Oct 2, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


June 2011 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.

Preparing Yourself For The USDA Report

Jun 28, 2011

 I wanted to pass along a few of the more basic numbers that the trade is looking for going into Thursday's big USDA report.  This is not a complete guide, but it should certainly help give you some direction as to what most of the traders will be looking at and what numbers they are expecting.

 

Total Planted Corn Acres - I get the strange feeling there are now several jumping into the camp that acres will be left unchanged or bumped just a hair higher.  There are several  average trade guessed floating around. Some are a little higher at around 90.75 and some are a little lower at around  90.65 million acres.  If you remember back last month, the USDA lowered it down to 90.70 million acres.  With this being said you would have to believe a jump or a drop of 500,000 acres could be seen in either direction. Put it this way, there are definitely guys on both sides of the fence.  Some of the lowest estimates I have personally seen thrown out were at 89.5 million acres.  Remember, last year we were at 88.192 million acres planted.  The highest I have heard is a jump back to 91.5 million acres by the boys over at Iowa Grain.  As you can see there is a big difference of opinion.  In this case two very respected sources are 2 million acres apart, truly anything is possible. 

 

    • Quarterly Corn Stocks - Most are thinking this number will be reported right around the 3.3 billion.  Last year for this report, we were at 4.321.  The range of guesses is running from a low of around 2.99 to a high of just over 3.5. 

 

 

Soybean Planted Acres - This one here is equally as tricky as you have two camps of thought.  One adamantly predicting more bean acres (because of poor corn planting conditions), and one predicting a significant cut in bean acres (because of the lop-sided profitability in planting corn acres).  Last month the USDA reported soybean acres would total 76.609, this month the average trade guess has been lowered closer to 76.509.  Bottom-line: the trade is looking for an ever-so-slight reduction in total bean acres.  The highest bean acreage estimate I have seen has about 77.2 million, the lowest I have seen was about 75.5 million acres.  Once again, close to a 2 million acre difference of opinion. 

 

  • Quarterly Soybean Stocks - Last month we were reported at 571 million.  This month the trade is looking for something just a little less than 600 million.  The range of guesses is somewhere between 475 and 675 million.

                                 

* For the rest of the story on Wheat and to know my thoughts on what Managed Money and the Funds will be watching for and how it will impact prices, make sure you sign up for my FREE report a couple days ahead of time so that you can catch the lead up to the big report!

 

 

 

 

 

If you are not getting my free report make sure you get signed up by simply following the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 

 Send My Free Report

 

       

Follow FarmDirection on Twitter

 

 

 

 

 

 

 

 

