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September 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.

Imports of Corn Largest On Record for US

Sep 27, 2012

 Quick Update: USDA export sales data released this morning showed horrible sales numbers for corn, average numbers for wheat and numbers at the high end of the range for soybeans. There was an announcement after the numbers were released that South Korea Feedmillers agreed to buy 266,500 tons of corn at $299-$304.5/ton, C&F, so we are starting to see some corn buying interest creep back into the equation.


  • Corn export sales reported at just 400 tons. The trade was looking for a number between 150,000 and 300,000. Last week 69,900 exports were reported. 
  • Soybeans export sales reported at 799,500. The trade was looking for a number between 600,000 and 800,000. Last week 717,800 exports were reported. 
  • Wheat export sales reported at 426,000. The trade was looking for a number between 400,000 and 550,000. Last week 489,000 exports were reported. 

 

 

Corn bulls have to believe as prices continue to break there will be less farmer selling and more global interest in buying corn. Do you realize South American corn is not only about $30-40 per ton cheaper than US corn, but it is close to $60 per ton cheaper than US feed wheat. Asian buyers who had made the switch to wheat may soon be flipping back over to corn. One of the problems however is that US end-users  are also highly interested in "cheap" South American corn supplies. 

Hog producer Prestage Farms Inc and two other livestock companies in North Carolina have confirmed yesterday that they had inked deals to import some 750,000 metric tons of corn from Brazil in the wake of skyrocketing US prices.  From what I understand, the imports were made through agribusiness companies such as Bunge and Archer Daniels Midland and are the largest imports of corn ever on record for the US.  To be clear, we had rumors that livestock producers had likely purchased corn out of South America, but this is the first official confirmation that US companies were importing such a large amount of corn from Brazil.  The USDA has set projections for US corn imports at a record 1.9 million metric tons in the marketing year ending August 31, 2013.  Prestage, whose family company ranks among the top five US hog producers, said that as the weather turned hot and dry through the spring and summer, they started thinking about looking around for other sources of feed.  From what I have heard, their corn is scheduled to arrive in some 15 cargo loads with about 50,000 metric tons each over the next six months, and the first is scheduled to arrive at the Port of Wilmington, North Carolina next week.  Prestage has also said that they are exploring futures imports of soybean meal, but will wait to make anything official until after the first of the year.  If you didn’t know, livestock and poultry producers in North Carolina normally rely heavily on rail shipments of feed grains from the Midwest.  They said costs were nearly 5% lower to import corn from Brazil than to transport it from the Midwest.

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

Van Trump Report

 

 

Are We Seeing Harvest Lows Yet?

Sep 25, 2012

 

Soybean bulls are reacting to some new reports and rumors coming out of Brazil that they are dangerously close to being OUT of soybeans. This certainly isn't anything we didn't see coming, but actually hearing it from Brazil is making it feel much more realistic. There is also some additional rumors of more Chinese interest in soybeans from both the US and Canada. Net-net, the soybean bulls have a little something to cheer about as demand is NOT being rationed at these price levels.
 
 
Wheat bulls continue to believe the rains in Australia have simply come too little too late and the crop is still well below the current USDA estimate of 26MMT's. There was also some additional bullish news thrown on the table when a reputable weather service reported that 62% of the projected Hard Red Winter Wheat area had too little top soil moisture for adequate planting and emergence. The same group also reported that around 56% of the normal Hard Red Winer Wheat acres has received less than 50% of their normal average rainfall within the past 30 days. On top of this I truly believe we are going to see Russian wheat exports come to a screeching halt within the next 60-days. Keep in mind their prices have jumped higher by some $30-$40 per ton just in the past 30 days, making US wheat much more competitive now.  Moral of the story, wheat producers may want to continue waiting for higher prices before marketing additional bushels.
 
