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June 2012 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.

Corn Yields and Ethanol Demand

Jun 26, 2012

   

Corn Yields: As most of us know the trade had already been discounting the USDA's yield of 166 bushel per acre and in fact most in the trade seemed to be trading a number closer to 160 bushels per acre. Now all of a sudden, it feels as if we are trading a number closer to 155 bushels per acre. I am telling you now, if the heat continues to surge in the eastern corn belt and the rainfall is limited, a sub-155 corn yield will be an afterthought. Many analyst are now in fact throwing around sub-150 type corn yields. I know this sounds extreme but a 149 type yield number can not be ruled entirely out of the equation. If you start to cut close to 1.0 billion bushels from the corn balance sheet, there are certainly going to be some fireworks to the upside.
 
July corn continues to struggle in comparison to the Dec contract as more end-users bank their hopes on "new crop" supplies arriving sooner than deliver of "old crop" corn. From what I heard yesterday, there was actually 88-day corn already harvested and in the truck coming out of a few fields in Arkansas. I am not sure about the specific yields or quality, but the word on the street is it was fairly good. You also need to keep in mind, Brazilian corn is believed to be trading some $35-$40 per ton below US supplies, therefore US exports may continue to struggle for the next few weeks. With "first-notice-day" this Friday in the July contract, being long "old-crop" over "new-crop" may end up being a loosing battle.
 
Ethanol demand seems to be a subject the corn bulls are trying to avoid. Yes, I am a "bull," but I also understand the importance of ethanol demand, which is now estimated to be over 5.0 billion bushels per year. Unlike corn being used for feed, where demand simply can't just go away...because the livestock have to eat, corn being used of ethanol can end with the simple flick of a switch.  My point is if crude oil and corn prices continue to move in opposite directions many ethanol plants will have no choice but to shut off the lights (at least temporarily). Considering we have been chewing threw about 95 million bushels (plus) of corn per week for ethanol usage dramatic slowdowns in production could go a long ways towards offsetting problems and setbacks associated with the corn yield. As I have mentioned time and time again I need to see all of the stars aligned to give my highest bullish rating, right now we do NOT have the ethanol stars aligned, nor do we have the "macro" market stars aligned, therefore I can not be wildly bullish the corn market. Conservatively bullish based on extreme weather conditions and possible production setbacks, yes! Wildly-bullish...No, not at this juncture.     
 
Wisdom of the ages would tell me to be smart up here and take advantage of this rally, especially if I were behind on my cash sales. The "outside" markets have been getting hit hard and they are nothing like they were the past couple of years when we enjoyed longer-term trending higher prices. My point is this trade is going to move...
 

We are making some moves in response to what the market is showing us. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  


Could the Wheat Market End Up Being the Sleeper?

Jun 20, 2012

All of the talk of late is centered around soybeans and corn, but there is starting to be a little buzz stirring about the wheat market. Not only have we seen the USDA recently reduce crop production estimates here at home but also in key producing areas of Europe and Russia. There is some talk that Russian estimates are still way too high and could be reduced significantly in the weeks ahead. Keep in mind, several areas in Russia, Ukraine and Kazakhstan are all seeing temps between 95 and 105 degrees! These smoking hot conditions could invoke even greater damage. I should also mention that Australia is in the process of slashing its wheat production estimates by 5%-10%.

What could end up being the biggest kicker is the fact the Chinese are reducing their production estimates as well. As I mention time and time again, just how bad does the situation have to be for China to start cutting its estimates? As of right now, the Chinese have lowered this estimate by about 2%, but the rumors are it could more realistically be around 5%.

What you may not realize is that while there are extremely dry conditions in many parts of China, the cuts are being made primarily because of widespread damage associated with a fungus disease in the crop. The winter wheat crop now being harvested in China makes up about 95% of its total wheat production, so this harvest is critically important considering China is the world's largest wheat consumer. The rumor is, large producing areas in the southern part of China have been hit by major pest and disease problems, causing both quality and output to suffer.

We have already seen China step in as a buyer of SRW, but if disease is truly an issue, we may soon start to see some additional buying of higher protein wheats as well. There is no doubt Chinese wheat imports could easily double this year. In fact, there is speculation that China could import up to 5 million tons of wheat this season. No one is really certain how much wheat the Chinese have left on hand; many analysts believe it is around 30 million tons. Which, if true, could keep them from being massive buyers unless the prices really fall back.

With production in the global markets easing as of late, the world may soon start to look to the U.S. as a source for supplies. The problem is many producers here at home may have recently opted to stick a majority of the wheat in storage after harvest, then wait for higher prices. If the grain stays in storage, it will obviously take some additional coaxing to bring it back out. My hunch is, wheat prices will then have to move higher to get the grain out of storage. If you're a producer, continue to be patient, as higher prices might be just around the corner. As for specs, I continue to like bull spreading the CBOT "DEC vs MAR."

We are making some moves in response to what the market is showing us. You can sign up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  

 

Will Large Planted Acres Translate Into Record Yields???