My Current Thoughts About US Corn Yields

Jun 27, 2011

One of our southern Kansas clients told me this weekend the corn in his area just isn't tasseling.  Only six inches of rain in past nine months and one hundred degree temps forecasted for this week has them extremely worried.  Many in this area are now saying their corn is essentially "done."  Several producers in Nebraska reporting that they have had to replant more acres than they have at any point in the past several years, and are extremely worried about overall yields.  Some fields are looking great, some fields are looking terrible.  I had one client from North Dakota call and ask me if I knew of any "midgets" or "little people" that did crop tours, so he could have them out to his fields...he  wants to be able to tell folks that he has knee high corn...lol!  In all seriousness several North Dakota producers seem extremely worried about over all corn and spring wheat yields.  Several reporting they have never seen so much yellowing and uneven growth in the field.  Remember, many were forced to "mud" in the crop and the outcome is very sketchy at best.  Several were also forced to go with much shorter varieties at a significant reduction in yield.  Indiana, Ohio and many of those out east are projecting very questionable outcomes.  The crops in the South, as well as those in the Delta areas are also reporting some serious stress.  I don't want you to think for a second that it is terrible across the board, because it isn't.  In fact, I know of many producers in Iowa, Illinois, Missouri, etc...that are telling me they have fantastic looking corn. A few actually saying it could be some of the best corn they have ever seen.  The point I am trying to make is that the crop conditions are extremely diverse this year from region to region, state to state, and even county to county.  With this being the case, I am starting to become more and more concerned about whether or not we will actually be able to meet the current projected USDA yield.  It just seems like in the years we actually achieved this type of national average we ended up with what seemed to be "average" to "excellent" results across the board.  This year we have the "average" results, and we have some reporting "excellent" results, but I am worried because I seem to be hearing more "poor" to "very poor" comments than I normally would hear in a high production year.  Up to this point, I have felt the USDA has done a fine job with the data they have had to work with, and their current yield projection seemed to be very fair.  I am thinking things are starting to change a little.  As of right now there has only been a couple of producers call into the office to adjust their estimated number of bushels higher.  While there have been a countless number calling in to adjust their numbers lower.  Early on many were calling in to adjust the number of planted acres lower, simply because they couldn't get the crop in the ground.  Recently, producers have been calling in and actually adjusting their "yields" to the downside.  Rather than being optimistic about yields to the high-side, many producers seem as if they are just hoping they will be able to achieve their 5-year average.  Certainly things can and will change during the next several weeks as we are quickly approaching the critical stages of growth.  Weather is obviously going to dictate the overall end results, and will ultimately hold the answers to all of our yield questions.  As of right now however, I am starting to move into the camp that is projecting "LOWER" overall yields.  It is still early in many parts, I know, but you have to be concerned about the conditions being so extreme all across the country.  My thoughts are if the USDA were to raise the yield in Thursday's report, it might provide us with a longer-term buying opportunity.  You certainly have to believe if the USDA raises yields, the market will set-back dramatically.  I am thinking down the road the USDA will want to take that shot back, and will be forced to make a correction.  I am not going to throw out any yield numbers just yet, as I would simply be arbitrarily guessing.  I will go on record however as saying a 160 bushel per acre yield or higher by season end seems to be almost completely out of the question at this point in the game.  In fact, any type of bump higher in yield by the USDA from their current level in this Thursday's report would seem to me to be a move in the "wrong" direction.  It is however possible that the USDA could make the move based on current condition ratings, and therefore can not be ruled out entirely. 

 

*Remember folks, next Thursday we have the USDA Planted Acres Report coming out.  It is shaping up to be one of the most important reports of the year.  To know my thoughts on what Managed Money and the Funds will be watching for and how it will impact prices, make sure you sign up for my FREE report a couple days ahead of time so that you can catch the lead up to the big report!

If you are not getting my free report make sure you get signed up by simply following the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 Send My Free Report

 

       

Follow FarmDirection on Twitter

 

"What A Long Strange Trip It Has Been..."

Jun 24, 2011

"What A Long Strange Trip It Has Been..." famous words from my late friend Jerry Garcia of the "Greatful Dead."  I played golf with Jerry on numerous occasions, and I am telling you now, he would have had a much more colorful vocabulary in trying to describe the recent price movements we have witnessed in the grain markets as of late.  Obviously the "outsides" have had the big boys reeling, and yesterday's announcement to drop some 60 million barrels of crude from strategic reserves on the world market sent the long energy bulls scrambling for cover.  This in turn lead to massive liquidation across the board as a "risk-off" alert was sounded.  Closer to home, the wheat, corn and cattle markets came soaring back.  Wheat in Europe seems to have found some stabilization, and Asian demand for US meat is starting create a buzz.  Talks also indicating corn was able to find some interest on the break from the ethanol plants and livestock end-users, while some additional whispers were made that China may have in fact have made some purchases in both the old and new crop cash markets, and may have even jumped in the futures market.  There is a certain fear in the air that if China were to start buying in the futures market, we could see some some serious volatility in the coming weeks.  Look at it this way, you have several commercials still in the July contract trying to wait it out and make the roll to Sept at even money or better.  If some serious longs get into the July contract, and are looking to take delivery, this could force the shorts to come up with the bushels.  This is were the problem might could occur, as some will find it next to impossible to originate the corn.  All it will take is a big enough player who is serious enough to call their "bluff," and the shorts could quickly be forced to throw in the towel.  I will guarantee you China is a big enough player.  Who knows is if any of this has or will take place, but it is certainly something to think about as we move forward. Longs taking delivery of the July corn can not be ruled out with prices tumbling and the basis remaining this strong. 

