Sep 22, 2014
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The Hueber Report

RSS By: Dan Hueber

The Hueber Report is a grain marketing advisory service and brokerage firm that places the highest importance on risk management and profitable farming.

All that glitter...

Sep 20, 2014

In keeping with my last few letters, I would like to continue to focus on the recent bullish activity in the U. S. Dollar alongside the related bearish patterns for commodities in general.   As noted last week, we have seen commodity indexes push to the lowest levels in a year, heavily influenced by weaker prices in energies, and of course we in agriculture are painfully aware of the fact that prices for row crops are sitting at the lowest levels in over four years.  There is another specific commodity that seems to have been in the news quite a bit that I would like to focus on this week; GOLD. 

Those of you who have read my letter for any number of years know that I am not a gold bug.  This is not to say that I do not understand that gold has value.  It is durable, is widely used in electronics, dentistry and of course in the jewelry industry.   For millennia it has been used as a currency or held up as a treasure, but history is littered with stories of those who are blinded by its allure.  King Midas, the search for El Dorado and even the Leprechauns at the end of the rainbow are all myths or legends that should warn us of the dangers of lusting after this metal and that even possessing all that our hearts may desire is just as apt to bring us sorrow as joy.  I came into the commodity business just ahead of the inflation driven gold rally in 1979 and 1980. I witnessed first hand not only those in single minded pursuit that wanted to possess gold as they has been assured that the financial Armageddon was going to begin at any moment, but then the subsequent collapse and surrender.

As we know, in near classic cyclical fashion we saw gold begin a major advance beginning soon after we entered the new century and raced to new record highs along with almost all other commodities as financial panic engulfed investors once again. This time the gold rush was not because of fears of hyper-inflation and a currency collapse but because of a major recession, dramatically rising level of public debt and…fears of a currency collapse.  Granted, I have the advantage of now being able to look back at another bubble bursting, but I remember at that time being almost amused when listening to the purveyors of fear and gold weave elaborate tales of impending disaster. I swear they had taken the identical scripts from 1980 and replaced the names Carter and Volcker with Obama and Bernanke and hyper-inflation with hyper-debt.  There is a theory that one of the reasons that the 30-year cycle is so dominant is that you have replaced an entire generation at the decision making level and of course the new never want to listen to the old as we are always that much "smarter" than those who came before. We certainly saw that happen as the most recent gold bubble was growing. 

Actually I digressed as to what led me to the topic; this week there were a number of stories in the press about gold extending lower this week in response to waning demand in China and other spots around the world as economies cool off and of course the rise in the Dollar.  Gold has not reached all the way back down to the lows posted at the end of 2013, but this was the lowest we have traded since posting highs back in the spring and it does not appear ready to stop just yet.  Sounds just like the rest of the commodities markets right now.

The reason that I find this note worthy is you can look at just about any business publication and you will find a bearish story about one commodity or another.  I recognize that there are solid fundamental reasons for this and of course they always need something to fill in the space. But for someone that has a natural contrarian bias, when I see everyone headed in one direction, my antenna goes up on the lookout as to why I need to start looking the other way.  As a friend of mine used to like to say, "the Masses are Asses and if you run with them you are liable to get kicked." 

 By no means am I implying that gold or crude oil or the grain markets are at a bottom as there is nothing to indicate that is the case just yet.  That said though, I do believe it is likely that we have already witnessed the lion’s share of the downside in a number of these markets and becoming wrapped up in all the bearish talk at this point will blind you to potential signs that the end of the move is coming.  Markets always look the most bullish at the top and the most bearish at the bottom. Unfortunately because of that, they always trap a lot of people at each extreme, particularly those the most emotionally attached to the value of the product.

I have written numerous times over the past couple years that commodities were entering a period of realignment as we determine the new trading parameters for post-30-year peak.  That said, for several markets I believe we are into the twilight period for the break and now would not appear to be the time to panic on the bear side.  As I stated before, I am not saying that I believe we are ready for any immediate turnaround, nor is it an excuse to not make marketing plans and decisions. But if your choice is based solely on a feeling of desperation, chances are the decision will be not be the correct one.

Nary a bull to be found

Sep 19, 2014



Without some type of miraculous recovery today, the wheat market will have closed lower for the fourth week in a row and at the lowest level for a spot contract since June 25th, 2010.  With the exception of dryer than normal conditions in Australia, just about every news item is negative.  After showers pass through this weekend the weather outlook appears conducive to wrap up harvest of the spring wheat, export sales were sub-par yesterday morning at 11.6 million bushels with little interesting in the lineup and of course, stiff competition in the international markets as France and Russia aggressively market their crops. Without bearish news we would not have any it seems.