Jun 18, 2012

    

The debate continues to press on and I continue to argue that the current 166 corn yield estimate by the USDA is overstated. I have two main arguments. First and foremost is the number of acres planted. Remember in 2009 and 2004, our two crops with a 160 plus yield, we had a lot fewer corn acres in the ground. My guess is the additional acres being planted, or should I say the most ever planted in the past 75 years, will not be going on the most optimal corn ground. If the ground was conducive for extremely high yielding corn I would have thought the near $8.00 per bushel price tag back in 2008 would have prompted the acres to be planted at that time. The other obvious issue is the extremely warm and dry conditions we have been experiencing here in the US the past several months. You have to believe if the trend continues we may be looking at one of our warmest summers as well. There has been some data circulating throughout the trade the past couple of days that backs up this thought. Do you realize we have only once followed up a warm winter with a record corn crop. That happened in 1992 and many analyst attribute the phenomena to the abnormally cool summer, thought to be caused by the Eruption of Mount Pinatubo. Not one of the other ten-warmest winters ever produced a record corn yield the following season. The point is the USDA is forecasting something that generally doesn't happen. I wish I could personally give you more accurate estimates in regards to the crop, but unfortunately I can not. My guess is the USDA number is too high, so then what is the best number to use? Is it the lower 164bpa trend line yield or is that still too high considering the current conditions. Right now I am thinking a US corn yield number between 158 and 162 bushel per acre is a fair assessment if you take into account all of the current variables. My reason for not pushing the number lower is because we have been experiencing some fairly cool nighttime temps, put more limited stress on the crop. If the nighttime temps start to heat up, I will be inclined to further drop my estimates. In the USDA's defense they do admit to a large variable or variation being possible in their early estimates. I have heard many in the trade say the early numbers can have a 14 bushel variance in either direction. Because of the large discrepancy I have heard many trader actually argue for the USDA to use a range type estimate early on in the year, then start narrowing the range down as they start to get more puzzle pieces in place and see a much clearer picture. I don't think any one would have argued if the USDA would have said early on they believe the US corn crop could yield between 155 and 170 bushels per acre. From there start to move the scale and narrow down the range accordingly.
 
We are making some moves in response to what the market is showing us. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  

Where Is All the Corn?

Jun 15, 2012

    

Where is all of the Corn? I have talked with several sources the past few days, each with years and years of experience in the industry ALL saying the same thing, "We have never seen it this tough to originate corn...I am telling you now the bushels are just not here!" Not only are the US bushels not here, but this could be one of the first times in years we see both India and China with production problems.  Certainly "global demand" is presenting some concern on this side of the equation as Argentine and Brazilian corn looks much more attractive from a price standpoint (I am hearing US export corn still overvalued: US Gulf FOB=$270/MT; Arg=$240/MT, Brazil=$235MT), lets also not forget Ukraine corn. There is also some fear that the Brazilian corn crop could be getting bigger on record "second crop" production. From what I heard last night Brazil's Agroconsult estimated their second crop corn at a record 38.8 million metric tons, if this proves to be correct, then Brazil's total corn crop could push upwards to 73.8 million metric tons, keep in mind the USDA is currently at 69 million. The bigger question though in my opinion is what happens if China ends up with some type of production failure? I promise you now the balance sheets will quickly start to change.  Keep in mind only about 50% of the Northern Chinese Plains are irrigated, this is the area being closely monitored and experiencing abnormally hot and dry conditions (temps in the 100's the past few days). You have to imagine even a small setback could push Chinese corn imports north of 10 million metric tons. A jump in Chinese imports and a US yield down around 155 bushels per acre makes this dance quickly change directions.   
 
Soybean fundamentals continue to build a more bullish argument, even though recent  price action would have you believing otherwise. Yesterday's NOPA crush numbers would force one to believe old crop ending stocks could be down closer to 120 or 130 million bushels vs the USDA's current estimate of 175 million, while new crop ending stocks could be down well under 100 million bushels as compared to 145 million in the the most recent USDA estimate. The fundamentals are telling us that we may soon NOT be able to keep up with domestic crush demand. This could even further intensify if recent rumors I am hearing about some cattle operations starting to make the switch from DDGS to soymeal plays out.  If ethanol plants are forced to close because they simply can not source the corn or margins force them to temporarily shut down, end-users may soon be looking back to soymeal as a more viable option.... Then what? I am also hearing the Chinese still need to import a couple million tons of beans. With the Brazilian bean basis soaring (rumors of Brazil's FOB vessel bids were reportedly trading and rebid at +100 over July) and the "real" showing some improved strength the US could certainly see some increased soybean export activity in the weeks ahead. Just look at yesterday's export sales numbers that were much better than anticipated. The problem right now however is "money-flow."  Prices continue to setback because we are NOT seeing any major players wanting to extend or add additional risk on the rallies.  With so many large "Macro" concerns looming over the trade in the next several days I am doubtful large money-mangers want to extend exposure into these waters. 
 
