Apr 23, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


January 2013 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.

Trade Continues To Focus On South American Weather

Jan 30, 2013

     

South American weather continues to be the main song and dance. If the rain misses Argentina this weekend the trade will look to add additional risk premium on fears that both corn and soybean production estimates will almost certainly move lower in the upcoming USDA report. I have actually heard a couple of private sources now saying "IF" the rains in Argentina remain limited, the corn crop could drop to 22-23MMT's. Keep in mind the USDA is currently estimating 28MMT's. The trade is obviously living and breathing off of every new South American weather run. This weekends rain event is being billed a MUST. All I can say is try not to get yourself chewed up in the choppy back and forth market action as the trade tries to appropriately price weather risk. More rain in the South American forecast (especially in Argentina) equals lower prices; Rain taken out of the forecast, coverage reduced or rain pushed back, prices will move higher on additional risk premium being added. Producers should be smart and take advantage of the rallies. 
 
Corn traders continue to talk about very limited "action" as of late. Paper is basically short all the "short dated" options, such as May and July based on the DEC13 price. This means they are basically hoping futures prices do next to nothing. Most in the trade seem to be thinking "demand" might be strong enough to support our current price levels, but simply NOT strong enough to support any type of major rally to the upside. I am hoping they are wrong.  From a trade perspective, and based on the low "vol" in the front-end, I am thinking the algo players might start to trade the CSO (corn spread options), buying the JUL13 and selling the DEC13 trying to catch a pop. Not sure when it happens, but I feel "demand" could be tightening a bit and an unforeseen short-term rip to the upside could happen in 30-60 days out. I say 30-60 days out because I still believe we need to get past the USDA Outlook in late Feb and past the fund roll that starts next Thursday. I also believe the ethanol industry is still in the midst of a shake down with more plants closing because of high corn prices and the fact they simply can not source any corn. Keep in mind, just yesterday White Energy's 120 million gallon plant in Plainview Texas halted production. The list of shutdowns continues to grow. In the past few weeks we have White Energy closing plants in Texas, Valero closing three plants, Poet closing plants in Missouri, Abengoa closing plants in Nebraska. I still believe exports are going to pick back up, and ethanol is going to find more stable ground, the question is when??? It is hard for me to imagine "demand" picking up with prices moving higher. That is why I believe any Producers who are still sitting up in the tree-stand waiting on a trophy buck ($8.00 or higher corn), might want to pull the trigger sooner rather than later on old crop corn. My thoughts are the closer we get to new-crop supplies coming online, the quicker your basis is going to erode, and in return your net price could ultimately suffer. Bottom-line, your next explosive old-crop move higher has to be taken advantage of. 
 

For the rest of the story including more insight into what traders believe are influencing market prices currently, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report

New-Crop vs. Old-Crop Corn

Jan 22, 2013

 

"New-Crop vs. Old-Crop" continues to be the fight most in the industry are talking about and trying to handicap. As we left last week Informa threw out their latest acreage estimates for the 2013/2014 new-crop. Below are their new estimates vs. what we actually planted last year: 
 
  • Corn acreage estimated at 99.30 million acres vs. the 97.2 million corn acres we planted in 2012. Basically bumping their previous estimate higher by almost +300,000 acres. Actually lowered their yield to 160.5 bushels per acre and are now expecting a total crop of 14.757 billion bushels. 
  • Soybean acreage now at 78.77 million acres vs. the 77.2 million soy acres we planted in 2012. Basically lowering their previous estimate by -185,000 acres. But still 1.3 million acres above the previous US record set back in 2009.  
  • Wheat acreage now at 41.82 million acres vs. the 41.3 million wheat acres we planted in 2012. Basically lowering their previous estimate by -378,000 acres, and now back inline with the current USDA estimate.     
 
Corn continues to dance to the same song... Exports struggling against South American competition. Talk inside trade is that Brazilian vessel lineup to load corn  has grown even larger: Several sources now talk about lineups reaching 3.5 million metric tons vs. 2.9 million last week and just 271,000 metric tons last year. Traders also more concerned with rumors that the Argentine government will be issuing another 3 million tons of export licenses next month for 2012/13 corn. To say South American exporters are killing traditional US demand is an understatement. To make matters a little worse I am now hearing that producers in Southern Brazil are harvesting full-season corn at slightly better than expected yields (more supplies coming online in South America, just what we need). New-crop Ukraine corn is also starting to trade into Europe. Lets keep in mind US ethanol demand is also in question, with many in the trade speculating on even more plant closures in the weeks ahead as margins continue to struggle. How long can plants continue to operate in the red is the question? 
 