I intend to expand on this theme a bit more in the weekend comments but it would appear that we are reaching the point in not only wheat but commodities in general that everyone has given up hope.  All they can envision is low to no inflation and declining prices ahead.  For me, that begins to raise a big warning flag.  This is not to say prices will not head lower for the near-term or that it can identify a specific point in time for which we will turn around, but this is the kind of attitude that develops and exists when you are approaching lows in markets.  As one of my favorite saying goes, when everyone is thinking the same way, no one is thinking and once that happens, we will miss subtle changes that are taking place in the undercurrent.

Keep in perspective as well that markets always overshoot be that at bottoms or top so for now, we need to remain patient as the market demoralizes the last of the bulls.  


While weak, the corn market has still been resistant to pressing into lower lows but with the selling witnessed this morning, it would appear that we will put that to test for the weekend. Here are well we are struggling not only with the weight of a potentially larger crop but the overall negative attitude toward commodities in general. 

Export sales last week were Ok, coming through at 26 million bushels.  This brought the marketing year to date figure up to 513.3 million bushels so we need to average just 24.7 million per week to reach the target of 1.75 billion.  The most discouraging aspect of this is that we really need to boost that number closer to the 2 billion bushel level to lift prices away from the basement.  The USDA did announce a sale this morning of 376k MT of corn to Mexico.

The most positive news I have seen in the past 24 hours is the fact that the CME lowered margins on corn from $1500 to $1250 per contract.  While this may not sound like a big market influence and reflects the lack of volatility we currently experience, traditionally this has been once of those minor flags that is waved when you begin approaching lows. 

After showers pass through the Midwest this weekend, the outlook appears to be nearly ideal to put the finishing touches on the corn market.  With ample moisture already present we should potentially be building test weight, which would be that final essential step for maxing out the yield this year.  It would appear that the harvest should really kick into gear once the calendar rolls over to October.

Later this morning Informa will be releasing their initial estimates for corn and bean acreage for 2015.  While this will only the opinion of one company and should not be a market mover, it should provide an interesting base from which to begin discussions about next year.


Solid export sales yesterday of 53.9 million bushels were ultimately not enough to support the bean trade nor was a sale announcement this morning of another 1.236 MMT or 45.4 million to China as prices have now extended into lower lows for the year.  With a clear forecast in the weeks ahead the trade will be looking for harvest to kick into high gear.  Yield reports from areas in the south continue to be outstanding with 60 to 90 b/p/a’s commonly heard.

The CME also cut margin on beans, moving from $3000 to $2500 and meal from $1500 to $1300.  As I commented under corn, traditionally you begin to see margins reduced as you approach lows in markets but the key word to keep in mind here is "approach."

The Informa estimate for 2015 beans should be particularly interesting as we will potentially be coming away from a huge record acreage of 84.8 million this year. With 9.75 new beans versus 3.80 new corn, will many intend to cut back on the beans?  A topic of debate for another day.

Acre debate continues

Sep 18, 2014


An early travel schedule has meant that the morning comments will be out before export sales are released this morning so we will report on those figures later today.


All the nervous anticipation concerning a possible early interest rate boost by the Federal Reserve was for naught as policies were left at the status quo with a rate hike expected sometime later in 2015.  There were two dissenting voices on the committee but Chairman Yellen, citing the ongoing concerns about the slow employment gains and fledgling economic recovery in face of world headwinds as the reason to stay on the current course.  This news still did not temper the enthusiasm in the dollar as prices poked into a higher high yesterday and has advanced again overnight.

Other news is sparse this morning.  The Russian wheat harvest has advanced to around 70% complete and yield has continued to perform better than expected.  Estimates for the total crop range between 59 and 62 MMT.  The forecast in Australia leans to the dry side, which could be a drag in yields as plant should be filling out heads but hardly an alarming problem at this stage. 

The world remains awash in wheat and as we have been experiencing, others in the Northern Hemisphere outside of our borders continue to dominate the export scene.  Chicago futures did close higher yesterday and are relatively flat this morning which could be suggesting that we have readjusted to the recent supply increases and with nothing exceptional happening in the Southern Hemisphere, we may be ready to begin base building once again.  This is not to say that we could not still see a dip in December Chicago futures down against the 2010 lows at 4.73 but as a whole may be set for sideways action for the last quarter of 2014. 


The corn market struggled throughout the day yesterday trading in a very narrow range but is realistically treading water at this point.  This is really the third time since the spring peak that we have witnessed this type of price action.  The first was back in June when we spent 3-weeks chopping between 4.55 and 4.35 in December futures before exiting through the lows.  After reaching the 3.60 level then in early August, we spent a little over 4-weeks trading between 3.60 and 3.80 before the next push lower.  In each case, the breakdown occurred right at the end or beginning of the month.  Would this suggest we could keep tracking sideways now through the end of this month?  Certainly not out of the question. 