Greece will be the center of attention this weekend as Sunday's election could prove to be the straw that breaks the Camel's back in Europe. Be careful getting long the stock market even if the Greek elections end up triggering a rally, I am just not sure anything really changes. In my opinion the Europe Union is still on a path to destruction. The more prudent play maybe to simply wait for the rally to spook more nervous "shorts" out of their current positions then be a seller NOT a buyer. Following the elections most eyes will shift towards the Iranian negotiations, then to comments Wednesday from Fed Chairman Bernanke following the two day June Federal Reserve meeting. My guess is we will see the Fed extend "Operation Twist" and move one step closer to a new round of "quantitative easing." If Europe melts-down following the elections this weekend, I would suppose we will see the Fed do a little more. Personally though I am thinking they want to keep as much "powder" dry as they can, electing to use it later on down the road if and when we hit a more major US stock market set-back. Right now fuel prices are back under control which could spark some additional consumer spending and the US stock market is still trading higher on the year. Little or no help from the Fed could bring on some temporary disappointment, so be prepared for another rocky week. 
 

We are making some moves in response to Tuesday's USDA report. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of the "Weather" trade, "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  


A Look at the "Weather" Trade

Jun 13, 2012

    

Weather will obviously be the key focus for the trade here at home during the next few weeks now that the June USDA report is behind us. We still have the highly anticipated USDA Planted acreage numbers and Quarterly Grain Stocks coming out on Friday June 29th, followed by the July USDA Crop Production report on Wednesday July 11th, but between now and then it is ALL about "weather." The question is will temps run on the cool side with additional moisture coming our way or will we continue the hot and dry pattern seen the past several months? A lot will depend on if and when an El Nino weather pattern starts to develop in the US. As of right now, the "Southern Oscillation Index" for the 30 days ending June 10th was reported by Australia’s Bureau of Meteorology right around -7.8 vs -2.7 in May. That’s currently neutral for an El Nino, but it is certainly approaching the -8.0 area. A sustained SOI value below -8.0 is often associated with El Nino while a number above +8.0 is associated with a La Nina pattern. The U.S. Climate Prediction Center said on June 7th that there is a 50% chance the El Nino weather pattern may strike later this year. The chief of India's state-run weather office has said El Nino conditions are likely to emerge over the Pacific Ocean by mid-August. The Japan Meteorological Agency is saying it is highly likely that "normal" weather patterns would prevail in Asia through November this year and doubt an El Nino type pattern will show up any time earlier. Keep in mind, the last El Nino was recorded in 2009/10, though it was classified as weak to moderate. My point is yes, an El Nino weather pattern may certainly form, but I am afraid it may be a little late showing up for the party. 
 
To summarize, I would have to say it will be all up to the weather from here. If we assume the USDA is going to leave the 2012/13 demand numbers intact then a corn yield of around 154 to 155 bushels per acre would keep ending stocks at their current levels.  With this in mind, I would have to imagine any type of yield sub-155 would be extremely bullish, any type of yield north of 160 extremely bearish and a yield in between somewhat neutral. The "wild card" in the above scenario is obviously Chinese demand.  Will the Chinese import the 7 million the USDA is currently estimating or could that number potentially double. Remember, I am NOT wildly bullish as of yet. I just believe the current 166 yield is too high. Will we fall below 155? It's simply too early to tell. Keep in mind I also respect the fact the funds may be apprehensive to add ANY additional risk ahead of this weekends Greek elections, next weeks negotiations with Iran and the upcoming US Fed meeting. Remember, if the money doesn't flow into the marketplace prices will NOT be going higher. Below is a recent visual of soil moisture deficits around the country, as you can see it certainly doesn't look conducive to what we would traditionally find in a record producing year.  The makings are here for higher prices, but we are gong to need some help form the outside markets. Any type of mild stabilization in Europe would obviously be a big help, unfortunately we may not see that for several more days or even longer.   
 
We are making some moves in response to Tuesday's USDA report. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of the "Weather" trade, "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  

A Few Surprises in Tomorrow's USDA Report?

Jun 11, 2012

    

Corn and Soybeans, in my opinion, should start to push towards higher ground, unless Fed Chairman Bernanke and crew announce they have found a way to not only print more US dollars, but to somehow also create more rainfall. The bottom-line is its DRY in many parts of the US corn belt as well as in many parts of the Northern Chinese Plains. Talk in the trade is that 10-15% of the Chinese crop could already be under to  moderate-to-severe stress. Here at home we have to be looking for a reduction in the USDA weekly crop ratings this afternoon by at least 2-3% in corn and 1-2% in soybeans.  I know the USDA has thrown out a 166 yield estimate for corn, and rarely has changed their mind in the June report, but I can NO longer play along along with this type of number. Sorry it is simply too high! Don't look for any changes in the soybean yield estimate either, because from our data the USDA hasn't adjusted  soybean yields in the June report for over 15 years.
 
I mentioned above that I had everyone in the office doing research this week on the difference between the growing conditions and weather back in 2004 and 2009 in comparison to 2012. I include below a few of the headlines the guys pulled from the "National Climatic Data Center" web site.I am sorry about the length of the report today, but I though it was important that you see for yourself the difference of where we were at during May, June and July (of 2004 and 2009) the years the corn yield was over 160 bushels per acre. You will see from the date I included there is a drastic difference... Thanks again to the National Climatic Data Center giving us the ability to easily access the information. We start by taking a look at 2004, then move on to 2009 and wrap up with 2012: 
 
MAY-JUNE-JULY 2004 - Yield second highest ever at 160.4 bushels per acre. 
 