Looking forward over the next couple of weeks we may have a tough time rallying despite the extremely tight balance sheet. Below are a few key reasons the bears continue to lean on the downside (selling into the rallies) and possibly why a portion of the bulls continue to liquidate more length:
 
  • Month-end and Quarter-End fund liquidation could add some additional money-flow pressure to the Ag markets.
  • Fund rolls may add additional pressure to the front-end. There is some talk that several funds will opt to roll long NOV12 soy positions out into the deferred NOV13 soy contracts. 
  • Not only are Chinese crush margins slipping but imports maybe starting to slow as the Chinese head into their "Golden Week Holiday" or what some call the "Mid-Autumn Festival," one of the most important holidays in the Chinese calendar. Keep in mind the following week the new Chinese Leadership will begin transitioning into their rolls. Bottom-line, things could be a little slow in China for a couple of weeks. 
  • USDA's Quarterly Stocks Report scheduled to be released this Friday continues to garner more bearish talk as traders fear there worst. 
  • Talk of improving yields in the US and improved planting conditions in South America causing the supply side of the equation to swell.

 

I am hoping once harvest is behind us, both the "cash" corn and "cash" soybean markets will start to strengthen. From my perspective, the recent pork and poultry slaughters just don't indicate a ton of corn feed rationing has been done. Yesterday's export data also showed us that corn is still being delivered into China (6.5 million bushels last week reported in the export inspection data). The price of corn is also dropping relative to the price of wheat. In return, we should start to see some renewed Asian interest in corn. In fact, just yesterday the South Korean feed group NOFI supposedly grabbed a cargo of option-origin corn at just under $309 per metric ton, or some $30 per metric ton cheaper than feed wheat values were being quoted.  I also continue to hear more rumors about Chinese soy buying on the breaks. My point is, supplies are going to be extremely tight once we get past harvest. Yes, in the interim we may continue to break as the trade readjusts and backpedals a little in regards to the severity of the supply situation, but once farmers lock away the bushels, they may be increasingly tougher to free up and the "cash market" might lead the parade back higher.

Bottom-line, yes I think we are eventually going to head back to higher ground, I am just not sure we have seen the seasonal harvest lows put in. Eventually "demand" is going to be the driving force. The problem right now is increasing "supply" estimates in corn and soybeans along with seasonal and technical weakness may continue to pressure the trade. 

We are making some moves in response to what the market is showing us. You can sign-up here to receive a 30 -DAY 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.  Simply click the link below -

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Producers Continue To Let-It-Ride

Sep 24, 2012

 

Looking forward, there is no doubt the US "weather market" is behind us. The market however is now trying to accurately define "SUPPLY."  Once that number becomes more clear, and not a moment sooner, we will start to focus on the "DEMAND" side of the equation. You have to believe any bushels the farmer locks away and stores are going to be tough to buy back. With this in mind, "IF" new highs are to occur, I have to believe it happens out in the FEB, MAR, APR, MAY time frame. The recipe for $20 beans and or $9 plus corn will need the following ingredients: 
 
  • Weather problems in South America.  
  • Strong enough demand to force the US to literally run out of soybeans.
  • Outside market help. Continued monetary easing by the worlds central banks and some stabilization in economic global growth. 
  • Limited downside pressure in Crude Oil. We need positive biofuel margins to help ensure strong global demand.   

 

Any combination will work. Simply stated, if we draw these four cards it will be like holding four aces. Sure there are a couple of "wild-cards" out there that could help make the hand as well, but from my perspective these are the four cards we are looking for. Come up with just one or even a pair and it might not be enough to post NEW all-time highs, but it will be enough to prompt a short-term rally and another opportunity to make more sales. As with any game, timing will also be of the utmost importance. As the clock ticks away and traders see fewer possibilities of this combination of cards being drawn, more and more players may opt to fold their hands. That's why I suggest ONLY gambling with bushels you are comfortable holding until the final flop. Be smart...and recognize that as time passes and the possibilities are eliminated additional premium could be taken out of the markets.  

I remain bullish, but keep in mind I have very little risk left on the books. We have made some great cash sales along the way on the rallies and can afford to stay in the game to see the final cards. Producers who have very little marketed have a much tougher decision. Continuing to "let-it-ride" so to speak could be extremely painful if we don't draw a single "Ace," as identified up above. I like the thought of pulling some "chips" off the table and cashing them in rather than pressing your luck.    
 