In regards to the Outside Markets, there was some sense of relief when newswires announced EU & IMF officials had approved an austerity deal for Greece.  Be very cautious buying into this rhetoric or reading into it the wrong way.  To the best of my knowledge, all that has happened, are measures proposed by Greek Finance Minister Evangelos Venizelos to complete a $170 billion austerity package were approved or endorsed by officials from the European Union and International Monetary Fund. Big deal, this really means nothing!  The whole package still faces a critical vote next week in the Greek parliament, the approval yesterday was merely a condition or hurdle they needed to overcome before they could even put it to a vote. There are huge spending cuts and tax raises that need to be approved by the Greeks next week before anything else can happen.  Remember, they barely passed the simple vote of "confidence" this week 155-143, this is not a done deal!  The bottom line is simple, if they don't get another line of credit Greece will default immediately, they need the funds ASAP to cover some 6.6 billion in euros that are maturing on bonds in August.  If they do get the line of credit needed most are betting they simply are delaying the inevitable, and default down the road.  Can You Say Dead-Man-Walking. the "outsides" are obviously still reeling from a very rough week and currently sit unchanged on the day.  *Remember folks, next Thursday we have the USDA Planted Acres Report coming out.  It is shaping up to be one of the most important reports of the year.  To know my thoughts on what Managed Money and the Funds will be watching for and how it will impact prices, make sure you sign up for my FREE report a couple days ahead of time so that you can catch the lead up to the big report!

If you are not getting my free report make sure you get signed up by simply following the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 Send My Free Report

 

       

Follow FarmDirection on Twitter

 

Q&A: Should I Get 50% Sold in 2012 Soybeans?

Jun 23, 2011

 

Q.  Kevin, what do you think about getting 50% sold in my 2012 soybean crop, considering the weak fundamentals that are setting up?

A.  In the "real" world, there is an issue with getting yourself sold too far out - too early.  Not that those in the "trading" world or advisory business ever really feel the pain.  But for those producers who are aggressively trying to expand their operations or participate in the great "land grab" that is taking place, there are some definite areas of concern.  I could talk extensively about the details, but to make it plain and simple, and for argument's sake, let's just assume the Funds jump the bean market and prices explode to $18 or $20 (not that I am in that camp, but simply for argument's sake let's run with it).

 

There are many producers now in the game who are flush with heavy cash, and have the ability to store a large majority of their crop.  Let's further assume these "homerun" producers (what I like to call them) have 0% sold in 2012.  You, on the other hand, pull the trigger early locking in your profits, and get yourself 50% sold.  If we base this scenario on a 30,000 acre operation (assuming a yield of 43 bpa yield) the homerun hitter ends up banking an extra $5 on every bushel or at least on the 50% of the bushels that you elected to pre-sell early on.  In this scenario, the homerun producer ends up banking at least (645,000 bushels x $5) $3,225,000 more than you.  

 

The problem I am seeing is that extra $3.25 million he is now sitting on immediately goes to work against you and your operation, by bidding up the cash rents in your area and snagging any and all farms coming up for sale.  Not to mention input costs or other unforeseeable expenses that you could incur, ultimately reducing your penciled profits in a hurry.  

 

In today's world it is of my opinion that getting yourself 20% sold this early in the game is one thing, but 50% is ONLY for those who are not in an expansion type mode or needing to hang on to leased acres.  If you are a producer who owns your ground outright, have no cash rents coming up for lease, and you are not concerned about buying ground in this environment, pencil the profits and lock them in. 

 

 

As for predicting future soybean prices, I am with you in the fact that soybeans seem to have little if any story at the current time.  This seems to be what everyone thinks, and that is what worries me.  If everyone is thinking there is NO story, and prices are at these levels, what the heck happens when a bullish story actually does hit the trade?