Ethanol production last week remained very solid as we manufactured 273,126,000 gallons, which should work out to around 98 million bushels.  Note though that stocks jumped 33 million gallons this past week and with the summer driving season behind us, DDG’s under pressure, and the corn market largely flat for now, it could begin to weigh on margins.  

Not surprisingly, there continues to be a debate as to the discrepancies between the USDA/NASS acreage numbers and those of the FSA.  Realistically there always is and the fact that there are stores that the FSA will update the numbers at least another time just adds to the dispute.  We very well may eventually see the acreage number pulled lower but I suspect for the time being, the focus will again shift to the many exceptional yields being reported.  This is something to keep in the back of your minds though as if you recall, it was back in January of this year when the bear was all primed for a negative final production report and when they were not granted their wish, that is when prices really turned the corner back higher. 


It would appear that the bean harvest in not stepping into gear fast enough for a number of processors as there are reports each day of additional plants shutting down for maintenance.  The potential challenge here is that losing capacity now could make it difficult to reach the USDA target at 1.770 billion bushels.  Keep in mind that would be the 3rd largest crush on record.

Export sales are expected to be in the 1 to 1.4 MMT range as China continues to book in needs through spring.  Outside of this I find very little fresh new to mull around this morning as the trade awaits additional harvest news.  It would appear that there could be a few showers that pass through the Midwest over the weekend but outside of that, the weather would appear ideal to speed up the maturation and of course the harvest of this crop. 

Fed Watching

Sep 17, 2014



Generally quiet news morning as we reach mid-week with many traders/investors as concerned about the Fed Reserve Open Market Committee meeting that is being held as anything Ag related.  As has been the case when this group meets, everyone will be scrutinizing each and every word for a hint as to when they may begin boosting interest rates, or maybe better stated if there is a possibility that it could occur sooner than later.  A rise in rates would not only potentially stall the equity markets but should send the U.S. Dollar higher, which of course is not a positive for commodities export business.

As expected, the Egyptian wheat tender went to France who is aggressively marketing their crop.  Turkey, the T in the MIST countries, was in for 200k MT of US wheat and Morocco is tendering for 386k MT.  Weekly sales will be released tomorrow morning. 

The ranges for wheat overnight are quite small at this point and we currently hover around the unchanged mark but this of course after dropping to lower lows once again yesterday. I continue to believe December futures have room to slip down to at least the June 2010 lows at 4.73 between now and the beginning of October. 


Well, the FSA acreage bump faded rather quickly yesterday as ongoing reports of big yields occupied the minds of traders.  While I suspect we will eventually see the USDA adjust corn acreage lower, considering that the FSA data is evidently still incomplete and may not be finalized until December, that would mean changes will not be made until the final reports in January. Of course the horses are long out of the barn by then so closing the door a touch may not be much of a market mover at that time.  We did still manage to close right around the unchanged market so it was a victory of sorts.

At this point lower prices do not appear to have stimulated any exceptional export interest for new corn.  The only tender lining up overnight is Israel looking for 70k MT and it would appear the report tomorrow morning will not hold any positive surprises.  You have to imagine that outside of immediate needs, buyers will be content to allow the market to come to them.  Also consider the fact that since July, new crop corn futures have lost around 17% and during the same time the dollar index has gained over 5% so all the flat price decline is not being reflected in other countries. 

While I am not sure if this qualifies as new or old news but it was reported overnight that China and the US failed to reach any kind of agreement on the testing for and acceptance of certain GMO’s in DDG’s as well as corn.  This effectively continues to lock us out of the majority of the Chinese market at least until they suffer a crop problem.  You have probably all read that Cargill has now filed a suit against Syngenta over unapproved GMO varieties which will be very interesting to watch unfold. 

The corn market has actually been quite stable now for the past 5 sessions which is not unexpected but I cannot imagine we will hold this range for any extended period.  A push through exiting lows in December corn at 3.35 ¾ should open the door for a slide down to the targets between 3.10 and 2.90 most logically in October. 


The early bean strength yesterday fizzled quickly after touching the 10.00 mark in November futures.  It would appear we know where the sell order will be sitting is at this point.  We have tried to stabilize and bounce overnight but without a fresh positive story soon, I suspect the expanding harvest and consistently solids yield being reported will overwhelm the support once again. 

According to the Ministry of Agriculture in Argentina, farmers in that nation have sold just 58% of this years’ crop.  Last year at this time they had sold around 66% which was also at a slower pace than usual and I have to believe heavily influenced by the troubled political/economic situation down there.  It is better to hold a commodity than a worthless Peso.  There are two negatives for the US with this situation though.  First, it means there is a larger current world inventory just as our new beans are becoming available and hence, greater competition.  Second, this means the Argentine farmer is probably cash strained moving into the spring season, which would suggest they will plant crops that require less money, i.e., more soybeans. 