My rec's for producers remain the same as they have been the past several weeks:
 

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

Van Trump Report

Debate Rages Over US Corn Supplies

Sep 21, 2012

 

Corn traders are digesting a couple of key items right now. First is the lack of export interest. Do you realize US corn commitments for the current marketing year are now down over 30% compared to last year at this time. Bears believe corn will eventually have to trade down to a level that attracts some type of global buying of US corn. The problem is with South American supplies so much cheaper than US supplies the bears believe we will simply continue drifting lower until we become more competitive. The bulls will argue that increasing logistical constraints at the South American ports will soon start discouraging purchases driving more business back to the US. Its like the big midnight Christmas sales that run the day after Thanksgiving, sometimes the hassle and headaches just aren't worth the savings. My guess is if the Asian nations get in a jam they will quickly look to the US to source their corn. On the flip side, as long as they have adequate supplies they may not mind waiting in the long line for the savings. Outside of the lack of "export" interest, US "supply" is being heavily debated as well. One private analyst group yesterday proclaimed that the current USDA estimates are way too low and the national corn yield will end up closer to 135 bushels per acre and soybeans up around 38.7 bushels per acre. I am not sure how far out of their area they have driven or whose crops they have been looking at, but being from the "Show-Me" state (Missouri) I call B.S. In my opinion, we have a better chance of dropping below 115 bushels per acre than we do rebounding back up to 135 bushels per acre. Now if you were to tell me the USDA was going to lower harvested acres down below 82 or 83 million, then yes, maybe I could swallow a yield in the low 130s. In fact many producers I am talking to are starting to really worry about the serious "Aflatoxin" issues coming out of corn fields in Iowa and Illinois. Keep your eye on this as I believe it could become a much more talked about problem as we move forward. From what I hear the feed lots have been taking a large quantity of the aflatoxin corn (as they can feed it at a reduced blended level), but many are now "full-up" and are turing it away. Many elevators are turning away anything 20 parts or higher, and others are hitting producers with huge discounts. Bottom-line there may end up being a lot more corn than we thought that we simply can't do anything with. It will be interesting to see the actual numbers -- unfortunately -- that might go down in the USDA history books as yet another "unsolved mystery."
 
USDA's Stocks Report will be released next Friday and there seems to be some nervousness amongst the bulls. If you recall last year the Sept 30th Stocks Report for corn was 160+ million over trade expectations. There is also some fear that the USDA could raise the prior years' soybean crop.
 
Moral of the story, I am afraid the markets (corn and soy) could still succumb to additional long liquidation on fears of potentially bearish USDA "stocks" data next Friday, the bearish "acreage" numbers out of Informa Friday, and some increasing "production" numbers possibly coming from the USDA in their October report (only 15 trading days until its release). As long as "demand" stays backstage and "supply" continues to try and warm up the crowd center stage, I am afraid the critics and the fans are going to keep picking away and pointing out all of the reasons why prices are too high and why the "supply" story is overrated. However once the opening act, "supply," is eventually booed off the stage, I suspect the headliner, "demand," will come out and deliver a jaw dropping performance. Remember, we have already sold 75% of the USDA's estimated soybean sales forecast for the entire 2012-13 season. Unfortunately the question is how many critics and fans will be left in the crowd once "demand" actually gets a chance to take the stage and show the world why the price of admission was so high.
 

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

Van Trump Report

Have We Seen the Highs In December Corn???

Sep 17, 2012

 

Corn traders continue to speculate on what the "total" US crop will eventually come in at. Obviously there are still many unanswered questions floating around (FSA acreage estimates, ethanol demand, exports, imports, feed usage, harvested acres, yield, etc...) but it seems the trade has shifted its range of guesstimates higher, from say the 9.8-10.2 billion bushel range up to something more like 10.2 to 10.7 billion bushels. Similar to last year when the trade digested the "worst case scenario" early on and is now looking and listening to "improved yields" coming across the wires. There is story after story circulating of producers in parts of Illinois and Iowa who were expecting yields a few weeks back in the 50-60 bushel range ending up with harvested totals closer to 100-120 bushels per acre. Irrigated producers throughout the Midwest are also reporting better than expected yields. Don't misunderstand what I am saying. We still have a ton of fields reporting "zero" to low double digit yields, but several of mid-range reports have improved. Just as we spent a couple of weeks hearing how the bad fields were getting worse, I believe we are now in that period of time where we have to hear about how the questionable fields have gotten better.
 