 

Remember, China is openly announcing....

 

 

 

For the rest of the story and my thoughts on Cash Sales and Marketing, make sure you are getting my free report!  Simply follow the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 

 Send My Free Report

 

       

Follow FarmDirection on Twitter

 

 

 

Consider These Facts Before Selling In A Panic

Jun 17, 2011

 

The corn market has been under pressure as of late and could continue under pressure as the big-boys try and sort out the "outside" markets and decide just how much money they want to allocate towards the commodity sector.  In the end however, I think corn still has a few unanswered questions that might ultimately provide the market with some renewed life.  To begin with, it is my contention that no one really knows how many acres of corn actually went in the ground.  How many acres were sent to preventive planting?  How many acres were switched to beans?  How many acres were flooded and how many more will be flooded in the coming weeks? On top of that, no one is even close to having enough information at this juncture to make an educated guess at this years yield.  With this being said we still have to then assume all of these "cards" are still in the deck.  Certainly they could be dealt and turned over as "bearish" cards, but they could also be revealed as being extremely "bullish."  In any event, these variables are still unknown and look to remain unknown for several weeks.  Some additional cards that I believe are still in the deck pertain to last years crop, and just how much of it we actually have left?  If you are of the belief that most US farmers have already sold their 2010 crop, and what bushels they do have remaining in the bin they are in no hurry to get rid of or as far as that goes they don't really need to get rid of, then we are on the same page.  I believe many producers had a great year and are content with sitting on their remaining bushels and letting this one play out.  Stocks are just too tight for producers to be forced into selling.  That means with very few new supplies coming in the door, the elevators are left to make due with what they have on hand.  To make matters worse the ethanol plants are bidding bushels higher.  You have to believe if the farmer is considering a sale, then most of the bushels are heading to the ethanol plants, and being used for production.  That leaves fewer and fewer bushels available for the elevators, feed lots or other end users.  If the USDA wasn't 100% correct in their assessment of last years crop, then we could all of a sudden have a serious issue on our hands.  Say for example the USDA's yield estimate was off by just a touch, and we were actually lower than last year like many have suggested.  What happens then?  What happens if feed-usage was actually a little more than they have estimated?  The numbers that the USDA provide us with can not be considered an exact science.  Certainly those folks are trying to do their best and provide us with the most accurate data, but be realistic.  You guys have filled out the surveys, you guys have taken the calls on occasion, how accurate were you in regards to the information you provide them?  Did you count it down to the last bushel?  They can only report as accurately as the information they have been provided.  I think I am willing to take a chance this time around that these numbers might be off just enough that we finally have the opportunity to take a really accurate account of inventory. My assumption is, taking inventory might just become a whole lot easier when there isn't any thing left to count.... 
 
 

If you are not getting my free report make sure you get signed up by simply following the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 Send My Free Report

 

       

Follow FarmDirection on Twitter

 

 

 

Q&A: Will Corn Go Higher From Here?

Jun 16, 2011

 Client Question & Answer Session 

Q: Do you think it is unrealistic to believe July corn could eventually trade to $8.50?
A: No I do not think it is unrealistic that "old-crop" corn reaches $8.50 given the right set of conditions and circumstances.  Demand has to stay in tact though, and the "big-money" has to stay in the game.  If the big money gets spooked or thinks demand is wavering, then they will exit their long positions and head for the sideline.  This wave of heavy sell pressure as they close out their long positions will obviously push prices much lower.  What we need are small controlled breaks that encourage "more" demand.  This needs to be followed by a stair-stepped rally to higher ground, then start the cycle alll-over again.  Any fast explosive move higher would simply cut off "demand" as most would find corn too expensive to pencil.  The end-users need time to digest the higher costs and pass along the expense.  At this juncture quick explosive moves in either direction will not be conducive for posting new highs.  At these extremes, that could be a tall order.  As you can see, the higher we trade the more extreme are the moves both up and down.  These extreme type breaks could certainly  spook the massive number of long positions currently in the trade, and a massive push higher will spook the end-users causing them to look for alternatives to corn or ways to start rationing demand.  If your looking to hold me to the fire, then yes, I think we trade to $8.50 at some point later in the sumer, but it is starting to look as if it could be after the July contract expires.  Am I willing to bet the whole farm on it? ...No!  That is why I continue to preach rewarding the market on moves to higher ground.  There are just too many variables that need to fall in place to bet it all.   
 
