Aug 20, 2014
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June 2014 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.

Will the Bulls Have Their Say in Corn Acres?

Jun 30, 2014

Corn traders are looking for "total planted corn acres" to dominate the trade today. There is no real "story" in old-crop so most of the attention is on new-crop supplies.  I suspect moving forward in the next few weeks it's going to be all about total US acres (how many have now been lost due to flooding), weather (is more rain expected) and the recent policy changes and dynamic shifts associated with Chinese corn demand???  CLICK HERE for my daily report....

  • Acreage - The trade seem to be looking for a few more acres than the USDA projected back in March (91.691 million).  A 93 million acre number would be viewed as bearish by the trade especially considering the good rainfall totals and near normal temps we have been experiencing.  A number sub-91.5 million would be viewed as bullish by the trade. In fact a number sub-90 million, which a few sources have now estimated, would be viewed as wildly bullish. My thoughts are if the number comes out bearish (say 92 million) most of the trade is going to immediately dispute the number saying that the recent storms and flooding in many locations has drastically reduced this number from when the survey data was originally compiled back in early-June. On the flip-side if the acreage numbers come out unchanged or perhaps even a bit lower than the March survey the bulls will win once again by saying the numbers are now even lower.   My point is I have a hard time seeing the bears winning this category unless the USDA comes out with a 93 million plus total acreage number. 
  • Ending Stocks - The standard debates between the bears and the bulls continue in regard to total exports, feed and ethanol usage. My guess is for not a lot of change.  I doubt they make the huge adjustment to "feed usage" like the bears are hoping to see and I doubt there is any real change in exports or ethanol.  CLICK HERE for my daily report.....

Its All About the Acres for Price Direction....

Jun 27, 2014

What Do I Think About Acres? Obviously you have to question "total" acres in play. I'm thinking total acres may be lower than most have thought. I also have a hard time swallowing 83 million soybean acres. I continue to feel like the March survey data for soybean acres was simply too high in comparison to other crops. The survey came at a time when US farmers had a bad taste in their mouth about corn prices and were desperately looking for ways to cut expenses and reduce input costs. The Spring Insurance guarantee was established at more profitable levels and corn caught a bounce back above $5.00 by late-March and early-April...just in time to encourage more planting and giving the US producer hope of chasing yields. Moral of the story, yes some acres to the north have been switched to beans due to weather and planting difficulties, but I haven't found hardly any producers who rolled with a significantly larger amount of soybean acres than normal.  That's why I believe the March estimate of 81.5 million was off base, potential way off base. If you held a gun to my head and told me to call a shot, I would have to say corn acres stay steady to a bit higher (weather after the survey kept some corn acres from going in the ground that would have been planted). Soybean acres steady to lower.  Even though beans acres had to replace corn in the delayed planting areas I'm just not seeing the big shift to soybean acres like the trade was talking back in March. Just be careful getting overly bearish the soybean market going into this report.    CLICK HERE for my daily report....

Bearish Surprise Seems Limited in Upcoming USDA Report

Jun 26, 2014

Corn continues to trade in a tight range near the bottom of the barrel. The DEC14contract seems content hovering just above the early-Jan lows of $4.35.  Many of the "tech" players believe if the market closes below that level a test of the $4.05-$4.10 area could soon be in order. On the other hand, several of the larger spec's and fund traders I speak with think the market could be a bit oversold right in here and due for a little bounce. The odds of a bearish surprise seem limited, especially with everybody and their brother already aligned on the bearish side of the boat and bracing for impact.  Who out there isn't already worried or if you wanted to play the short side hasn't already placed their bets on more burdensome US supplies? Who out there hasn't already thought about 92.5 million acres planted and a potential 168 bushel yield? Which would essentially insure us ending stocks of over 2.0 billion bushels and prices potentially under $3.90 per bushel. Obviously there are a million "what if's", but from my perspective it still ALL comes down to the US weather, and how much are you willing to bet on the outcome??? Will the rains continue to fall across the northwestern portion of the corn belt? Will we have a short fall, which could cause harvest hiccups? Will we have flooding problems down south? My gut tells me this market doesn't post it's low until most of the major weather hurdles are behind us... meaning sometime during the month of August.  The "crop tours" and all the hype surrounding a record crop will be in full swing and everybody will be on the bandwagon. I suspect the bears will then have a hard time keeping that type of fire burning and the risk to reward will be much less enticing for the funds. If we can catch a weather rally of some sort before then it would be nice, but if "Mother Nature" continues with her current forecast I'm afraid we may have to sit here another 30-45 days as prices slowly grind lower and more bears come to feast on the kill. I'm simply going to stay patient. Focus as much attention as you can on producing your best crop ever... Don't let the markets get you down!  CLICK HERE for my daily report....      

Good Source...Roach Ag Has Corn Planting Lower:  The folks over at Roach Ag, who generally have very good research, took a recent survey and now believe US corn acres could be lower than the trade is anticipating. From what I heard the group is thinking more acres were lost in areas like MN, NE, ND, SD & WI than most realize...due to a long winter and very wet spring. In fact they are thinking total planted acres could actually fall below 90 million for the first time since 2010.  For all of us who have more bushel to price lets hope the research team over at Roach Ag is correct in their assessment. The fear is the numbers coming out on Monday will be from a survey the USDA conducted between late-May to mid-June, perhaps a bit ahead of the heavy rains and flooding that washed out many of the fields in the northern pasts of the belt. Meaning the reduction in acres may be slow to develop or reveal.  In fact they maybe counted in the "abandonment" category rather than subtracted from the planted area???  CLICK HERE for my daily report.... 

Will the Bean Balance Sheet Puzzle be Solved in USDA Reports?

Jun 25, 2014

Soybeans catch a bit of breeze behind their back to start trading this morning. It seems a few US crushers (primarily those with Bio) have once again started bidding up for supplies. China appears to be snooping around for more AUG soybeans and the trade seems to be a bit more concerned about the lack of rainfall in India (and what it could mean to the Oilseed market). Here at home traders continue to debate several market uncertainties and eagerly await Monday's USDA Quarterly Stocks & Acreage numbers. Below are a couple of thoughts:  CLICK HERE for my daily report....

  • Old-Crop Balance Sheet: Does more price rationing need to be done or has the market completed it's objective? The bulls are fully prepared to see the lowest June 1 stocks figure in some 37 years. The bears continue to argue and believe the USDA is going to raise their total old-crop production estimate by 20-50 million bushels. Simply telling the trade they underestimated last years crop. This would obviously offset any higher adjustments the USDA deems appropriate for the crush and or export demand side of the equation. There trade also appears to be a bit more nervous about total soy imports and will be looking for some reassurance from the USDA that the bushels are going to show up.  CLICK HERE for my daily report...
  • New-Crop Supplies: While the old-crop balance sheet is important, the other key part of the equation is new-crop supplies. In particular how many US soybean acres are we dealing with in 2014. Most of the trade seems to be thinking the USDAs current estimate is a bit conservative and that ultimately 82-83 million soybean acres will be in play. Keep in mind many areas have seen very heavy rainfall totals and there is still an estimated 1.5 million soybean acres that have yet to be planted. Moral of the story, the trade might be a bit surprised if the USDA fails to raise their current acreage estimates to levels the trade is anticipating. I hate to say it, but from where I sit, I wouldn't be surprised to see the USDA catch a large portion of the trade offsides by throwing out a downward adjustment closer to 80 million acres. I just have a hard time digesting more than a 5% jump in soybean acres. Just remember, back during the early-March survey neither corn or beans looked to be very profitable, therefor most producers we looking for the best ways to limit downside losses...soybeans provided that play with fewer input costs. As planting rolled around and prices started moving higher that theory went out the window for many.  CLICK HERE for my daily report...

Is China the Key to Higher Corn Prices?

Jun 24, 2014

Corn conditions in the US drop -2% with the USDA now estimating 74% of the crop is rated "Good-to-Excellent" compared to 76% last week. The real kicker, at least in my opinion, is that only 5% of the entire corn crop is rated in "Poor-to-Very Poor" condition. This is the least percentage of the crop (at this stage of the game) I have seen rated in the "Poor-to-Very Poor" categories for many years. Meaning it's been a long time since we've seen this large of a portion of the US with so little crop failure.  This is obviously offsetting the talk of excessive rain and flooding in many northern corn belt areas and has the DEC14 contract now dangerously close to it's early-Jan low of $4.35 per bushel. As I have mentioned the past couple of days, another large game changer is the continued lack of Chinese demand.  For the past several years this market has had an unspoken fear of potentially huge Chinese corn demand at any given moment. In other words, there has always been a bullish wild-card in the deck in regard to Chinese demand.  Traders just never knew if China was going to make the jump from "price" buyer to "quantity" buyer, similar to what we witnessed in the soybean market.  This potential major demand push by the Chinese has kept many of the bulls in the game as they hope to draw that winning wild-card. Unfortunately, that card now seems as if it's been temporarily removed from the deck. China continues it's ban of US corn and is said to be sitting on much larger domestic stocks than the trade had been estimating.  With China out of the game, many are arguing we are looking at fairly flat-demand curve moving forward. In fact, this has many in the trade thinking the USDA may currently be a bit overly optimistic with their current estimate. Moral of the story, it doesn't look like China is going to need much US corn anytime soon. Throw on top a very-good crop across a LARGE section of the corn-belt (certainly potential for a record US crop) and the bulls have very little to cheer about.      CLICK HERE for all my grain comments....

USDA's Weekly Corn Crop-Conditons: Below are some specific's in regard to the recent weeks change in overall crop-conditions rated GD/EX, as you can see from the map the states colored "green" improved and the states colored "red" are seeing some setback out in the field:  MN crop down -9%; CO & IA -4%; SD & WI -3%; PA -1%; KY, MI & OH "unchanged"; KS, NC, ND & TN +1%; IL, IN & NE +2%; MO +4%.    

Soybean "technicians" State Key Bullish News...

Jun 23, 2014

Soybean "technicians" are talking about what could be a weekly bullish "key-reversal." The only problem is the "fundamentals" haven't changed that dramatically in the past few sessions.  The bulls continue to talk about the overly wet conditions in many US locations; the possibility now of fewer double-crop bean acres going in behind wheat simply because of the delays in harvest; the recent renewed strength in bean oil; the lack of farmer selling in Argentina due to the weakening peso; limits movement out of Brazil due to the World Cup.  On the flip-side, the bears continue to talk about record US acreage (despite the heavy rains); the break in meal prices; less than ideal Chinese crush margins; and the potential for burdensome global soybean supplies longer-term. Both parties seem to be correct in their current assessments, and that might be why we are stuck in a bit of a trading-range between $12.00 and $12.50.  The kicker however will be how things play out moving forward: It's ultimately all about how many acres will get harvested...not planted? How many bushels will actually get imported from South America? and How the Chinese demand plays out moving forward? I am closely monitoring prices in both the NOV14 and NOV15 contracts as they start to more rapidly approach our next sales price targets. Producers with good sales already in place should remain patient for the time being letting the market work...                         CLICK HERE for my daily report.....

Soybean Bulls See Weather to Push Prices Higher...

Jun 20, 2014

Soybeans bulls continue to remind the trade of the old adage "soybeans don't like wet feet". In other words the heavy moisture levels are doing very little to insure a record crop yield like the USDA currently has projected. From a "technical" perspective, most new-crop traders believe a close below $12.00 could start an avalanche to the downside, while a close back above $12.50 could bring out the green flag and once again prompt racing to the upside. The tightness in old-crop, however real it may be, seems to be less of a story and less influential in regard to overall soy complex. Yes, it still matters, but not nearly as much as it did a few weeks back.   Chinese credit issues and banking investigations are starting to gain more attention and may eventually turn out to be a much larger monkey-wrench for bullish players than the trade had anticipated.  The USDA is expected to raise both their domestic crush and export estimates for soybeans, but the kicker remains the fact most bears believe the USDA in turn will raise their production estimate for last years soybean crop. Meaning if the  USDA raises demand by 20-40 million bushels, they could announce they underestimated last years crop production by a very similar amount.  Net-net, in typical USDA fashion, there might not be as big of a change in the balance sheet as some are hoping to see. Stay on your toes and use any type of extend or unforeseen rally to the upside as an opportunity to lock in profit and reduce additional longer-term risk. With the NOV15 contract bobbing it's head above $12.00 locking in profits on a percentage might not be the craziest of ideas??? I already have 20% priced and will be looking to do more if we get a pop to the upside.  CLICK HERE for my daily grain report. 

Commodity World Grows Weary of China's Missing Goods....

Jun 19, 2014

Why You Need To Be Concerned About China's Missing Commodities - In case you haven't heard the Qingdao CCFD ponzi investigation is in full-swing and starting to make many in the commodity investment world very nervous. In case that wasn't enough, Chinese commodities trading firm CITIC is now admitting that over half of its 220,000 tons of aluminum have pulled a "David Copperfield" and vanished. On top of that there is talk that other commodities at the Qingdao port could be missing as well. The fear is as the investigation into the "missing" commodities grow and deepen,? traders are going to realize a much larger portion of the so called Chinese "demand" has been fictitious and used exclusively to fuel several elaborate banking schemes. Investigators are trying to determine if various groups have been using the same batches of copper and aluminum stored at the port as collateral to secure multiple loans. The other fear, which is already starting to materialize, is that increased uncertainty and scrutiny of shipments may severely hurt or drastically slow down imports of various commodities. We are already seeing international traders holding back and delaying cotton and copper shipments as they wait for more clear Chinese policies and some type of ruling on the current investigations. We are hearing customs officials are taking anywhere from 15 to 20 days to up to a month to clear shipments of copper cathodes. Earlier, it used to take seven to 10 days.  The question being asked is just how much of the Chinese demand was REAL and how much was fabricated to provide collateral in a very smoked filled shadow banking system?                                       CLICK HERE to get all of my grain comments......

Where Wheat Prices Could Go

Jun 18, 2014

 Wheat catches a slight bounce this morning on escalating turmoil in the Middle East, but has recently tumbled to its lowest level since early-Feb.  There are some arguments circulating that we could start to see SRW wheat gain back a bit of ground on HRW wheat. Thoughts are the SRW wheat harvest could end up being more delayed than the HRW harvest.  Be careful with this rhetoric as I continue to hear more concerns about the overall "quality" of the HRW crop. The heavy rains and storms could be a bit more severe than the trade is currently giving it credit.  From a producers standpoint, it feels like, without a major geopolitical twist of some sort, wheat is going to CLICK HERE to find out will wheat prices will go

 

Record Corn Crop?...Not So Fast

Jun 17, 2014

Corn bulls have little to cheer about as the USDA shows emergence slightly ahead of normal (97% emerged) and one of the best "early" corn crops in recent years with 76% of the crop now rated in "Good-to-Excellent" condition. From a specific state-by-state standpoint, the bulls remain focused on the setbacks in NE (due to storm and hail damage) and the setbacks in MN (due to the heavy rainfall totals). Just keep in mind though that conditions in most of the other key growing states actually improved, including both IA and IL.

 

 I have to believe from this point forward though the crop will be much more hard pressed to advance or improve overall crop conditions.  I can site year-after-year where conditions started out very favorable but between now and mid-July that started to slide precipitously.

 

One saving grace is the fact demand still seems to remain strong, the question though is for how much longer.  You have to believe we will soon (Aug or Sept) start to lose ground to South America as the world's low-cost corn supplier. 

 

After that there will be new competition coming online from Ukraine, Which certainly won't make winning export business any easier,  In other words bullish US corn export headlines might soon be tougher to come by??

 

Have old crop sitting in the bin? Click Here to see how to handle it

Cheap DDGs are being Substituted for Meal

Jun 16, 2014

Crushers seem to have coverage for another 30 days (plus), exporters aren't really bidding up for supplies...so who really needs the immediate supply of soybeans??? There is also continued talk by the bears that US soybean acres are getting larger not smaller.Yes, we all realize the weather could change at the blink of an eye, but as of right now there seem to be very few bullish face cards in this deck. I have heard the Chinese crushers are once again picking up the pace and margins have vastly improved over the past few weeks. Meaning the Chinese buying frenzy may continue to provide some temporary bullish relief from time to time.  I wish I could be more optimistic about longer-term price projections for our 2014 crop, but I continue to believe most producers should position themselves accordingly. CLICK HERE for what percentages we are recommending.  

With the Recent Setback, Where Does the Bean Market go Next?

Jun 13, 2014

Soybeans bears are talking about the fact old-crop beans have given back $1.00 per bushel since the end of May. The question now that the "roll" is over for most...what happens next? With crushers thought to have ample coverage for the next month or perhaps even a bit longer and the cash market not being overly strong, it might be tough for the JUL14 contract to gain a ton of upward momentum, especially nearby. Moral of the story, the crushers seem to have beans, the exporters don't really need the beans and now US DDGS are backing up into the pipeline because of the cancelations and recent ban from China. My thoughts are we may have the occasional knee jerk to the upside, but a massive blow-off top towards $16.00, like so many "tech" traders have been projecting, seems more and more far fetched. If we are to get a big bounce higher in old-crop my hunch is it doesn't come until early to mid-July.   As for new-crop, many players are talking about the possibility of a 10-15% correction from the Spring highs. If you use the $12.79 Spring peak then you can conclude a 10-15% setback would put you in the $10.85 to $11.50 range. My point is, don't be oblivious to the fact we could still perhaps shave another $0.75 to $1.50 off new-crop prices before seeing any type of real sustained upside turnaround or major bounce back towards higher ground.   CLICK HERE for my daily report....

Do you Have a Plan for Unpriced Corn Bushels?

Jun 12, 2014

Corn producers who are still holding old-crop bushels are starting to more quickly run out of time and seem to be getting a bit more nervous.  Yesterday's USDA report was somewhat uneventful, but with the Chinese backpedaling more in regards to US imports a late inning rally in old-crop is certainly starting to feel much less likely. Personally, I've been sold-out for months, but I know many producers who are still holding old-crop supplies and are willing to take the gamble.  It worked well for those who held their soybeans, as I sold-out just above $13.70, some of those who elected to hold out were able to get over $15.00.  I am just not so sure the same type of outcome will hold true in the corn market. I'm pulling for you...but it just feels like the corn market is ready to turn the page and focus on new-crop potential. Unfortunately for the bulls there is not a lot of exciting news in the new-crop headlines either. Keep in mind the USDA is now saying the "corp condition" ratings the past few weeks (to start 2014) are some of the best they have seen in several years for the 18-major producing states. Moral of the story, there continues to be more talk of a potential record US corn crop in excess of 14.0 billion bushels. In light of the big potential the USDA has lowered their projected 14/15 estimated price range for US corn to between $3.85 and $4.55 per bushel.   CLICK HERE for my daily report.....

Know When To Hold'm...Know When To Fold'm - I have been asked several times as of late by producers, "What should I do if I am way behind on both old and new-crop sales?" This is a tough question because I personally believe everyone has to define and develop their own personal marketing plan.  Even more important than "designing" the plan, I believe is being able to "execute" the plan. Everything looks easy on paper, but are you honestly following your predefined roadmap? Unfortunately this is where most drop the ball.  For me I prefer to make a good portion of my sales early (if profits are on the table) to take some of the emotion out of the game in the later innings. Simply stated, by reducing the "emotion" I am able to more easily "execute." I'm not trying to avoid the question, I am just pointing out that I design my marketing plan to avoid the proverbial belly-aches and to avoid getting myself in a situation like this.  If I had drifted off course and found myself with a large dose of old-crop still in storage and almost no new-crop priced heading into pollination, I would be asking myself a zillion questions about cash-flow, liquidity needs, potential storage complications if prices don't rebound before I harvest new-crop, etc... Bottom-line, dumping the old-crop bushels and holding off on any new-crop sales obviously makes the most sense.  It creates cash-flow, frees up available storage and buys lots of additional time. Also with new-crop prices well below the Spring revenue insurance guarantee of $4.62 per bushel I see no real need to start making new-crop sales at this stage.   CLICK HERE for my daily report... If you find yourself in this position, contact us for a plan...  

Soybean Bulls Look for Tighter Supplies in USDA Data Dump...

Jun 11, 2014

Soybean bulls are not only talking about the possibility of tighter US supplies following todays data dump by the USDA, but also increasing logistical problems out of South America. Not only is there a strike in Argentina that has kept over 125 grain ships from entering or exiting the main grain hub of Rosario, but now there is talk that "dredging" problems at the Port of Santos in Brazil is preventing many ships from docking at some terminals, More specifically there is talk that soybean cargoes leaving the country are either leaving partially filled or being forced to wait until high tide to sail. CLICK HERE for my daily report...

USDA Soybean Preview: There is some talk by the bulls that the USDA's initial soybean yield estimate of 45.2 bushels per acre might be lowered a touch. For the life of me I can't understand why they are saying this when you consider  we are seeing almost ideal growing conditions.  Lets not forget five years ago we harvested a 44 bushel per acre yield, so don't fool yourself into believing it's not at all possible. Yes, I even debate the number myself when you consider 82 million plus acres may end up going in the ground, but we certainly can't rule a 45 bushel yield out of the realm of possibilities. As for old-crop, the consensus seems to be for a slight reduction in an already tight situation. How much will the USDA increase their current crush and export estimates? Will the import numbers be eased back a touch considering the delays? Will there be any really adjustment made to the global supply and demand situation?  My guess is for not much of an overall change in the balance sheets. Perhaps maybe a move down closer to 125 million bushels, which seems to be the bare minimum the USDA will project, but the "potential" for a huge new-crop is definitely around the next corner.         CLICK HERE for my daily report.....   

Corn Headwinds Provide a Bullish Opportunity.....

Jun 10, 2014

Corn traders took a couple of steps backwards yesterday as the so called "high-pressure ridge" that appeared out of no where late last week disappeared just as fast. The corn market also ran into some headwind as China temporarily bans the import of US DDGS. As for overall US crop conditions, it's tough to argue or complain with such nice rainfall totals and extremely nice June temperatures. I suspect the trade will try to best prepare itself today for the USDA numbers out tomorrow.  You can argue that with both corn and wheat experiencing massive breaks this past month we could see some short-side profit taking or some type of "dead-cat" bounce.                     CLICK HERE for my daily report...

Chinese Corn Auctions: There is talk inside China that they have all of a sudden decided to up the amount of corn offered in their public auction to 5 MMTs this week.  This is much more than originally anticipated. Thoughts are they maybe looking to clear out more storage to make room for this year's crop.  This leads many to believe they are "loaded up" on corn...Hence the reason for "banning" US imports.

Corn Conditions Still Looking Good: Below is a map we created in the office that shows states were crop conditions improved for the week (in green) and states where crop conditions deteriorated for the week (in red). States experiencing the largest setbacks were...TN where overall conditions fell by -7% and NE where conditions fell by -6%. Click the map to see a larger version!                     CLICK HERE for my daily report....


Bean Stocks and Demand Keep Bulls Optimistic....

Jun 09, 2014

Soybeans traders are patiently waiting to see the USDA's latest ending stock estimates due out Wednesday. The average trade guess is lower for both old and new-crop balance sheets.  Just the opposite of corn, soybean traders seem to be focused more heavily on "demand" rather than "supply."  The biggest questions still seem to be what will the USDA do with the "crush" and "export" numbers?  I suspect once we clear this hurdle and gain more certainty about overall "demand," the trade will quickly turn its attention more towards "supply." In my opinion this has been one of the most frustrating things for the bears..."when is the trade going to start focusing on the massive amount of 'supply' that could soon be coming our direction?"  From a "technical" perspective, the trade is still keeping a close eye on the $12.00 area for new-crop soybeans...a close below this level could certainly make the trade a bit more nervous. From a producers standpoint, I'm still hoping to see some type of  "summer" weather induced rally to give us an opportunity to make another round of cash-sales. The bears seem content on assuming very little in the way of a weather hiccup or  a production setback for this years crop.  I am not saying they can't ultimately be right, but I'm just thinking somewhere between now and then, with global demand being strong and old-crop balance sheets being tight, a shift in the weather pattern could cause a large portion of the bears to cover their new-crop short positions and move to the sideline. This buy-back pressure could give us the push back above $12.50 that we are hoping to eventually see... Remain patent!  CLICK HERE for my daily report....

Can US Corn stay Competitive Globally?

Jun 06, 2014

Corn traders are eager to see the next set of USDA numbers which are scheduled to be released next Wednesday.  I however am not looking for many really changes and feel the bulls could be a bit disappointed. The bears are arguing the current export estimate of 1.9 million might need to eventually be adjusted lower, especially when you consider we are already seeing more global interest in cheaper supplies out of Argentina and Ukraine. There is also the argument that the current USDA yield of 165.2 bushels per acre is now too low in light of the recent rains and overall pace of planting.  Personally I doubt the USDA makes a change to their current yield estimate, but it certainly does NOT feel like production is moving lower.  Moral of the story, and with the theme of trying to keep it simple, it feels like there could be more bearish potential coming out of next weeks USDA report than there is bullish potential.  The "technical" picture hasn't improved any either, as both old and new-crop contracts fell back below $4.50 for the first time in months.  Techies are also pointing out that open-interst is increasing while prices are falling. This is NOT a winning combination as it tells us the break is not just simply due to long liquidation but NEW short's jumping on the bandwagon as well. My hunch is with the lows now well within striking distance ($4.35 vs. DEC14 contract) just $0.10 to $0.15 cents away, the bears won't be satisfied until they test the waters. Producers should continue to remain patient. Spec's looking to pick a "bottom" may get their opportunity next week. CLICK HERE for my daily report..

A Key ingredient to corn "demand" is missing

Jun 05, 2014

 We are seeing both Argentine and Ukraine corn being  offered $0.20 to $0.25 cents cheaper than US corn and we are hearing more and more talk that US exporters are going to start losing out to South America and Ukraine in the months ahead...specifically during the months of Sept, Oct and Nov.

Color corn

Keep in mind the one saving grace for the corn market has been the huge increase in overall "demand."  You take away the bullish "demand" card or at least start to place some doubt in regard to its trumping abilities,
royal flush
leaving the trade to digest 91-92 million corn acres with near optimal growing conditions (at least for the time being) and it becomes very difficult to sustain or mount much of a real rally. 
 
With this in mind, don't be surprised if painfully grind lower for a period of time. 

 

Should We Lock in Fuel Needs?

Jun 05, 2014
Crude Inventories Shrink: Total US crude stockpiles dipped to 389.5 million barrels, a drop of 3.4 million, which was considerably more than expected. Cushing inventories fell to a five-year low of 21.4 million barrels. Imports fell nearly 700,000 barrels per day, which some analysts believe is due to logistical problems. Supplies of refined fuels, on the other hand, rose with the biggest increase being distillate supplies, which include diesel and heating oil, rising 2 million barrels. Keep in mind that even with that expansion, their inventory levels are still 4.2% below last years levels. My concern here is that if those inventories don't continue to rebuild, we may be in for some much steeper diesel and heating oil prices come winter.  CLICK HERE for my daily report.... 

 

USDA's current soybean yield estimate of 45 bushels per acre is simply too high

Jun 04, 2014

 Soybeans producers are wondering if the NOV14 new-crop contract can hold "technical" support at the $12.05-$12.06 area...if not there is continued talk about a potential free-fall into the mid to low-$11.00 price range. The fear is obviously a HUGE crop going in the ground here in the US. 

 
It isn't as if we haven't seen this storm brewing on the horizon, but perhaps the trade is simply becoming more of a believer as the USDA shows better than expected planting progress and a pace now well ahead of our 5-year average. 
 
In other words the thought of "harvested" soybean acreage north of 80 million is now a true reality. In fact harvested soybean acres in the US might end up north of 81 million acres... The bears are arguing if the weather continues to cooperate and we see limited crop-stress, we could end up swimming in soybeans. 
 
Certainly pushing ending stocks well above the 160 million bushel average we have traded during the past five years, perhaps even doubling that number (a 320 million bushel ending-stocks number is not out of the question if growing conditions remain optimal). Throw on top the argument by the bears that South American soybean acres continue to push higher and so do yields. 
 
The most recent data shows South America soybean acreage at around 137 million. Brazil at around 73.9 million and Argentina at around 49.4 million, the kicker is both combined are adding about 3.5 million NEW soybean acres each year. 
 
If the US raises the bar and starts to more consistently plant 80 million plus acres and the growth in Chinese demand begins to slow in some capacity something will have to give...the bears obviously suggest it will be "prices." 
 
The bulls are being forced to give-up on their acreage arguments, conceding to the 80 million plus figures, but continue to hold onto their arguments regarding yield. Their thoughts are the USDA's current yield estimate of 45 bushels per acre is simply too high, especially when you consider the record acreage that is being planted. 
 
cropdusting5 bsh
 
There is even new evidence floating around the trade that shows overall "yield growth" in the US is actually slowing down a bit. Rather than adding the 0.5 bushel per acre per year to our trend-line estimates, some are arguing that number needs to be reduced.
 
In other words technological gains that we have been experiencing the past several years might be starting to slow to some degree.
 
 

$2.80 Corn! I am NOT in that Camp.

Jun 03, 2014

 There is talk now floating around the trade, that if you were to extrapolate out this year’s current rating of 76% "Good-to-Excellent," it would equate to a 169.5 bushel per acre national yield or in other words about 14.2 billion bushels in total corn production.  As you can imagine this has many in the marketplace throwing out more bearish price forecasts.

I'm not going to throw anyone under the bus, but I heard a couple of notable sources yesterday quoting in their reports that corn could easily print a $3 handle and perhaps even worse...maybe even trade down to sub-$3.00 levels ($2.80 perhaps).  
Bear Camp
I'm obviously NOT in this camp, but certainly believe we could continue to drift lower if nothing in the way of a weather hiccup arises. That certainly seems like a tall task to ask of "Mother Nature," especially when you consider her volatile mood swings the past few years, obviously time will tell.
 
From a producers perspective I am going to continue to hold at around 50% priced. I am thinking "end-users" should be looking more seriously at ways to lock in needs for the entire growing season on the breaks.  As price moves lower and lower the risk-to-reward clearly begins to shift itself to the upside compared to the down.  
 
End-users can look at techniques like simply buying out-of-the-money calls to protect the upside risk or more experienced hedgers can look at strategies that involve selling put premium and using the revenue to buy upside call protection.
 
Moral of the story, if the nearby weather forecast stay optimistic and prices continue to drop, end-users should be thinking about making more longer-term strategic moves.   
 
To find out what we are doing from a producer’s perspective Click here,
Want to know what I think "end-users" should be looking more seriously at and
what simple techniques they can use at this point? Click here.
 

 

Soybeans: The old-crop woes vs. The new-crop promises of grandeur

Jun 02, 2014

 The Fund "Roll" Continues To Be Debated: Many traders are wondering what will happen once the funds start to more aggressively "roll" out of their JUL14 positions.

Soybean farm

Remember, the "Rogers" roll started late last week and the "Goldman" roll will begin this Friday. 

Take a look at the numbers, at last glance, "managed-money" was still holding close to 150,000 long JUL14 soybean contracts and about 175,000 long JUL14 corn contracts.

bean pit traders chicago

Will some simply liquidate and move to the sideline?
or will they opt to roll their long positions into the new-crop contracts?
 
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