Demand has still not become the main story. And now that there is talk that supplies could be improving slightly we may find it tougher and tougher to gain a lot of ground. Especially since it is doubtful that the USDA will be dropping "ending stocks" below 625 million any time soon. That is leading me to believe the DEC12 corn contract highs are in place. My hunch is we stay somewhat range bound ($7.20's-$8.20's) through year-end. Beyond that point it will depend on how the "demand" story shapes up. Will China produce a record corn crop like the USDA is anticipating. Will Chinese demand slow down at all? Keep in mind China is now expected, for the first time ever, to use more corn for animal feed this year than the US does. Analyst are thinking rather than the US using an additional 20 to 40 million tons of corn for feed this year it will be China using more than we do. Best guess is that China uses 132 million tons compared to 112 million tons by the US. The question is will they end up being net-buyers of more corn than the market is currently estimating? I think they just might! Therefore if you are looking for a chance to sell $9.00 to $10.00 corn I think it will have to be in the late-spring or early-summer of 2013, probably something like the May-June-July timeframe. With this in mind Producers who are exclusively using "cash-sales" type marketing strategies should look to move ALL of their harvested corn that has any type of "quality" concerns. Anything harvested with any type of "mold" or "aflatoxin" issues should be sold. If you can afford to store the bushels until mid-2013 there is chance you can pick up a little more revenue. Keep in mind though if the "outside" markets turn less favorable for the funds there is a chance prices could fall below $6.50. As long as ending stocks stay below 800 million I find it hard to imagine corn trading much below that level. Producers who are comfortable using the board should consider moving ALL of your harvested bushels and re-owning paper simply to spec higher prices. I would ONLY be re-owning or buying a break to the lower end of the range, meaning something south of $7.50, probably something down closer to the $7.10-$7.20 range.
 
As for today, the trade will be digesting the latest USDA crop condition reports (scheduled to be released at 3:00pm CST). Thoughts are the corn harvest will have advanced more quickly than most had anticipated. From what I am hearing the US corn harvest could advance to 25% complete and the US soybean harvest 10% complete. I am doubtful that the soybean harvest makes a huge jump but it should certainly remain well above the five-year average. Overall conditions for soybeans should have improved as well. There is some talk that producers in some areas are neglecting the soybean harvest because of the poor quality and condition of the corn crop. With weak stalks (thoughts the ears might fall) and fears of mold and aflatoxin, many producers are trying desperately to get the corn out of the field in a hurry. The downside is soybeans might stay in the field a little longer than they should. As many of you know or have experienced in the past if you don't stay on the front side of your soybean harvest and conditions are dry it could eventually cost you some money. Ultimately my thoughts are improved conditions might be offset by some unforeseen losses due to delays getting the soybeans out of the fields. Only time will tell, but I am not looking for total soybean production to improve by much. I know there are a lot of guys looking for big gains, I am just not sold yet on a big jump in "total" production. In the end I still believe US production ends up sub-2.7 billion bushels and prices will eventually need to work higher. Remember, as Henry David Thoreau one said, "It's not what you look at that matters, it's what you see." Right now I see a tried market that needs a little time to catch its breath. This bull run in soy is not yet over, the market is simply adjusting to supply side improvements. The problem is "supply" is not going to be the story moving forward...the story is going to be that prices simply can not ration enough demand!  
 

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

Van Trump Report  

 

The Looming Fed Decision and the Grains

Sep 13, 2012

 

With the USDA report behind us ALL eyes will now focus on today's Fed announcement due out around 11:30am (CST). Most leading analyst are betting that the Fed will take another stab at invigorate the US economy. This means another round of "quantitative easing" should be announced shortly. I understand the argument, I just don't agree with the move. The Fed seems to be facing steep pressure to act now because the US economy is still growing too slowly to create the needed number of jobs. The unemployment rate has topped 8% every month since the "Great Recession" officially ended more than three years ago. Just look at  August, as job growth slowed sharply once again. Some guys will point to a lower unemployment rate as it fell from 8.3% to 8.1%, but most realize this was due to a large number of Americans who simply stopped looking for work, therefore they were no longer counted as unemployed.
 