As with the corn, the FSA data released yesterday would hint that we could see acreage adjustments on future reports but if that does not happen until January, it could be anti-climatic.  I continue to believe we will see November beans slide down to at least the 9.50/9.40 zone and if yields continue to come in a solid as the early numbers, a push down against 9.00 would not seem unreasonable.

Acreage confusion

Sep 16, 2014



While it is not much, the wheat market is looking at a higher trade here overnight and we have posted the first higher high in the past 7 sessions and only the second in the past 11. Hardly what would qualify as a turnaround but you have to begin somewhere.

I suspect the bounce is primarily technically inspired, as there is precious in the news that one would construe as positive.   The Russian Ruble has pushed to record lows against the dollar keeping US wheat less than competitive against the Black Sea and  French wheat is even less expensive than the Black Sea currently.

Export inspections last week fell right in the range of estimates at 20 million bushels.  This brings the YTD loadings up to 279.8 million bushels.  The glass half full crowd would say this means we need only average 17.4 million per week to reach the USDA targets but the half empty group would counter that this pace is 34% behind last year and with stiff competition the picture will not improve.

Spring harvest has reached 74% complete, which was up 16% for the last week and is 12% behind the normal pace.  Winter wheat planted is now at 12% complete, up 9% in the last week and 1% ahead of the normal pace.

While the bounce the morning allowed the few remaining bulls a little chance to take a sigh of relief, I would not be too confident that we have seen the last of the selling.  I still expect to see prices press into lower lows at least once more time with room to take December futures down to at least the 4.73/4.83 range. 


The corn market did finally catch a little bounce for the close yesterday and have followed through a bit overnight.  It would appear that concerns about possible acreage adjustments after the FSA updates number has done what the threat of an early frost could not. As it turns out, the FSA release did not really provide much for the bull to hang onto.

The FSA reports that planted acreage that has been certified is 84.3 million, which is actually 1 million higher than their August estimate.  There was speculation, evidently by the bulls, that the figure could be a million lower than the previous estimate.  To complicate the figures even more there is a story circulating that due to technical difficulties the FSA would not have the "real" final data until December.  The Farm Service Agency has many fine individuals that work within their offices and are asked to do more with less each year.  I shudder to think of the outcome had some Washington administrators and politicians had their way and were successful at pushing the entire crop insurance program onto them. 

We appear to be past the cold weather concerns and with forecast for normal to above normal temperatures stretching now through the end of the month. This should help crop development speedily move along.  As of September 14th corn in the dent stage had reached 82% which is just 3% behind normal but corn mature stood at 27%, 12% behind the 5-year average.  The crop rating was unchanged at 74%, which other than for the historical reference means little at this point.  This was the first week of summarized harvest data and for the 18 major states and we stand at 4% complete versus a normal of 9%.  North Carolina and Texas were the furthest advanced at 52% and 59% respectively.  Illinois only reflected 2% complete versus a normal 13% and Iowa was a goose egg compared with a normal 5%. 

After a nice bump the previous week, export inspections were pretty dour.  For the week ending September 11th we loaded just 29.2 million bushels, which was a solid 10 million below even the lowest estimates.  Year to date we stand at 57.75 million bushels.  

It is nice to see a nice little bounce this morning following-through on yesterday strength but it is difficult to imagine that is will carry far.  Yield estimate continue to increase as Cordonnier has pushed his number to 173 and I have read other now advertising figures in the upper 170 zone.  There are some who suggest that the FSA figures will ultimately result in a couple million cut in acreage.   While I do not profess to have any insight as to if that will be correct, keep in perspective that a boost in yield to over 175 would more than compensate that kind of loss in acreage.

Overhead resistance should be tough as we approach 3.50 in December futures and I expect would be thick from there all the way to 3.60.  The last corrective phase in corn entailed 6 weeks of sideways trade but with harvest upon us, it is difficult to imagine a replay of that kind of action. 


Anticipation of the FSA acreage data prompted a bean bounce as we but we have the same type of semi-conflicting information as well.  The FSA reports planted acres reported at 80.8 million, which is up 1.6 million from last month.  They have prevented plant at 841k which is 14,000 acres higher than the August figures but of course this all could be adjusted in December if the stories are correct.  As with corn, a higher yield on the next report could easily offset any loss in acreage.  Condonnier also bumped his bean yield but just by 1/10th to 46.7.  

There were no surprises in the monthly NOPA crush data as we used 110.66 million bushels of beans last month.  Crop conditions were left unchanged once again 72% good/excellent and beans dropping leaves moved to 24% of the crop, which lags the 5-year average by 8%. 

November beans pressed back against the 10.00 level overnight and I suspect we will find very stiff resistance from there up to the old lows at the 10.20 mark.  The current weather outlook for the balance of the month would look ideal to kick the bean harvest into high gear and I cannot help but think that will squash any rally in the near future.

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