*I know many of you have moved your sale prices higher and higher during this bull run.  You may have started out saying you would pull the trigger and sell if and when the corn market reached the $6.00 mark.  Then you moved your sell target up to $6.50 or maybe even $7.00 as we pushed higher.  Once we broke those levels, you said $8.00 was the magic number.  That strategy has worked well up to this point, but you have to realize at some juncture it will cost you dearly.  Need I remind you of the famous Baron Rothschild line..."I made my fortune by selling too soon."  Stick to your plan, stick to your plan, stick to your plan...  Do not continue to move the finish line.  I have made this mistake several times myself in the past, only to find my horse run out of steam as I lengthened the race.   
 

If you are not getting my free report make sure you get signed up by simply following the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 Send My Free Report

 

       

Follow FarmDirection on Twitter

 

 

 
 

 

More Thoughts On Feed Wheat Being Substituted For Corn

Jun 14, 2011

I know many US analyst and traders will be quick to point out that producers here in the US rarely like substituting "feed wheat" for corn.  The problem is feed wheat's widening discount to corn is starting to push up demand for wheat in many Asian countries.  They understand that while corn is a source of starch, wheat does provide them with ample protein in their animal feed.  Right now there are rumors flying everywhere that many animal feed manufacturers have started covering their import requirements for the October-December quarter, and they are seriously considering a much larger switch to less expensive feed wheat varieties.  Currently Australia feed wheat is penciling about $95 cheaper than US corn to the Asia countries.  Some are reporting that further down the line this trend will reverse.  I am not sure when though, as US new crop corn shipments scheduled from October onwards are still running close to $65 per ton more expensive that Australian feed wheat, and about $40 per tone more than Ukraine's feed wheat.  Maybe here in the US, producers aren't making the switch, but with no major corn purchases reported in East Asia for the last two weeks, you have to imagine Asian producers and end users have a different way of thinking.  From what I hear, most insiders are looking for a 5-10% shift in feed millers' usage towards wheat and other ingredients and away from corn this year.  Some traders are thinking this might already be taking place however, because corn has been selling at a premium to wheat in the cash market over in Asia for sometime now. With the US lowering their corn production estimates and being the world's largest exporter, some Asian nations are starting to worry that wheat may soon be their most viable option.  In late April, South Korean buyers purchased 275,000 tons of feed wheat in the span of just two days, mostly from Canada and Europe for shipment in the third quarter. They are now seeking more feed wheat cargoes for September-December shipment. In Japan, similar events are taking place. In Vietnam, the preference is clearly for feed wheat over corn.  The Philippines has covered its feed grain import needs through the next few months with purchases of Australian feed wheat earlier this year.  All I am trying to say is be careful listening to all of those who want to say no one will really make the switch from corn to wheat...some already have and more will follow should corn prices continue to push higher and availability becomes scarce. 
 