  • May 2004  - May 2004 ranked as the 15th warmest May in the 1895 to present record. The preliminary nationally averaged temperature was 62.8°F (17.1°C), which was 1.7°F (0.9°C) above the long-term mean. May 2004 was above average for precipitation nationally, ranking 24th wettest.
  • May 2004 - March-May was near average for precipitation, ranking 54th wettest in the last 110 years.
  • May 2004 – The June 2003-May 2004 (12 month period) precipitation total was near average for June-May, ranking 38th wettest for the last 12 months based on a record of 109 such periods.
  • June 2004 - June temperatures were near average for the nation as a whole, with cooler than average temperatures in the middle of the nation and in the Northeast.
  • June 2004 - June 2004 ranked as the 42nd coldest June in the 1895 to present record. The preliminary nationally averaged temperature was 68.8°F (20.4°C), which was 0.5°F (0.3°C) below the long-term mean.
  • June 2004 - June was much above average for precipitation nationally, ranking 7th wettest.  In fact April-June was above average for precipitation, ranking 15th wettest in the last 110 years.
  • June 2004 - June was record wet for Texas and much wetter than average for 7 other states including Louisiana and Mississippi, which had their 3rd and 2nd wettest Junes on record, respectively. 
  • July 2004 - July temperatures were cooler than average for the nation as a whole, with cooler than average temperatures in the middle of the nation and in the Northeast, while warmer than average conditions prevailed in the West.
  • July 2004 - July ranked as the 29th coldest July in the 1895 to present record. The preliminary nationally averaged temperature was 73.6°F (23.1°C), which was 0.7°F (0.4°C) below the long-term mean.
  • July 2004 - was near average for precipitation nationally, ranking 39th wettest.
  • July 2004 - May-July was much above average for precipitation, ranking 9th wettest in the last 110 years.
  • July 2004 - Precipitation was above average for August 2003-July 2004, ranking 35th wettest for the last 12 months based on a record of 109 such periods.
  • July 2004 - Nationally, the contiguous U.S. was wetter than normal due to heavy rains that fell across the southern and central Plains into the Northeast.

 

*To say the least the May, June, July time period in 2004 seemed to have cooler temps with good rainfall.  
 
