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March 2010 Archive for 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.

How to Play the Report

Mar 30, 2010
How to Play the Report
 
Everyone in the industry is looking for the report to show some big numbers for both Corn & Beans. In fact, most expect corn acres to be the second-largest in some 65 years (over 2.7 million more acres of corn than last year), and beans to set a record high (over 1 million more acres than last year). If this all plays out, it will mean back to back years of record crops, and certainly some added volatility to the price. 
 
For me its all about having the right plan. If the report shows corn plantings to be much over 89 million acres and beans any higher than 78.5 million acres we are definitely heading lower.  How far and how long is the magic question?
 
The market has obviously all ready priced in the expectations of larger numbers (thats why we have drifted lower the past few weeks), so the only way we are going to get really rocked to the down side is if we see something extreme like large than expected grain stocks, ethanol production dropping, larger than expected acres planted. 
 
I think initially it will take some time for the market to digest the big numbers if they come out in line. I am believe we will see some additional sell off, but from there you will see some bigger players and funds step in and start to focus their attention on the wet weather conditions, and the USDA's updated annual acreage report that will be out on June 30th.
 
I think you will see some of the large spec traders and funds buy the breaks and look to dump it for a profit on weather and report concerns during the coming weeks. The demand seems to be holding strong, and any type of production fear will send prices racing higher for brief periods during the next few months. 
 
If your a producer you have to absolutely have a plan in place to play this market.  You need to know exactly how many bushels and at what price you are going to target for your next sale. I am afraid this market may only give us brief moments of hope based on weather scares and production fears.  With this in mind you have to be primed and ready to pull the trigger when the market makes it's move, otherwise you might be watching it fall back to levels we have not seen in some time. 
 
Look for the market to break until it fully digest the huge numbers, then look for rally points based on weather and production concerns, along with acreage theories on the updated end of June report. 
 
Additional Thoughts:
 
Also remember we will be getting our quarterly grain stock reports at the same time. Corn should come in around 7.5 billion bushels, the most since 1988, and soybeans around 1.2 million bushels. Beans are tight right now, as China has continued to be a strong purchaser. 
 
Keep your eye on winter wheat longer term as plantings are the smallest since 1913 due to a drop in prices. 
 
Current Marketing Efforts:
    
Wheat 70% priced @ average cash price of $5.43 
 
Soybeans 40% priced @ average cash price of $10.25 
 
Corn 35% priced at an average cash price of $4.05 
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