Bernanke is believed to have tipped his hand toward more easing when he identified "chronic high unemployment" as his most pressing concern at Jackson Hole. He has also mentioned on several occasions that his research indicates the two previous rounds of "QE" had created 2 million jobs and accelerated economic growth. In any regard most seem to think he wants to try and do something now about the US "jobs" situation rather than waiting for it to get even worse. I just think since the situation in Europe seems to have eased to some degree and the US stock market has raced to highs not seen during the past five years, he maybe more hesitant than previously believed. If Bernanke and the Fed disappoint a "risk-off" theme will be the battle cry from midday through the close. If some form or fashion of QE3 is announced look for higher prices across the commodity sector. 
 
As for today, we simply need to remain patient. My guess is the soybean market may need to take a few deep breaths after yesterday's rally, and may in fact setback a bit the next few sessions as traders fear that improved growing conditions may actually bump yields higher in the October report. However, once supply side debates are behind us I believe the market will have very little choice but to move higher on strong demand and fear that the US will soon run out of soybeans. I would also suspect some type of South American weather scare will arise during the next few months giving us more bullish headlines to trade. Wheat bulls will try and get in the race and may actually be the leader during this period of time where soybean yields are being debated. The wheat story is starting to gain some attention and I would be cautious leaning on the short side of this market. Corn may pull up the rear at least until harvest pressure subsides. Until the "cash" corn market starts to turn back around I suspect corn will follow both wheat and soy. Keep your eye on the Fed as they will greatly influence "MONEY-FLOW" by their actions announced this afternoon!
 

If you would like to hear my comments on the Fed decision and get some strategies that can help you make a play on the market moves, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. Simply click here and get started!

Van Trump Report


"So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you hould respond."

 

Highlights of the USDA Report

Sep 12, 2012

 Bearish USDA report being digested by the trade this morning. Most analyst were thinking the USDA would push the corn yield down below the 122.8  yield number released this morning. In addition the USDA decided to keep "harvested acreage" unchanged for both corn and soybeans. As a result total US corn production was estimated at 10.727 billion, well above most all trade guesses. In addition ending stock were raised in both 11/12 and 12/13 marketing years.  On top of this the USDA raised global ending corn stocks in both years as well. Not really sure how, but none-the-less they "RAISED" the ending stocks rather than lowering them. Some additional highlights are as follows:

 
  • Soybean yield lowered to 35.3 bushels per acre. 
  • Australian wheat crop estimate left "unchanged" at 26MMT, the trade was looking for a substantial cut. 
  • Russian wheat production cut big from 43MMT down to 39MMT. 
  • Soybean ending stock left "unchanged" in 12/13 at 115 million. 
  • Global ending stocks in wheat, corn and soybeans all "HIGHER" than most in the trade were expecting.

 

Outside markets are stronger as the US dollar trades down to four month lows.   Moody’s Investors Service yesterday stating the US runs the risk of losing its "triple-A" rating by early next year if something doesn't drastically change. On top of that  reports this morning indicating "Germany's Federal Constitutional Court" cleared the way for Berlin to ratify the euro zone’s permanent rescue fund. Essentially meaning the Germans will NOT block the EU bailout proposal. Also keep in mind the US Fed starts it two-day meeting this morning. Another round of quantitative easing could pressure the US dollar even lower, ultimately giving the commodity bulls even more to cheer about.  We'll have more updates coming!
 
I have gone in to much greater detail on this morning's USDA report.  If you would like to read my daily report and receive some critical strategies that you can implement to help improve your marketing, simply click here to get started - Van Trump Report  
 
"Remember, it's never too late to improve your marketing..."

Are You Ready for the USDA Report Tommorow???

Sep 11, 2012

 

USDA's September crop report scheduled to be released tomorrow morning (7:30am CST) should garner most of the attention early this week. The trade will be focused on several key data points, below are a few of the main ingredients:

 

 

