshadowed by expectations that a "big" increase in the national average bean yield will build plenty of a stocks cushion to put 2013-crop soybean carryover closer to 200 million bushels.

That's one reason I can't wait for the Nov. 8 Crop Production Report. Bullish or bearish, it's time to get another crop update from USDA. We feel like we've got a good idea of what will happen with the corn and bean crops (likely higher than estimated in September), but bigger crop estimates are just another "rumor" in the market that has to be confirmed (like strong demand rumors being confirmed Thursday) to put everybody back on "equal footing" to move the market forward.


That's it for now...

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