MAY-JUNE-JULY 2009 - Final yield the highest ever at 164.7 bushels per acre 
 
  • May 2009 - This was the 22nd wettest May in the 1895-2009 record. An average of 3.22 inches (82 mm) fell across the contiguous U.S. this month, which is 0.35 inch (9 mm) above average.
  • May 2009 - The Southeast region experienced its second wettest May in 115-years of record-keeping. For the contiguous United States as a whole, precipitation was above normal. Both Florida (9.86 inches) and Arkansas (10.91 inches) experienced their all-time wettest May. The last time Florida saw a record wet May was in 1976 when 9.15 inches of precipitation fell. Arkansas experienced its last record wet May in 1930 when 10.07 inches of precipitation fell.
  • May 2009 - Spring (March-May) 2009 ended with the contiguous U.S. averaging 52.7°F which is 0.9°F above normal. The contiguous U.S. was also 0.64 inch above normal in terms of precipitation, which was the 24th wettest spring on record. Based on 115 previous spring years, 2009 was Georgia's second wettest.
  • May 2009 - While the vast majority of the High Plains Region was dry, western Colorado, and small portions of Kansas, Nebraska, and North Dakota received above normal precipitation.
  • May 2009 - A wet April followed by a wet May across the central Midwest led to significant planting delays across much of the Midwest. At the beginning of May only Minnesota and Iowa were ahead of schedule, with the remaining states significantly behind. As of May 3rd, only five percent of the corn was planted both in Illinois and Indiana, compared to a five-year average of 66 percent and 47 percent, respectively. Conditions improved and planting increased about the middle of the month, with the biggest surge during the week ending May 24. This was a sunny, dry, and warm week, and corn planting jumped to 62 percent complete in Illinois and 55 percent complete in Indiana. By the end of the month planting was complete in Iowa, and 90 percent to complete in Minnesota, Wisconsin, Ohio, and Missouri. Corn planting was 89 percent complete in Kentucky, 82 percent complete in Illinois, and 78 percent complete in Indiana. Some of the remaining corn acreage may be planted in soybeans due to the lateness of the season. Soybean planting, which typically starts later than corn, was also well behind schedule except in Iowa, Minnesota, Wisconsin, and Ohio.
  • June 2009 - The frequent and heavy rain in the central Midwest continued to frustrate agricultural interests. At the end of June soybean planting was still behind schedule in Illinois, Indiana, Kentucky, and Missouri. Soybean planting was nearly complete in Iowa.
  • June 2009  - Saw a return of active weather across the High Plains Region. A large swath of the Region extending through Wyoming, Colorado, and Nebraska received over 200 percent of normal precipitation and many locations ranked in the top 10 wettest Junes on record. Interestingly, according to the National Weather Service in Sioux Falls, SD, there were an unusually high number of days with measurable precipitation at several locations. This June, Sioux Falls, SD and Sioux City, SD both had 16 days with measurable precipitation and Huron, SD had 15 days with measurable precipitation. Each city tied the record for the most number of days with measurable precipitation for June. Crop damage was reported in many locations due to flooding and hail. Wheat was especially hit hard as it was near harvest in many areas and some fields were complete losses. Other crops affected include, but are not limited to, alfalfa, corn, dry beans, and sugar beets.
  • July 2009 - For the contiguous United States the average July temperature of 73.5°F was 0.8°F below the 20th century average and ranked as the 27th coolest July on record, based on preliminary data.
  • July 2009 - An abnormally strong and persistent upper-level pattern during the month helped produce a large number of record low temperatures east of the Rockies, while warmth was focused west of the Rockies.
  • July 2009 - Four of the seven states that make up the Central U.S. (Ohio, Illinois, Indiana, and West Virginia) experienced their coolest ever July in 115 years of records. The region's three remaining states of Kentucky, Missouri, and Tennessee recorded either their second or third coolest July in history. Pennsylvania also experienced a record cool July, while Wisconsin and Michigan each had its second coolest on record.
  • July 2009 - This was the 40th wettest July in the 1895—2009 record. Precipitation across the contiguous U.S. averaged 2.90 inches (74 mm), which is 0.14 inch (4 mm) above the 1901-2000 average.
  • July 2009 - About 19 percent of the contiguous United States had moderate-to-extremely wet conditions at the end of July, according to the Palmer Index (a well-known index that measures both drought and wet spell intensity).
  • July 2009 - Temperatures were cool across the Midwest in July. Departures ranged from 2°F (1°C) below normal in eastern Ohio to as much as 6°F (3°C) below normal in eastern Iowa. Most of the Midwest remained below normal throughout July with only occasional excursions above normal. For the entire Midwest in July, only one record high temperature was recorded along with 18 record high minimum temperatures. On the other hand, there were more than 400 record low temperatures and more than 1300 record low maximum temperatures during the month. Two periods were particularly cool, July 1-9 and July 17-23. During the former period, 23 record low temperatures and 370 record low maximum temperatures were set or tied. In the latter period, 337 record low temperatures and 942 record low maximum temperatures were set or tied. There was also a drastic reduction in the number of days reaching 90°F (32°C) across the Midwest.
  • July 2009 - Preliminary numbers show July 2009 as the coolest on record for the Midwest. Illinois, Indiana, and Iowa also recorded the coolest July on record. Michigan, Ohio, Wisconsin, and Kentucky were the second coolest, while Minnesota was the third coolest and Missouri was the fourth coolest.
  • July 2009 - Numerous stations recorded their coolest average July this year. Stations that set July records include International Falls, MN, Madison, WI, Grand Rapids, MI, Flint, MI, Saginaw, MI, Benton Harbor, MI, Dubuque, IA, Cedar Rapids, IA, Rockford, IL, Peoria, IL, Lincoln, IL, South Bend, IN, Fort Wayne, IN, Lima, OH, Cincinnati, OH, Jackson, KY, and Frankfort, KY. The stations broke previous monthly records by up to nearly 4°F (2°C).
  • July 2009 - The cool temperatures combined with timely precipitation in Nebraska to produce one of the best wheat crops on record. According to the USDA the average yield has been 48 bushels an acre which is nearly 10 bushels an acre more than usual. Unfortunately, in other parts of the region, there are some concerns about whether or not crops will reach maturity before freezing in the fall.
  • July 2009 - The big precipitation story this month comes from Wyoming where, for the first time in nine years, 100% of the state is free of drought or abnormally dry conditions.
  • July 2009 - With the exception of southern Texas, southeast Mississippi and north central Oklahoma, the bulk of the Southern Region received near or above normal precipitation totals for the month. Much of the Southern Region, however; did accumulate rainfall totals that were well above the monthly expected values. In central Texas, rainfall totals ranged between 200 and 300 percent of normal. Similar values were also observed throughout much of central and eastern Arkansas, northwestern Mississippi, and southwestern Tennessee.

 

*Once again cooler temps and ample rainfall seemed to be the theme in 2009. 

 
MAY-JUNE 2012 - Yield estimated at 166bpa, the highest yield ever. The problem is I am just NOT seeing the same type of conditions...You be the judge!
 