  • Corn Yield - USDA currently at 123.4 while most in the trade are now talking about a sub-120 type final yield number, some respected sources now thinking a sub-115 bushel yield is possible. 
  • Corn Production - USDA currently estimating 10.779 in total US corn production. Trade seems to be thinking somewhere between a 9.8 and 10.35 billion bushel crop is much more accurate and realistic. 
  • Corn Harvested Acres - Once again a highly debatable subject. The USDA is currently estimating there will be 87.4 million harvested corn acres. The bulls will argue this number needs to come down closer to 84-86 million harvested corn acres, while the bears will argue that the 87 million number is close to accurate since the total planted acreage number is more than likely going to jump higher on the updated FSA estimates.
  • Soybean Yield - Did the rains the past few weeks help those producers most in need or will we see the soybean yield continue to drift lower and lower. The USDA is currently estimating a 36.1 soybean yield. My guess is once all of the smokes clears and dust settles we ultimately end up a little lower than this, somewhere in the 34-36 bushel per acre range is my guess. Maybe even a little lower. Keep in mind last years soybean yield was 41.5 bushels per acre.
  • Australian Wheat - The USDA is currently estimating total Aussie wheat production at 26 million metric tons, the trade however is thinking this number could ultimately fall to 18-22 million metric tons. 
  • Russian Wheat - The USDA is currently estimating the Russian crop at 43 million metric tons, well below the 56.23 million Russia produced last year. The problem is the trade thinks total Russian wheat production could easily fall below 40 million metric tons before all is said and done. 

 

Hedge fund money has been pouring into "commodities" the past several months as investors speculate on the promise of additional economic stimulus coming from the US, Europe and China. My question is what happens "IF" the powers-that-be disappoint? From the reports circulating the past few days, money flow into commodities just recently hit a new one-year high. In return, gold has traded up to six-month highs, copper has been seeing terrific gains the past few weeks, the corn and soybean markets recently ran to all-time highs and the energies have strong the past several months. The bottom-line is "money-flow" has been steadily pouring into the commodity sector on hopes of more quantitative easing. The CFTC recently reported "managed money" had increased their bullish bets on commodities to more than $111 billion as of last week. The fear as we approach another Fed meeting (this Wed/Thu) is that they could disappoint the trade by electing to "do nothing." Connecting the dots you have to figure if the funds have been adding length in anticipation of the big carnival coming to town, a few might get cold feet as they get closer to the front of the line. Essentially meaning fund managers who are scared about the Fed's rhetoric may reduce some of their long exposure heading into the big event this week. As we saw yesterday, just the slightest in fund liquidation could cause a few ripples in price. I do NOT look for this to be a longer-term trend or reversal of "money-flow." 

 

As for today, I suspect we will see more market consolidation ahead of the USDA report tomorrow morning and the highly anticipated Fed announcement Thursday afternoon. I continue to like the thought of being a buyer of Dec12 corn on the breaks and staying long bull soybean and soybean meal spreads. Spec's should continue to remain long going into the report, just make sure you are comfortable with the risk you have on the board heading into the numbers. Producers looking to make sales should pay close attention to the price action the next couple of days, a bullish USDA report followed up by a bullish announcement of more economic stimulus by the Fed could give us that pop to the upside we have been waiting for. Specs may want to use the initial upside momentum (if it occurs) as an opportunity to bank more profits.   With the Fed meeting following up the USDA data (the next day) a few of the funds might opt to take a little exposure off the books if they can catch a bullish number. In other words there is a chance you could see a "buy-the-rumor / sell-the-fact" type trade following an extremely bullish report.   

 

 

If you would like, I can send you our Supply and Demand worksheet that will help you understand exactly where the trade is estimating the numbers tomorrow.  If you would like to hear more of my commentary on tomorrow’s numbers, follow the link below to receive a Risk-Free 30-Day trail to my report. I will get our information out right AFTER we have a chance to digest the numbers and report the specifics.  

 

 Van Trump Report  

Could Wheat Start Gaining On Corn???

Sep 07, 2012

 

I have received some questions as of late about wheat prices rallying over corn prices. One reader was entertaining the thought of going long March KC Wheat vs short March Corn. I certainly believe that "IF" wheat were to catch a big story (production problems in Australia, continued problems in S. Hemisphere, export bans in Russia, etc...) Kansas City Wheat could be the market that runs as "premium quality" will be in short supply. The downside is the "Funds" aren't huge fans of the KC or Minneapolis contracts, and when a wheat story starts to gain traction the "money-flow" often gravitates toward the CBOT wheat contract. Not to say the reader is not on the right track. In fact, several large traders in the industry are currently building  positions going "long the KC wheat vs short the Chicago wheat" at $1.35 or better. I haven't really heard of anyone betting on the KC wheat over the corn market as of yet, but I could certainly understand the reasoning. I assume if corn ends up a little better than we are thinking and global wheat production continues to struggle, you will have a winner. I am just not so sure you want to bet on the corn crop "improving" from here.  I believe the current 123.4 yield could drift lower...maybe not as low as as the 115 estimate some are throwing out but closer to 120 seems to be a definite possibility. Total production estimates seem to be between 10.2 and 9.8 billion bushels vs the last USDA estimate of 10.779 billion. Obviously, the difference and concern is in the "harvested acres." The USDA is still at 87.4 million while the trade is thinking something much lower. 
 