As for now it seems that "Managed Money" and "Index" players have seen enough liquidation and have taken on more of a "buy-the-break" type mentality. This along "weather" uncertainties should continue to provide near-term support in the grain and soy markets. The problem is we will be needing more bullish news each day to keep the rally moving higher, and I am just not sure we can keep a steady dose. Therefore if you are wanting to re-own previous sales or get long, be patient and do NOT chase the market. I continue to remain "neutral" flat price, believing the markets will remain in "limbo" or in some type of trading range, as fear of increasing new-crop supplies are being kept in check by more reports of extreme weather uncertainties.    
 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report

Is Weather Back In Control???

Jan 17, 2013

 

Weather uncertainties seem to be pumping a more "risk premium" into the market place then we have seen the past few months. One of the biggest concerns is that the high pressure ridge and heat in Argentina might hit their corn crop at just the WRONG time. Insiders are reporting that a large chunk of the Argentine crop is starting to tassel and up to 50% could be pollinating within the next few weeks. You have to believe "IF" the extreme heat sticks around through the critical growing stage, it could end up being a lethal combination. However, from what I am hearing from the weather gurus, the heat is supposed to break and rain should follow, but how many times have we heard that forecast the past couple of years? I hate to say this, but if the heat breaks and rain comes in South America I suspect some of the recent weather premium will be immediately taken back out of the market.    
 
USDA export sales data this morning showed MASSIVE soybean sales, better than expected wheat sales and corn sale towards the upper end of estimates. WOW!!!
 
  • Corn sales reported at 393,300. The trade was looking for a number between 250,000 and 450,000. Last week 24,200 were reported.
  • Soybeans sales reported at 1.79 million. The trade was looking for a number between 550,000 and 750,000. Last week 406,800 were reported.
  • Wheat sales reported at 574,700. The trade was looking for a number between 250,000 and 450,000. Last week 233,700 were reported. 
 
It's all about "weather" and "demand" right now. Any unforeseen or bullish combination of the two will push us higher, any bearish combination will cause the trade to quickly deflate premiums. Keep your eye on Asian demand and South American weather. I suspect with some outside market tailwinds, the better than expected export demand numbers released this morning,  all we are going to need is the rain in Argentina pushed back further in the forecast and we will have our recipe  for another bullish close. Producers should remain patient, while specs should stick with current bull-spreads.
 
Soybean traders continue to monitor "Chinese demand." Many insiders are reporting surging Chinese meal consumption as farmers try and more rapidly fatten hogs before their New Year festival in February. Bulls are also reminding the trade that Chinese crush margins are almost the best they have been in over a year. The word on the street is that crushers can now lock in profits in excess of $30 on every ton of soybeans they process during the next 30-60 days. The Chinese "cancelations" spooked the trade a couple of weeks ago, but now all of a sudden the trade is more fearful that the Chinese are going to make a late push to secure more US soybeans on rising livestock demand, tight domestic and international supplies, and logistical concerns associated with sourcing all of their soybeans from South America. Keep in mind China just imported 5.89 million tons of soybeans in December, the most in almost three years. As exporters have indicated, they normally see China grabbing between 10 to 20 cargoes of beans each week, but as of late that number has been  pushing up closer to 30 cargoes a week. Certainly something worth noting and certainly something that needs to be monitored closely as we move forward. 
 

For the rest of the story including more insight into what traders believe are influencing market prices currently, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report

 

What Producers Need-to-Know Before the Big Report

Jan 11, 2013

 

As we move one day closer to the big report, I am going to toss my hat in the ring and throw out a few thoughts: First off my "wild-card" guess is that the "old crop" corn supplies are tighter than the trade is thinking on increasing "feed" demand. I really doubt the USDA will do much with the export numbers or the the ethanol numbers despite the trade clamoring for a reduction to the estimates. My hunch is they will simply wait a little longer to see how it all plays out once South America shuts down their corn exports. Globally, I doubt we see much of a change to the corn balance sheet, as any reduction in Argentina will more than likely be offset by gains in Brazil. 
 
