Market Recap and Weather update!
Sep 08, 2009
All clients should have received our e-mail yesterday about the potential September frost alert. I talked with the advisor today and he’s reduced the potential down to about 20%. I stressed to him the importance of getting this one right. He will have an update on Monday evening before project (A).
This is the weather rally all the upriced sellers have been waiting for. For their sake I hope it shows up. I was on the road all week doing field days and working at the Farm Progress show. The observation I’ve come away with is the producers are way behind on selling this crop. I would not be surprised if more than 70% of an average production is still unsold. This is going to force a lot of producers to sell inventory off the combine if USDA yields are seen. I have to say the producer does not believe it’s going to happen. At this time I fear he’s preparing himself to store the corn in the bin unpriced and hoping for a demand event like 2007 and 2008 to bail him out of trouble.
Strategy wise, I have in my brokerage accounts rolled down deep in the money corn and bean puts to take some profit off the table but still hold position. As for speculative interest I bought a little corn here below $3.12 to $3.09 level for a shot at some weather fear spikes next week. One should be very aware that if we don’t get freeze in September it’s going to be a very long winter for those producers who are unpriced!
**** WEATHER BULLETIN *** SEPT. 5 1235 PM EDT
This bulletin is being issued because of the threat of a potential significant frost around the middle of September ... and the new information from the 12z Friday operational GFS model which is now just finished its run.
The model continues to bring in a pretty chilly air mass but does a little sooner, followed by a second COLDER air mass Sept. 17, 18 and 19 .
First the 12z Friday GFS brings down a fairly cold High across Manitoba and the Great Lakes Sept. 14 and 15. We do not see a massive plunge of very cold air but the model does bring down some cold air—air which is cold enough, according to the model—to produce a moderate frost over the Western Corn Belt and Eastern Corn Belt regions on the morning of Sept. 14 and/or Sept. 15.
Most of the cold air associated with this large autumn HIGH stays up across the Great Lakes and Ontario then moves into New England. If we take this run verbatim... then we would see a more serious frost over the Great Lakes into Eastern Ontario agricultural areas and into much of the Northeast on the morning of Sept. 15 and 16.
Of even more significance is that the model develops a second large deep trough over the Midwest and the Northeast Sept. 17-20... which develops a surface Low over the Great Lakes that jumps to the Northeast coast... sort of like a late autumn winter type of system. This trough pulls down a new surge of very cold air into the heart of the Midwest Sept. 17, 18 and 19 which eventually moves down into Tennessee, Arkansas and Virginia Sept. 18 to 19.
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Obviously the next question is do I think this is correct? My view on this hasn't changed but the fact of the models now showing to colder outbreaks as opposed to one is leading me to have some increase in confidence that something is going to happen around in the middle of the month. It may be that what we are looking at here is a "frost scare" and not an actual frost but that is assuming that the weather models were overreacting here.
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