*If you want to know our exact estimates, how high I think price will eventually go and when they will get there, simply sign up for the daily Van Trump Report. Best of all, Ag Web readers get it FREE for 30-days. No credit cards, no contracts to sign, no hassles. If you like it, just call and let us know you would like to keep receiving it. If you don't need it, simply do nothing and it will stop coming to your inbox in 30-days. Click here to get started!  Van Trump Report

 

What To Do If You Have Soybean Sales Booked Against The "NOV12" Contract

Sep 06, 2012
I recently received a question from a couple of readers about rolling their HTA type soybean sales from NOV12 to the JAN13 on the setback.  
 
Q. Kevin, what do you think of soy basis appreciation vs the SF3 (i.e. roll HTAs in soybeans from NOV12 to JAN13 at a penny inverse), looking for a significant pop in basis after harvest, but before the South American harvest? Also curious on your risk vs reward thoughts of owning KWH3 vs CH3 at 1.10?
 
A. Rolling the soybeans sales out into JAN is obviously a must, the question is timing. There are some who believe we could actually trade the JAN contract out to a carry into harvest pressure as many producers will elect to simply sell their beans right out of the field rather than storing into the steep $4 inverse. The flip side is that money-flow tends to love the front month. First notice day in the NOV futures is still a long ways out (Oct 31st), so we can not rule out more length being added. From my perspective you are toying with fire. Yes, the JAN may eventually work to a slight carry, but I am not sure waiting around for the $0.05 is ultimately worth risk that could come "IF" China decides to ramp up buying or the USDA leans on production. Bottom-line, you might wait a couple of days to see if we actually trade out to a "carry" but I wouldn't try and get too cute. 

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Could Europe Eventually Damper the Grain Rally?

Sep 06, 2012

There is no doubt the next 60 days in Europe could end up being the most decisive of the entire debt-crisis. Plain and simple there are several pivotal meetings on the agenda that could rock the "outside" markets if they don't go as planned. Lets also not forget we are only about 45 trading days away form the upcoming "US Presidential Election." Needless to say there will be a lot of "meat" on the plate to digest the next several weeks. To say the least I am concerned about the "outside" markets. Keep in mind, as of late the European debt story had been moved to the back burner. My fear now is the media may start leading this story once again as the hype surrounding the US drought comes to an end and the European leaders start to return form their summer vacation. Lets also keep in mind as the US election approaches and the B.S. starts to fly as both candidates tell us their plan for balancing the budget, creating more jobs, repairing the US housing market, etc...we may actually see more optimism and hope, therefore causing some additional strength and premium to be added to the US dollar. Remember, if Europe runs into more problems and the US dollar strengthens it will prompt more of a "risk-OFF" than "risk-on" attitude amongst the funds. Below are a few of the bigger government events and highlights we need to keep our eye's on the next couple of weeks: 

 
Even though the outside winds are at our back this morning, I question whether or not we can hold the rallies. The macro markets were hoping to hear some talk from Bernanke at Jackson Hole in regards to QE3...and it didn't happen. The markets were looking for a rate cut by the ECB this morning...and it didn't happen. Remember, talk is cheap. My guess is once the market stop rising on all of the "hot air" reality will once again set in and our hot air ballon ride could come to an end. Lets just hope it doesn't come crashing down! 
 