I suspect soybeans will also gain a little bullish "old crop" momentum with the USDA more than likely bumping overall domestic crush higher. Not only do I think more meal is being used, but considering the recent approval of the Biodiesel tax there will certainly be some additional demand added to the oil side of the equation. One could certainly argue that the USDA needs to raise exports as well, but with China canceling cargoes and Brazil getting ready to come online I suspect the USDA will wait to see if US exports can gain any attention at all in the months ahead. My gut tells me stronger demand than  anticipated will trump a bump in the USDA production estimates. 
 
Wheat seems to be a little tougher nut to crack. On one hand you have increasing acreage concerns, not only here at home but also in other areas of the world. On the flip side you have production concerns in Argentina (where the USDA will more than likely reduce their current estimate), and production concerns coming up here in the US, where the winter wheat crop may experience massive "abandonment." Demand wise exports continue to struggle and we continue to hold out hope for more demand moving forward, but there are simply no guarantees. Lets also keep in mind global wheat feeding has been nothing to write home about. In a nutshell, I guess I have no real clear cut opinion about how the trade will interpret the wheat numbers. I suspect wheat to be fairly "neutral," and therefore, at least temporarily follow the direction of corn, especially if there are no glaring changes in the USDA forecast.
 
Playing the Report: So what does all of this mean? As a producer, regardless if you are bullish or bearish, I personally believe you need to have 20-40% of your "new crop" corn and soybean risk already taken off the table at prices above $6.00 vs the SEP13 contract. If the report is wildly bullish you should be looking to hedge more of your production estimates or pulling the trigger on more cash sales. Even though the balance sheet is currently tight the trade will eventually start to look at new crop balance sheets which will ultimately put more downward pressure on new crop prices. If the report is bearish then you patiently wait for brighter days to make more sales. Wheat producers should already have 50-60% of their new crop production estimate priced or hedged so no major issue either direction. A wildly bullish report, and we will start to look for areas to make a few more wheat sales. A bearish outcome might actually prompt me to lift a portion of our hedges thinking we have some potential for bounce to the upside (depending on how the numbers look).
 

For the rest of the story including more insight into what traders believe are influencing market prices currently, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

 

"Cash Players vs. Paper Players"

Jan 10, 2013

  

I have had a lot of calls as of late from producers who are telling me they are apprehensive to make any new crop sales. Basically because the elevators are saying they are having a hard time finding any available bushels, and everyone is talking to someone who has a cousin or uncle  saying their current soil moisture levels are absolute the worst they have ever seen. That is what I call the "cash" side of the argument. Tight supplies, strong cash basis, and dry conditions out your back door. Understandably a bullish argument. 
 
On what I call the "paper" side of the equation, the funds, indexes, swaps, etc., they seem to be looking at an entirely different picture. They are looking out past the upcoming USDA report, and recognizing that the next major focal point in the trade will be the USDA Outlook at the end of February. Since the USDA traditionally uses trend-line type yields. It wouldn't surprise them to see something like a 160-163bpa corn yield and a 42-44bpa type soybean yield. If the USDA makes similar estimates to other analysts who are predicting the US could plant close to 100 million corn acres and close to 80 million soybean acres next year, then we could be starting off the season with huge supply side numbers in the balance sheets. Some analysts are already throwing around numbers like a 15 billion bushel corn crop and a 3.0 billion plus carry. There is also talk starting to circulate of a soybean carry in excess of 500 million. 
 
What you have to understand is that the "paper side" of the trade is deeply concerned that without another major weather complication supply could quickly overwhelm demand. Just take a look at a couple of simple corn numbers. Start with domestic ethanol demand. For the past several years we have been increasing our domestic demand for corn by 500,000,000 bushels or more each year because of surging ethanol demand. Sorry, no longer the case. Many actually believe ethanol demand has peaked, therefore we will no longer be able to pencil in and an additional 500 million bushels in demand each year. In fact as you can see from the numbers below we are now forced to reduce overall demand. 
 