 

If you are not getting my free report make sure you get signed up by simply following the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 

Send My Free Report

 

       

Follow FarmDirection on Twitter

 

Some Thoughts on "Short Term" Market Direction

Jun 12, 2011

I wanted to mention that I have been speaking with several producers as of late who are asking me about my "short-term" thoughts regarding market direction.  It is of my opinion that prior to 2008, short-term price direction in "individual" commodities was a game that could be played, and played very well by some.  Fundamental or Technical analysis of a particular commodity such as corn would be targeted by veteran traders in an attempt to predict short term-cycles or market "blips" on a regular occurrence. In today's world I have become more of the opinion that this type of analysis is no longer effective.  If you are following anyone that thinks or believes they can predict such random movements, I urge you to heed my warning.  Sure, I throw my hat in the ring each day and give it my best shot, not because I believe it is the best way to trade, but because everyone has been conditioned and trained to think in short-term intervals, therefore this is what readers want to see.  I know I can not change the way you have been conditioned to think about the markets, but listen closely when I tell you that trying to predict "short-term" direction is a losers bet.  Markets no longer exclusively react on individual merit.  Each individual market is now linked to a massive web of ancillary markets that can tug, pull or push the core market in any direction at any given moment.  Markets are no longer subject to domestic issues such as simple supply and demand numbers or technical indicators such as moving averages or trend lines, but rather global "macro" type events that can change in the blink of an eye, trigger domino type reactions that splinter into hundreds of individual dynamic moving parts.  These parts are juggled gracefully each and every day as the markets attempt to keep this house of cards intact.  As the parts evolve, take on new life, change directions, or as new parts enter and old ones fade away, the markets are in a constant state of change.  Taking a long-term approach is what has enabled me to have success the past several years while others have been left scratching their heads.  Predicting a "top" or a "bottom" in this type of environment is a complete joke.  There are simply too many moving parts.  Traders today have to paint with broader strokes to enjoy the fruits of their labor.  Jumping in and out of positions is as random as tomorrow's trade action.  Sure, you might see some short-term success, or should I say luck, but over the course of time the markets will certainly win out.  No one knows for sure where these markets are headed, that is why I urge you not to get caught up in the day to day price action or specific selling points.  I hate it when I hear a producer tell me they were $0.02 cents from pulling the trigger and making a sale, then all of a sudden the markets broke and never came back.  Seriously, do people honestly think they can accurately predict market direction and the specific price and point that it will turn.  The way to play the game is to view the bigger picture, if you think the tides are turning make some sales.  This is why I suggest getting yourself to at least 50% sold at these levels.  No one can assure us that prices are going to go higher form here.  By selling 50%, you have essentially eliminated half of your risk and ensured good profits on this amount. By having a floor in place on another 20-30% you have eliminated even more downside risk, and ensured even more reward.  The name of the game is "risk-management"...reducing your overall risk and securing profits.  This is not the "Psychic Friends Hotline."  Yes I believe prices could certainly go higher, that is why I am only 50% sold.  You need to understand however, several things need to fall into place for the market to actually trade substantially higher from here.  Without having a crystal ball, I am left to only "hope" these things might actually happen. Unfortunately "hope" doesn't pay the bills or put the kids through college, therefore I believe the most prudent and sound advice is to play this game from a long-term perspective, reducing risk and locking in profits accordingly when the market presents these opportunities.  Trying to play the short-term movements, in my opinion, is a thing of the past.  Reducing your size, managing your "risk" and taking a longer-term approach is the only way I see to navigate in these volatile waters. 

 

 

If you are not getting my free report make sure you get signed up by simply following the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 

Send My Free Report

 

       

Follow FarmDirection on Twitter

 

 

 

Could The Upcoming USDA Report Hold Some Surprises?

