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

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.

Acreage debate could stabilize prices

Sep 23, 2014

Due to early morning travel, the daily comments will be slightly abbreviated this morning.


Although wheat was unable to hold the early strength, prices were able to fight back late to close a bit higher for the day.  While that may sound like a pretty minor victory, it is something we have not been able to accomplish with much consistency recently. 

Spring wheat harvest did move forward another 12% to 86% complete but is still 6% behind the 5-year average for this date.  Winter wheat planted moved forward 13% to reach 25% complete moving a few point ahead of the average pace. 

Export inspections slipped back below the 20 million bushels mark this week coming in right in the middle of expectations at 18.6 million.  Year to date we have now loaded 303.97 million bushels meaning we need to average 17.3 million per week to reach the USDA target of 925 million. 

We are trying to maintain a little strength now in the early evening trade but nothing that is sending fear into the hearts of the bears.  If we can at least hold stable for the close, we should see prices track sideways to possibly even a bit higher through the end of the month.   


The corn market was not able to quite make it back to positive territory for the close yesterday but we did fight back to at least close towards the high end of the range.  As insignificant as that may sound, considering that the only positive news that can be found is continued discussion/debate concerning possible acreage adjustments on futures reports, which is anything but assured, and a slightly positive export inspection, it is a victory of sorts for any remaining bulls. 

For the week ending September 18th we loaded 40.1 million bushels, which was a solid 5 million above the upper end of estimates.  We are of course very early in this marketing year and have loaded 98.6 million bushels, which is just over double the quantity that loaded a year ago at this time. 

Corn dented is up to 90% but corn mature still lags the normal for this date by 12% and stands at 42%.  Harvest overall is slow in starting showing us 7% complete versus a normal 15%.  Texas was only able to gain 7% last week taking it to 67% complete but North Carolina moved ahead 12% reaching 64% complete and Tennessee gained 17% and has reached 37%. 

As I commented initially, the acreage discrepancy debate continues and I suspect will continue between now and the October crop production estimate.  I would be surprised if the USDA actually made any adjustments on that report but the uncertainty could be enough to keep prices in a state of limbo between now and then.  


The heaviest selling was reserved for the bean market on Monday as prices gapped lower and were never able to recover.  With what appears to be a near perfect weather outlook to kick harvest into gear, buyers would appear to have little reason to become anxious. 

Beans dropping leaves has reached 45%, still lagging the average for this date of 53% but with above average temperature in the forecast, we should see this number move up quickly.  This is the first week that the USDA reports nationwide harvest and as of the 21st we have 3% complete, which is 5% behind the normal for this date. 

One of the positive effects of harvest getting underway is that product is finally available once again and this was reflected in the export inspections.  We loaded 17.2 million bushels, nearly double the previous week and over 3 times greater than the 10-week average. 

Prices have been able to sustain a little rebound strength through the evening hours but this may be little more than a Tuesday undo bounce.  There is less of a discrepancy in the bean acreage number than in corn but there is one nevertheless which could keep the bares at bay for now.

Beans, beans everywhere

Sep 22, 2014



The wheat market stands out as the lone wolf here this morning as it is the only grain or soy market that is not under pressure.  Chicago, KC and Minneapolis are all showing slight gains for the overnight trade.  While a couple cent bounce may not amount to much in the overall scheme of things, we realistically have harvest behind us and it is difficult to continue pressing a market on supply once it is known.

While psychologically the corn and bean harvest should act like an anchor pulling against the wheat market, its biggest obstacle remains the world competition.  We are finally competitive with Russian wheat but EU/French wheat remains at a solid discount so unless we have some type of distinct freight advantage this keeps us out of the trade picture.   All that said, Egypt did purchase 55k MT of US wheat for late October.  Over the weekend Russia reported that for the marketing year, which began July 1st, they have exported 26% more grain that the previous year or which 87% is wheat.

Not that it is a big market influence, on their release on Friday Informa projected that the 2015 US wheat acreage would potentially increase 509,000 acres above current USDA numbers.  This would equate to 57.009 million acres and would be the highest total acreage since 2008 if correct.

As they old saying goes, the journey of a thousand miles begins with one step and for wheat we should be close to at least begin taking steps on level ground.


With clear skies ahead the trade is expecting the corn harvest to kick into a higher gear and we have begun the week with a dip into lower lows.  The trade is expecting the report this afternoon to show harvest to date in the 12% to 15% complete range.  Recognizing that is really a small percentage and remain behind normal, yield reports have continued to be outstanding. 

As expected, it has not produced any market reaction but the Informa acreage estimates on Friday were interesting.  They currently project we will plant 4.325 million acres less corn that the existing USDA estimate for 2014 with a total of 87.275 million.  If correct, this would be the lowest planted acreage since 2008.  They also adjusted down their assessment for the 2014 crop reflecting the recent FSA number estimating a planted number of 89.309 million compared with the USDA figure of 91.6 million.  As I commented in the weekly newsletter, we need to keep in the back our minds the potential for acreage adjustments for 2014, particularly post harvest if the USDA/NASS have not made any changes prior to that.  Yield is the name of the game right now and there are some even projecting a figure north of 180 but IF there were eventually an acreage cut, it could be that ending stocks will not climb significantly above current projections. 

I continue to believe that December corn has potential to head down and revisit the 2009 cycle lows that sit right at the 3.00 mark and the way we have begun this week, that could happen by early October.  While there is nothing etched in stone just yet, we have not seen a corn ending stocks figure north of 2 billion since the 2004/05 crop year but when viewed as a stock to usage ratio, supplies are nowhere near as burdensome as that period and actually line up about the same as 2009/2010, the last time we traded prices into this range.  


Beans have taken the harshest hit of any this morning with November below 9.50 for the first time since July 9th 2010.  Back at that time, we developed a base roughly between 9.50 and 8.90 that we traded within for around three months.  With a clear forecast for the week ahead and consistently solid early yield reports, it would appear the bean market has little to provide support. The trade is looking for harvest progress to stand between 2 and 5% complete.

As with the corn, there were several interesting notes from the Informa acreage estimate and it provides us with a base for discussion moving ahead.  First and foremost, they are calling for planted acreage in 2015 to reach 87.652 million acres.  If correct, this would be the first time ever in this country that we would plant more beans than corn.  I remember 20 years or so ago there was discussion that North America was going to evolve in to the corn hemisphere while South America would produce all the beans.  Granted, South America has certainly stepped up the production but evidently North American producers did not get the memo.  Hence the danger of making long-term projections.   Depending on what number you use for this year, either the current USDA estimate of 84.8 million or Informa’s adjusted 83.66, this would mean bean acreage in the United States could climb either 2.85 or 3.99 million next year.  In either case, the change is huge.

Adding to the potential bearishness of the potential US beans acreage are the recent numbers from Brazil.  The early beans are already going into the ground and Conab currently estimates that total acreage will be up 5% this year with a potential to produce a total crop of 95 MMT.  This compares with 86.7 MMT produced this last year.  Of course we all know that planting a crop does not assure great production but if the US sticks in an additional 3% on top of record acreage and Brazil pushes acreage up 5%, we have quite a buffer against weather issues. 

The slide would appear to be well greased at this point and with the majority of the harvest ahead of us, it would appear that bears are well in control of the bean market for now. 


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. 

Log In or Sign Up to comment


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|Site Map|Privacy Policy|Terms & Conditions