Annual Corn Bushels Used for Ethanol Production  
 
 
2006 = 1.575 billion bushels 
2007 = 2.15 billion bushels 
2008 = 3.2 billion bushels 
2009 = 3.6 billion bushels 
2010 = 4.2 billion bushels 
2011 = 4.9 billion bushels
2012 = 5.0 billion bushels
2013 = 4.5 billion bushels (current USDA estimate). 
 
As you can see we had been comfortably adding close to 500 million plus bushels per year to our total corn demand equation. Now all of a sudden demand for ethanol has leveled-off and we are in fact actually reducing our corn used for ethanol by 500 million bushels. 
 
Corn exports are not exactly setting any new records either. In fact they are no longer increasing like they once were. Instead traditional US buyers are now sourcing grain and soy from other sources. Below are the recent corn export numbers: 
 
Annual US Corn Export Demand  
 
 
2007 = 2.25 billion bushels 
2008 = 2.45 billion bushels  
2009 = 1.75 billion bushels 
2010 = 2.050 billion bushels 
2011 = 1.950 billion bushels  
2012 = 1.650 billion bushels 
2013 = 1.15 billion bushels (Current USDA estimate, maybe even lower). 
 
To put into real simple terms, the "paper" side of the market, who controls the lions share of money-flow, believes if the "supply" side of the equation moves aggressively higher on record acreage, and the "demand" side of the equation doesn't grow as quickly (or perhaps even shrinks), then we are simply going to end up with more available bushels and cheaper prices. Understandably a very-bearish argument.
 
Call it the "Hatfields vs. the McCoys," the "Have's vs. the Have Not's," or the "Producer's vs the Trader's." Whatever you want to call it, it doesn't matter, but you need to understand it. Who is going to be right and who is going to be wrong...I couldn't tell you! From where I sit the "smart" money looks to be betting on the downside break. Let's just keep in mind however the "smart" money was betting on the same break last year, and the Producers who didn't flinch or sell on the winter/spring break walked away the big winners. This is essentially the same type of setup we are looking at this year. The managed money could pressure the trade well into and through the "Feb USDA Outlook" on thoughts of massively increasing supplies. The question is will adverse "weather" once again bail us out. Remember the MAR13 contract traded down to $5.11 per bushel on May 11th of last year before finally being saved and running to new all-time contract highs at $8.45 on August 10th. The question is if we wouldn't have logged the hottest year in US history, where would prices have ended up? and will that be what happens this year?
 

For the rest of the story including more insight into what traders believe are influencing market prices currently, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report

 

2013 FARM OUTLOOK SEMINAR: I just wanted to let everyone know seats are filling up fast for our "2013 Farm Outlook Seminar." If you haven't been in the past, this is one event you don't want to miss. I cater in some of the best food in KC, we have an "OPEN" bar all day long, and you get the opportunity to rub elbows and network with some of the best and brightest in the industry.  

We have some fantastic guest speakers on board for the event this year. I should also mention the "PBR" is in town, as well as the "Western Farm Show," and the "Championship Tractor Pull Tour"... Lots of things to do in KC!!!

IF you haven't reserved your seat yet be sure and call the office at 816-322-5300 or follow the link for more info and online payment options: >>> 2013 Farm Outlook

*We also have a couple of "Sponsorship" opportunities still available if anyone is interested. This a great way to get your business in front of producers from all over the country. We already have guest coming from over 25 states and 4 countries.

What Producers Need to Know About Corn Ahead of Friday

Jan 09, 2013

  

USDA will warrant most ALL attention this week as we approach Friday's much anticipated report. Below are a few of the highlights, my thoughts, and the early estimates floating around in the marketplace: Because of the importance and historical volatility of this report, I will continue to run these estimates and numbers the remainder of the week in the report. 

 

  • Harvested Corn Acres: We all know this is one of the main numbers in question. How many acres were cut for silage and how many were simply abandoned before harvest in last years drought? We heard countless stories of producers abandoning fields and cutting crops early for silage but yet we have seen no real significant reduction by the USDA, who continues to keep their harvested acreage estimate at close to 90% of that planted. As I am sure you have heard, in the drought years of the 80s the harvested acreage numbers were closer to 85% of those planted. With the USDA currently estimating 96.9 million planted acres in 2012, an 85% "harvested" rate would equal 82.365 million acres. With advancements in technology, I don't see how we fall to those levels, but I do believe the USDA could cut another 1.5 to 2.5 million acres from their current harvested acreage estimate of 87.721 million. However to really excite the bulls I think you are going to need to see the USDA cut harvested acres by 3 million or more. Essentially meaning, if you are a bull, then you will need the corn "harvested acreage" estimate to be south of 84.7 million acres. 
  • Corn Yield: I think it is safe to say if the "harvested acres" are cut significantly, then the USDA will in turn RAISE their national average yield estimate from the current 122.3 bushel per acre. Think about it like this, if the producer could have harvested the field with an average yield of 5-10 bushels per acre, but opted for silage or abandonment, then the harvested acreage number must be reduced, but the average yield will move higher because the low total from this field were taken out of the equation. Certainly the best of all worlds for the bulls would be to see a massive reduction in harvested acreage along with a reduction in the overall yield. Sorry, I just don't see how this is possible. My guess is that there is very little shift or change in total yield but if there is it will be to the upside, offsetting any total production losses associated with the reduction in harvested acreage.
  • Total Corn Production: As I mentioned above, I believe there will be a sliding scale meaning if "harvested acres" are moved lower, the "yield" will move higher producing very little divergence from the current USDA "total production" estimate of 10.725 billion bushels. To help the bulls you will need to see a number south of 10.5 billion, where as the bears will be looking for a number above 10.8 billion bushels. 

 

Thanks for reading!  Remember, this is just a portion of my comments leading up to the January Report.  If you would like more of my thoughts on Dec 1 corn stocks or ending stocks as well as more detail on US soybean and wheat production and South American production, click here to sign-up for my FREE-TRIAL.  I will be doing extensive covereage of the report leading up to it as well as breaking it down in the days after.  It is a critical report and will set up market conditions as we move forward into 2013.  Don't miss it! 

So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report

 

 

Will the Bulls Take Control After the January Report?

Jan 03, 2013

 

USDA is scheduled to release its Quarterly Grain Stocks Report and its highly anticipated Annual Crop Summary for 2012 on January 11th. The January Report is the next focal point for grain and soy traders. I am a little apprehensive getting overly excited or overly bullish about this report, even though many bull's have been trying to build more length heading into the numbers. All I can say if just be careful if your waiting around on the USDA to help your bullish bets. Below are a few thoughts regarding the report: 
 
  • Even though total US harvested corn acres will more than likely be taken lower, will it really do that much to change "total production?" Currently the USDA is estimating 87.721 million acres will be harvested with a yield of 122.3 bushels per acre, for 10.725 billion bushels in total US corn production. Lets assume the USDA cuts harvested acres to 86.0 million and in turn is forced to bump yields higher to 125bpa. This scenario would actually give us an increase in total production to 10.75 billion bushels. What I am trying to say is be careful thinking just because "harvested acreage" is going to move lower that "total production" is going to follow. The more acres they cut from the harvested category, the higher the yield will likely push. 
  • Same type of scenario for soybeans. Yes, we could see a slight reduction in harvested acres, but hunch is the yield number jumps from 39.3 bushels per acre up more between 39.8 and 40.1 bushels per acre. Meaning total soybean production could push higher. I suspect however that total demand will more than offset any gains in total production. 
  • Wheat acres could move higher in my opinion. I know many areas were reporting very poor conditions during planting, but with such lofty insurance levels I believe farmers where eager to get the crop in the ground. The current USDA all winter wheat acres estimate could jump higher from 41.324 million acres. This could initially be interpreted as bearish, but ultimately I believe we are going to see a higher abandonment rate.
 

 

"The Van Trump Report" had some fantastic stories today, along with several specific cash sale recommendations.  If you have not yet gotten signed up for your FREE-Trial, please call 816-322-5300 today.  If you would prefer to sign up online simple click on the link below. 


If I can ever be of any assistance to you and or your operation please don't hesitate to call.  I hope I have proven myself and my ability to provide you with info and commentary that  can help you make better marketing decisions.


Click Here To Subscribe  


Thanks again for reading my comments!


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