Jun 07, 2011

Most generally all eyes are on the end of month USDA report in June, this time around however traders are increasingly concerned about the data that could be unveiled on Thursday in the June "Supply-Demand" report.  There are many now speculating that we might actually see a slight reduction and possibly even an adjustment in yield.  A few weeks ago, most thought we would see no more than simply an update in corn and bean ending stocks.  You have to believe if the USDA does revise its yield and acreage estimates in any form or fashion, they will be tipping their hand to possibly even further moves in that direction at the end of June.  I don't need to point out the fact that the Bulls are calling for massive reductions in both corn acres planted and the projected yield.  The USDA might be able to accommodate their request in corn acres planted as new data coming in might provide them with enough evidence to go ahead and reduce the acres by some small amount.  Especially now with more signs of flooding along the Missouri River.  If I were the USDA, I would prefer to make a few smaller cuts along the way rather than one giant one down the road.  This makes it look like you at least have some idea that things are changing, rather than it appearing to hit you all at once like a ton of bricks.  If cuts in corn acreage happen, the first place to look will obviously be in Ohio and North Dakota.  The current acreage is still at 92.2 million acres for corn.  As I have been reporting, many now have that number significantly lower.  Some estimating as low as 85 million acres.  I am no where close to that number, felling more comfortable somewhere between 90 and 91 million.  I remind you however, with this many acres in question no one, including myself, can have a real strong gauge on this thing, that is what makes any number possible.  Many trusted and well respected sources are well below my estimates.  I just think at these prices and with so much leg work already invested, producers are going to try and plant as much corn as possible.  Now obviously what the yield comes in at will be a serious question mark.  Right now, the USDA is at 158.7 bushels per acre, already down significantly from their original 161.7 estimate.  Having made a cut already makes it tough to rule out another entirely, but I just can't imagine another extreme type cut coming this early.  I personally doubt we see any real surprises coming from either yields or acreage.  The issue I see is if they decide to cut overall "demand" for corn.  With everyone looking over their right shoulder for the USDA to issue "bullish" news, there is the outside chance they pass us by on the left by issuing "bearish" news.  With corn trading at substantially higher prices, export totals may now be in question.  In addition, the USDA might question long-term ethanol demand and livestock feed usage.  All I am saying is don't be surprised if the USDA gives the "Bulls" and the "Bears" a little equal love in this next report.  Don't forget wheat will see some very serious data, and all eyes will be waiting to see what reductions are being made in Hard Red Wheat production numbers here in the US, and what type of reduction might be in order for both Canadian and European wheat production.  
 

If you are not getting my free report make sure you get signed up by simply following the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 

Send My Free Report

 

       

Follow FarmDirection on Twitter

What Point Does Demand Say "Uncle?"

Jun 06, 2011

 Many in the trade starting to question just how much higher flat price and basis will be able to run as more thoughts of poor livestock and ethanol margins loom.  At what point does demand say "uncle?"  If crude oil and livestock prices continue to erode, you have to believe it is sooner rather than later.  I hate to sound like a broken record, but there is also now the question about how livestock feeders will react to significantly cheaper global feed wheat in comparison to corn.  Not only has the flat price of wheat dropped significantly in comparison, but when you factor in the strong positive basis for corn against the weak wheat basis there are some significant savings.  Another obvious item of interest this week has to be the USDA report scheduled for release this coming Thursday (June 9th) morning.  There seem to be some speculation that a reduction in acreage could be in the mix.  Some are even speculating that a yield reduction could be coming down the pipe for corn, giving the  bulls even more reason to question supplies.  I personally don't see it in the cards, and if this were to occur, I would have to believe it would be such an extremely small cut or reduction, it would carry very little weight.  Still there is that possibility, so we have to be on our toes.  The name of the game however remains the "weather." From what I have been able to gather, there was actually a little more rainfall than earlier forecasted in many parts of the Eastern and Central Midwest.  I am doubting it slowed many planters down, but there were some areas reporting up to an inch late Saturday and into Sunday.  If anything I would have to say planting was extremely brisk, but maybe just slightly less than a few of the bears were hoping for.  The folks in the Southern plains unfortunately had to deal with more extreme heat.  A situation that has become all too frequent.  It is very tough right now to get a handle on the overall condition or yield projections.  I talk to some producers who say things look fantastic, while others seem to be more concerned.  A couple of producers are reporting very uneven growth in some fields, possibly being attributed to being worked too wet.  On a side note, I am starting to hear a few traders wondering how much of last year's poor yields could have been attributed to producers scrimping on fertilizer.  The thoughts are that with the previous crop being harvested much earlier and farmers eyeballing higher prices, significant "prep" work has been done this year to help ensure producers bountiful yields.  There is thought that some major differences between this years crop and last years crop will be seen as farmers were able to apply fertilizer in great mass, and were given time to work the fields to perfection.  As you can see, there are stories and theories on both sides of the fence regarding the projected yield.  Right now, no one knows for certain where we will end up, and I think this is why the USDA will error to the side of caution and choose to do very little with the yields.  As far as this week's trade is concerned, I am inclined to think prices may ease just a touch the next few days on improved weather conditions here at home and in Europe.  I also think some of the "longs" may be looking to lighten the load or square up some positions ahead of any possible curve balls being thrown by the USDA on Thursday morning.  Once this hurdle is cleared, which I guess to be only temporary, the trade should once again start to question supply, yield, acreage, etc...and resume its upward bias.  The "outside" markets and money-flow continues to frustrate and should be watched closely.    