Do you realize for the past three months we really haven't encountered any outside macro market headwinds. The same exact length of time as the recent bull run in soybeans. Below are a few interesting facts my research team dug up. 
  • NOV12 soybeans posted a low of around $12.45 on June 1st, since then the market has rallied to yesterday's high of $17.89.
  • DEC12 corn posted a low of $5.06 on June 15th, since then the contract has rallied to an August 10th high of $8.49 per bushel. 
  • Crude Oil put in a low of around $78 in mid-June and has since rallied to just over $98.00.   
  • The S&P500 posted a low of 1,255.50 on June 4th, since then the US stock index has rallied to over 1,400. 
  • Gold has traded form a low of $1,548 an ounce to almost $1,700 yesterday. 
  • The US dollar was trading at a high of 84.00 on June 1st and has since traded sideways to lower, yesterday trading down to almost 81.00.
 
My point is we have not faced any real stiff outside winds since this rally began. If the funds get spooked by a macro market aberration I am afraid we could see some serious blood shed in the commodity sector. I don't know when or how it will occur, I just know it seems eerily quiet for there to be so many unanswered questions still circulating and so many economic problems unsolved. Below are a few key events during the next few days. 
 
Fri 9/7 – US monthly jobs report for August. could influence QE3.
9/7 - Informa releases latest crop data estimates.
Wed 9/12 - September USDA crop report. Expected to be volatile. 
Thu 9/13 - Fed Meeting. Will Bernanke and crew announce QE3?  
Fri 9/14 - Eurozone Finance Minister Meeting. Should give us new direction.
 

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What About Cattle Prices Moving Forward

Sep 04, 2012

 

Q. Kevin, we haven't seen you comment much on cattle lately and were just wondering your short-term and long-term outlook. 
A. As most of you know, I have been somewhat "neutral" cattle prices the past few months. If you look at the OCT12 Live Cattle contract you can see the market has traded in a channel the past five months between 120 and 127. Many readers write in wondering why I am NOT extremely bullish cattle prices near-term with the herd continuing to decline. Unfortunately, it's not that simple. Even though US beef production should be smaller than last year, beef imports look like they are going to be much larger and beef exports much smaller. Obviously the global economies will play a big determining factor in overall beef price. If the Asian and European economies continue to slide beef demand could fall substantially. Keep in mind domestic beef demand will also hinge on the direction of the US economy. I am not saying we couldn't move higher in the near-term, in fact, I am moving my rating to slightly "bullish" for the cattle market near-term, especially as we move closer to pre-holiday buying and fewer cattle moving into the feed lots. I am thinking cooler weather might spark a little more domestic demand followed by extremely tight supplies during the 4th Quarter of 2012. On the spec' side I will be waiting for a little pull back before I buy the DEC12 or FEB13 live cattle contracts. Producers wanting to make sales should simply continue to hold tight for the time being. 
 
For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond. If you are looking to be educated and not just told what to do, simply click here and get started!
 
 

Is It Time to Make a Few Cash Sales?

Sep 04, 2012

 

Producers continue to call in and e-mail asking my thoughts regarding making cash sales at these levels. My answer emphatically is YES, YES, YES!!! Even though I am conservatively bullish "PRICE" that does not necessarily mean store the bushels. Let’s think this through for a moment:

 

 

  • Brazilian corn is being imported into the US right during the heat of our own domestic harvest for some $0.30 to $0.50 cents cheaper than it can be originated for here at home. 
  • Producers to the south have had a good corn crop with limited storage. Bottom-line, the bushels (for the most part) are being harvested and sold...not stored.
  • Demand for corn is not only being "rationed," but many analyst actually believe it is being "destroyed" as traditional global importers find new sources, livestock producers look for and find some new alternatives and the ethanol industry is being restructured and shaken down right in front of our eyes. 

 

I could go on and on, but why??? The market is jumping up and down screaming to make cash sales and re-own with paper, but still many producers want to store the bushels. Remember just because you are bullish "PRICE" does not dictate storing the bushels. There are only three reasons to store corn: 1.) Low Prices  2.) Weak Basis or 3.) Good carry in the market. Think about it, "prices" are sky high, not weak. The "basis" is as strong as it can be for harvest time. And the markets are trading at a huge "inverse," not a huge "carry." As I have been saying for weeks, why store the bushels??? If you want to "speculate" on price then simply buy a call or enter into some type of limited risk bull strategy on the board. Just remember, as CEO of your farm you are a "risk-manager," NOT a "speculator." I know its tough but you have to keep the two positions separated.  

 

If you have further questions regarding specific cash sales recommendations, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

 

 

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