  • May 2012 - The national temperature of 57.1 degrees F during spring was 5.2 degrees F above the long-term average, besting the previous warmest spring of 1910 by 2.0 degrees F. This marked the largest temperature departure from average of any season on record for the contiguous United States. The spring of 2012 was the culmination of the warmest March, third warmest April, and second warmest May. This marks the first time that all three months during the spring season ranked among the ten warmest, since records began in 1895.
  • May 2012 - Thirty-one states were record warm for the season, and 11 additional states had spring temperatures ranking among their ten warmest. Only Oregon and Washington had spring temperatures near their average.
  • May 2012 - Spring was drier than average for the contiguous U.S. as a whole, with a national precipitation total of 7.47 inches, 0.24 inch below average.
  • May 2012 - The U.S. Climate Extremes Index (USCEI), an index that tracks the highest and lowest 10 percent of extremes in temperature, precipitation, drought and tropical cyclones across the contiguous U.S., was a record-large 44 percent during the March-May period, over twice the average value. Extremes in warm daytime temperatures (81 percent) and warm nighttime temperatures (72 percent) covered large areas of the nation, contributing to the record high value.
  • May 2012 - The warmer-than-average conditions, which persisted through winter and spring, limited snowfall over a large portion of the country. According to the Rutgers Global Snow Lab, the spring snow cover extent across the contiguous U.S. was the third smallest on record.
  • May 2012 - The average temperature for the contiguous U.S. during May was 64.3 degrees F, which is 3.3 degrees F above average — the second warmest May on record.
  • May 2012 - The June 2011-May 2012 (12 month period) was the warmest 12-month period of any 12 months on record for the contiguous United States. The nationally-averaged temperature of 56.0 degrees F was 3.2 degrees F above the long-term average, surpassing the previous record, set last month (May 2011-April 2012), by 0.4 degrees F. The 12-month period encapsulated the second warmest summer, fourth warmest winter, and the warmest spring on record. Every state across the contiguous U.S. had warmer than average temperatures for the period, except Washington, which was near normal.  Every state from the Rockies eastward had a top five warmest June-through-May period, and twenty-six states had their warmest such period on record. 
  • May 2012 - Ongoing drought, combined with windy conditions, created ideal wildfire conditions across the Southwest.  According to the U.S. Drought Monitor, as of May 29th, 37.4 percent of the contiguous U.S. was experiencing drought conditions.
  • May 2012 - According to the National Agricultural Statistics Service, the earliest start to the wheat harvest in Kansas since records began in 1952 has occurred this year. By the end of the month, at least 4 percent of the wheat harvest was complete. The earliest harvest prior to this year occurred in 1962 when 1 percent of the crop had been harvested by June 2nd. The dry, hot, and windy weather in Nebraska led to low soil moisture which caused producers to turn on pivots to aid in crop germination. Although rain was a welcome sight to some, the tornadoes and hail that accompanied the storms led to crop damage which will require producers to replant in some areas of Nebraska. This spring (March, April, and May) was a record breaker across the entire High Plains Region. Average temperatures were above normal at all locations in the Region and the largest temperature departures occurred in the east as areas of South Dakota, Nebraska, and Kansas had average temperatures which were over 8.0 degrees F (4.4 degrees C) above normal.
  • May 2012 - The big story this month was the development of extreme drought conditions (D3) in northwestern Colorado due to extremely low precipitation. May 2012 was dry for much of the High Plains Region. A large area encompassing southern Wyoming, western and southern Nebraska, northern and western Kansas, and the east and west sides of Colorado had precipitation totals which were less than 50 percent of normal. In addition, many locations within that area received only 25 percent or less of normal precipitation and ranked in the top 10 driest Mays on record. Goodland, Kansas had its 2nd driest May on record with only 0.45 inches (11 mm) of precipitation, which was 13 percent of normal precipitation (period of record 1895-2012). The 1927 record held at 0.31 inches (8 mm). Snowpack in Colorado and Wyoming continued to decline. According to the Natural Resources Conservation Service, by the end of the month, the statewide snowpack was just 5 percent of average in Colorado and 22 percent of average in Wyoming.
  • May 2012 - Severe Drought in western Kentucky, extreme southern Illinois, and the boot heel of Missouri, but many other areas saw drying of the topsoil, stressed plants, and dry lawns as concerns increased about the potential for drought to rapidly worsen. 
  • May 2012 - The many days of dry conditions in the Midwest allowed farmers to spend more time in the fields, thus corn and soybean planting was running ahead of normal. With much of the crop in the ground by the end of the month, farmers were hoping for adequate rains to replenish soil moisture and supply needed water to stressed plants going into the hot summer months. 
  • June 2012 – Already 150 new nation wide record high-temps recorded and another 132 tied only one week into June. 

 

*Sorry, but as you can see it doesn't sound anywhere close to what took place in 2004 and or 2009.  I apologize for NOT doing my homework earlier and considering the historical weather data. We often get too close to the forest to see the trees and unfortunately get caught up in the day-to-day grind.  When you step back though and compare the data it looks like a no-brainer. Either temps need to drastically cool off and the heavens open up with a massive downpour of rain or there is absolutely no way in hell we end up with a 166 bushel per acre yield.  I know there will be those that want to argue the latest greatest "triple stack" traits are going to make a huge difference, but I simply can not buy into that argument any longer considering the evidence presented above.  There is simply a huge difference in the early conditions for the years mentioned above. The two highest yielding years were competing for record cool temps and above normal precipitation.  This time around we are already setting a record for the all-time hottest spring, the all-time hottest 12-month period, and are well below average in precipitation...Net-net we are completely opposite!  

We are making some moves in response to what the market is showing us. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  

 

 

Will the Corn and Soybean Rally Continue Next Week?

Jun 08, 2012

   Grain and soy markets desperately trying to hold onto recent gains as traders asses the latest weather models and try to anticipate the direction of next Tuesday’s USDA report. Producer are pointing to the recent history of both corn and soybeans posting significant rallies into the summer months. Corn generally picking up an extra $1-$2, while soybeans have religiously done even better the past few years. Moral of the story, producers seem to be almost certain prices are going to run much higher. Our office has been flooded with calls from producers the past couple of days who are kicking around the idea of buying back "new crop" sales in anticipation of Dec corn making another run to $7.00 and or beyond.  I am telling you now be careful getting all "bulled" up in this environment. In years past, when the  market moved to those extreme levels the funds were flying high and global economic growth was NOT in question. If the funds don't get behind the corn market in a big bad way the rally could be extremely short lived, i.e. just another typical "weather rally." Keep in mind we need ALL of the stars aligned to make a long-term run to higher ground ($6.50 - $7.50 range). 

 

Soybean "bears" are certainly getting more nervous as the trade begins to talk about fewer and fewer second-crop bean acres going in the ground here in the US, as well as more talk about full-season beans in some areas needing to either be replanted or scrapped altogether with conditions simply too dry to qualify. Up until this past week it was almost assumed that total US soybean acres would be moving from 73.9 million up towards 76 million. Now there are starting to be debates across the trade in regards to if we will see the USDA move the soybean acreage numbers higher at all in their June 29th Acreage Report. Soybean "bears" are also keeping one eye on the late to arrive monsoon rains in India which could soon start to put a damper on their global soymeal export business.  

Corn producers may want to take note of USDA's chief economist Joseph Glauber comments yesterday at the International Grains Council's annual conference. First he said that US corn yields could certainly reach record levels this year, ASSUMING normal weather. More importantly though he pointed out that domestic demand for corn from the ethanol sector was starting to flatten out. For me the weather is still to big of a "wild card" to predict a bumper crop, so I do not consider myself in that camp (it is just too dry in too many areas). I will however agree with what Glauber said about corn used for ethanol starting to level off. If you recall the corn used for ethanol number has been jumping much higher each and every year. I have been talking to many very reliable sources in the ethanol industry as of late and they all tell me the same thing..."domestically corn used for ethanol is starting to level-off, no question about it."  The fear then is "IF" the weather ends up cooperating to some extent and we have a crop at or above 160 bushels per acre, then prices will be heading lower as corn used for domestic feed and ethanol production simply will not be able to keep pace with the gains in domestic production. Sure, we may see some short-term weather related rallies, but I am afraid moving aggressively higher will take a major crop failure of some sort (sub-150 yield). With this in mind, along with a strong basis, I will be entertaining MORE new crop sales on a rally in DEC12 north of $5.50. I am NOT trying to buy back any previous sales or lift hedges at this juncture!

 

I am in agreement that "dryness" continues to be a major concern. And I also realize if the rains don't come soon this crop is going to be under extremely serious stress in many key growing regions. I am not talking just a little rain, but substantial rain needs to fall in many parts or we are going to be seeing some rapid deterioration. But in my opinion the concerns and additional premium that will be added need to be used as selling opportunities.  We have been patiently waiting for a rally during the growing period in order to get another 20-30% priced, now is the time to get your finger on the trigger... Sign-up for the free trial below for more help with cash sales...

Sunday afternoon's forecast will direct the trade as we re-open next week. I would suspect to see the USDA lower crop conditions just a hair on Monday afternoon in recognition of the dry conditions, but I wouldn't be expecting a major move. Then on Tuesday morning the trade seems to be looking for more bullish data coming from the June USDA report. Lets just hope we are not disappointed by the data.  I can't remember the last time we were all looking for a bullish report and the USDA came out with numbers that were MORE bullish than we were thinking. Maybe this will be the time Santa delivers...I wouldn't hold your breath! 

We are making some moves in response to what the market is showing us. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  
 

 

 

A Few Thoughts on USDA's Corn Yield Number

Jun 06, 2012

   

I am thinking the USDA report could hold some bullish cards, but it is tough taking long-side risk with so much fear brewing in the outside markets. The thoughts are both soybeans and wheat will see some bullish adjustments made to the balance sheets. Corn is a little more difficult to predict as there is fear that more ample and cheaper supplies out of South America are going to start weighing more heavily on export totals. Several in the trade thinking US exports could be lowered just a touch. On the flip side, some thinking the 166 bushel yield estimate could lower production numbers as well. I personally don't see the USDA lowering the yield numbers just yet, so I am having a tough time seeing a lot of bullish potential out of the corn numbers, but I doubt there will be much bearish data coming from the report either. Net-net I am thinking bullish soybeans and wheat...neutral corn.
 
I have heard some interesting Corn numbers floating around the trade as of late that I wanted to share...thought you might find them interesting. It just shows you how important "weather" will be in determining price in the weeks ahead: 
 
  • 165 plus yield will end up producing a 2.0 billion plus carry, therefore fall prices could eventually trade down to $3.75 or even lower if the outside markets continue to suffer.  
  • 163 yield produces around a 1.8 to 1.9 billion carry and a fall price could therefore fall to around $3.90 per bushel.
  • 159 yield produces around a 1.6 billion carry and a fall price of around $4.30 
  • 155 yield produces around a 1.3 billion carry and a fall price of around $5.00
  • 151 yield produces around a 1.0 billion carry and a fall price of around $6.25
  • 150 yield or lower and prices have a chance of jumping beyond $7.00   

 

Corn bulls continue to have a hard time digesting news that the US crop is rated 72% "Good-to-Excellent." In addition they had to swallow news out of South America that Brazil's corn crop is pushing higher and higher, now estimated at 67.8 million metric tons. If you recall just a few months back, the USDA had estimated Brazil's corn crop at just 62 million. The word is the "second-crop" corn has just been unbelievable and continues to show better yields. First crop corn in Brazil is now thought to be around 34.9MMT, second crop corn will equal around 32.9MMT's. Total 67.8MMTs compared to soybeans being estimated at just 66.3MMT's.  I doubt this trend will continue, (more corn than soy) as I mentioned yesterday higher Nitrogen cost should put a lid on a major jump in corn acreage. Also keep in mind late seasonal rains were very helpful and extremely rare, locals are doubtful the weather for second crop corn will be this good again anytime soon. The fact of the matter is go gin to end up with a large surplus of corn. I realize there maybe some logistical issues in getting the corn out of South America, but with price drastically cheaper than US supplies, there is more and more fear we could start losing some additional export business in the weeks ahead.  I am also hearing more rumors that China is close to inking some type of corn deal with Brazil. My sources are telling me that the Brazilian  government just recently presented the Chinese Ag Minister with some type of document describing plant parameters and protocols. Obviously once approved the Chinese will start to entertain more thoughts in regards to Brazilian corn. 

 
Soybeans are just the opposite, as the trade is expecting a major increase in overall exports the next few months. In fact analyst over at Oil World are now thinking US soybean exports during the month of Sept 2012 through Feb 2013 could see a jump by some 40% or a total of around 33 million tons. 
 
Weather traders are continuing to monitor the dry conditions in both India and China as the "monsoon" rains are fashionably late for the party. From what I am hearing, only about 20% of the Indian crop is being adversely affected by the delayed rains at this time, but moving forward that number could quickly escalate to 80% of the crop being adversely affected if the rains do not show up in a much bigger way. Here at home, the forecasts are a shade warmer and showing a little less rainfall than previously anticipated. Anyway you want to slice it I still do not see it being enough to solve the deficiencies with top-soil and or sub-soil moisture levels for the extremely dry regions, but on the other side I don't see the near-term temps being hot enough to do a ton of damage. Net-net the weather here in the US is currently a non-event, therefore not really giving us a ton of support in my opinion. Moving forward however I have a feeling that could change. I wrote a little longer-term perspective in today's story section down below. It will give you a better idea about why I am not overly bearish this crop just yet. 
 

Grain Markets Held Hostage by Europe

Jun 04, 2012

    

 Agricultural markets will remain hostage to the "headlines" coming out of Europe. We may get a chance to slightly catch our breath this week, but continuing problems in Greece and Spain will be carefully monitored and keep everyone on the edge of their seat. German Chancellor Angela Merkel is supposedly meeting with European Commission President Jose Manuel Barroso in Berlin today to discuss additional options, but with Merkel again ruling out any type of "joint debt sharing" or "German-backed euro bond" there may be little progress or solutions for the deepening problems. On Thursday US Fed Chairman Ben Bernanke will be speaking before the "Joint Economic Committee" on the economic outlook and monetary policy of the US. As you can imagine the market will be extremely eager to see if Bernanke gives even a hint of QE3 in his testimony. There are many analyst who believe the recent wave of poor economic numbers should be more than enough to justify and prompt another round of quantitative easing. If the market senses this is true we could see a definite rebound in commodity prices across the board, otherwise traders will be left trying to plot their course around several potential major road barriers that lie ahead.
 
Traders will certainly be keeping one eye on the road immediately in front of them, but rest assured they are becoming extremely nervous about the obstacles they see coming around the next corner on their GPS monitors. Starting next Tuesday (June 12th) we have the June USDA Crop Production Report (WASDE). Then just a few days later on June 17th we have the Greeks voting in a second parliamentary election after an earlier election in May failed to produce a coalition government. The fear this time around is if the right candidates are elected Greece could end up pulling out of the European Union and the whole house of cards will come tumbling down. Immediately following the Greek elections Iran will be wrapping up extended negotiations and talks with major world leaders about ending their nuclear weapon developments. If talks go well there is a strong chance crude oil could fall well below $80 per barrel. What happens to corn or ethanol if crude oil prices continue to slide? There is no way corn rallies if crude oil breaks another $10 to $20 per barrel. Then on June 19th and 20th we have the two-day Fed meeting here in the US. This is when the "bulls" are expecting the US Fed to ride in on their white horses and save the day once again by coming up with yet another "bailout" plan of some sort that drive the US deeper into debt (ultimately weakening the US dollar and pushing commodity prices higher). My personal concern is that with Europe still teetering on the brink of a complete melt-down the Fed will NOT want to waste their few remaining bullets getting out in front of this potential landslide. I am thinking their help may be more needed if and when Europe really takes the tumble, which is looking more and more like it will be inevitable. Moral of the story, "aim low, they might be ridding Shetlands…" Anything could be possible in the next two to three weeks. It wouldn't surprise me in the least bit to see a major melt-down or a last second "Hail-Mary" completion that total turns the game around. It is ALL coming to a head...
 
We are making some moves in response to what the market is showing us. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  

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