  
* On the global weather front, some continued rain fell across France and Germany just like we had anticipated.  Some locals are reporting extreme rain in some areas with as much as 2-3 inches being recorded.  You have to believe this weighs on wheat prices in the interim.  The trade is still however questioning if the the rains actually improved the current conditions or if the damage has already been done.  From what I have heard, it looks like things will be heating back up in the next few days, so there may actually be some additional concerns popping up down the road.  I will keep you posted if I hear of anything.
 

If you are not getting my free report make sure you get signed up by simply following the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 

Send My Free Report

 

       

Follow FarmDirection on Twitter

 
   
 

 


Why I Like Wheat

Jun 02, 2011

 Yes, there has been a lot of bearish wheat news to digest as of late, but let's not forget that the world's top exporter, the good o'l USA is in the midst of a massive drought in several key wheat growing regions, and is looking down the barrel of a million acre reduction in Spring wheat planting, and serious conditions in a large portion of our soft winter wheat crop.  Not to mention wheat acreage abandonment is running wild, and there is talk that hard red winter wheat output here in the US might fall by some several million metric tons because of poor growing conditions.  Throw in additional cuts coming in Canada, areas of Europe, and China and you can see a strong bull story is still intact.  The other issue I see unfolding is that the quick rise in domestic Russian wheat prices the past few days has the Russian Central Bank up in arms, and looking for the government to step in and take some type of action before runaway food inflation sets in.  From what I hear, they are asking that the government to quickly place some type of duty or tariff on exports so that food inflation simply doesn't take off like it has in so many other countries.  With Russian inflation already in the double digits they can hardly handle more rising prices.  It is my belief along with many others that Russia will soon be forced to take some type of action.  If they allow exports to poor out of the country their consumers may be paying dearly in the not so distant future.  Just as we have seen from other countries, when the price of food starts to become extremely expensive, the home town folk tend to get a little restless.  I highly doubt the Russian government wants to go down that road.  I will be very surprised if Russia allows exports to continue unrestricted.  Something else to consider is that wheat has once again fallen back to equal valuation to corn in the July contract.  Bottom-line I see value in wheat, particularly the higher protein KC and Minneapolis Wheat.  I also like the Chicago wheat contract as well.  I have been telling you for sometime, I wanted to get long the wheat market just before the producers started harvesting the bad areas, and right after Russia announced they would be getting back in the export business. Guess what, they are both upon our doorstep.  From where I sit, I have to jump in this market. I certainly stand a chance of coming up empty handed with the "outside" markets continuing to work against us, but I will be kicking myself all year if I don't pull the trigger now on a market I have been closely monitoring.  I simply don't think the yield is there, and I don't think the acres are going to be there either.  Watch out bears, I am sharpening both horns...  Remember, Only Buy On The Breaks!

 

If you are not getting my free report make sure you get signed up by simply following the link below.  You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.  

 

Send My Free Report

 

       

Follow FarmDirection on Twitter

 
  
 

 

 

 

Log In or Sign Up to comment

COMMENTS

Hot Links & Cool Tools

    •  
    •  
    •  
    •  
    •  
    •  

facebook twitter youtube View More>>
 
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions