Price Volatility in the Grains Looks to Continue
Oct 22, 2012
USDA Crop Progress numbers showed 81% winter wheat planted vs 5-year average of 80%. The kicker is that only 49% is reported as "emerged" vs the 5-year average of 56%. Basically we are seeing significant wheat emergence delays due to extreme dryness; SD traditional is 80% emerged at this time of the year, in yesterdays data the USDA showed SD just 13% emerged. MT is now 31% behind schedule, NE 29% behind, OH 18% behind, CO 16% behind, OR 14% behind, WA 7% behind, CA 6% behind, ID 3% behind. Below are some additional highlights of the report:
- Corn reported at 87% harvested which is below what the trade was anticipating but well above the 5-year average of 49% harvested by this juncture.
- TN 98% of corn harvested; MO 97%; SD & MN 96%; TX 95%; KY, NC & KS 94%; IA 93%; IL 92%; ND 91%; NE 89%; IN 72%; WI 66%; CO 64%; PA 58%; OH 50%; MI 48%
- Soybeans now reported as 80% harvested vs the 5-year average 69% harvested.
- MN, SD & ND 100% complete; IA 96%; NE 95%; MS & WI 94%; LA 92%; IL 80%; MI 77%; AR 75%; IN 69%; OH 63%; KS 59%; KY 54%; MO 50%; TN 48%
- Rice 90% harvested vs the 5-year average of 87%
- Cotton 38% harvested vs the 5-year average of 39%
Extreme price volatility in the futures market looks as if it will continue. From a producers standpoint it looks to me like the smartest play moving forward with your existing production is to simply store your remaining "unsold" bushels rather than selling the "cash" and re-owning the board. The way I see it the board will be much more volatile than the cash in the coming months. There is no telling what type of event could spook the fund traders or the managed money who remain massively long. My guess is if the prices on the board break the basis will strengthen even further to help absorb the setbacks. Seeing that most producers are in good financial standings I suspect once the bushels are locked away prying them loose will take some additional work and incentive. I currently have "ZERO" re-ownership in place. I believe owning the cash bushels and having some type of floor in place is a smarter move. It just seems to me that this is going to be one of those years where it is more beneficial actually having the "cash bushels" rather than owning it on paper. I feel that the strength is going to come in the basis. Producers wanting to actually make sales at this level may want to consider sellign the board and holding the actual cash crop until further into 2013.
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