Current Marketing Thoughts
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Will Corn or Beans Win The Acreage Battle???
Dec 17, 2010
I have heard some interesting numbers being thrown around the past few days regarding planting intentions and in particular corn versus beans. The argument being waged by many here in the heart of the Midwest is that Soybeans look like they will "pencil" better than Corn. There are research studies out now as well as several big producers I have spoke with who tell me the numbers are encouraging them to plant more beans, especially with the skyrocketing price of Anhydrous in many parts. One recent study out of Illinois had beans penciling out about $18 per acre better than corn. Their numbers indicated roughly $200 less in inputs for the beans. Obviously this number is going to vary tremendously depending on your area and what you were able to lock in early on. A lot of the guys who have been planting corn-on-corn also believe they will see really good yields from the beans because they haven't planted them in a while. You also have to think we will be seeing more double crop beans than we have ever seen in the past. You know guys are going to try and plant wheat then double crop the beans, it only makes sense. Just yesterday I talked with a couple of guys that had given the wheat a go but have ran into very dry conditions and told me they will more than likely scrap that plan and switch over to beans. I know farmers traditionally like to plant corn, but with more feed wheat pouring into the marketplace and beans obviously penciling better at this time farmers may actually make the switch. If everyone jumps on the soybean bandwagon will this ultimately leave us short Corn acres or will farmers stick with the norm and continue to plant more corn acres? Right now it is just too early to call, the beans however are certainly doing all they can to make it more enticing.
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Quick Thoughts From December 17th 2010
- I have been told the river in Illinois is still frozen so barges down by St Louis and further South seem to be in higher demand.
- There was evidence of China canceling at least four cargoes of beans in the sales data. This should not come as any big surprise, as I have been telling you the Chinese market has drastically slowed the past few weeks. On the flip side there are rumors that are looking at more beans for April delivery from either the US or Brazil.
- Some rumors are floating around that China officials have order vegetable oil producers to increase production and this might help some with short-term demand.
- The CFTC rule change proposals released yesterday could ultimately force up to 80 large grain trading funds to change or alter their strategies, certainly not bullish news, but I doubt it will have any huge bearish impact at this time.
- The most recent Commitment of Traders report showed managed funds have trimmed their long position by nearly 100,000 contracts since late September. This is a much larger set-back than I had thought. This certainly gives them room to increase their long positions.
- A few of the big boys are thinking that China's corn reserves may have actually been drawn down by as much as 45 million tons this year.
- I am told Soybeans from Argentina, specifically from Parangua are still cheaper for China than those available in the US. The good news though is that we are closing in and getting more competitive.
- Remember, Informa will be out with their private crop forecast today. In November they had the corn crop estimated to be 12.592 billion bushels and an average yield of 155 bushels per acre. They had estimated soybeans to yield 44 bushels per acre with a total crop of 3.425 billion. If Informa comes in with lower yields than the USDA's current forecast (Corn 154.3 bushels per acre, and Soybeans at 43.9 bushels per acre) the market will certainly view the news as bullish. I personally doubt Informa will veer far from the mother ship, if so it could certainly catch the market by surprise.
- More Importantly I want to see Informa's "Acreage Estimates" for 2011. Remember, their massive corn acreage estimate of 4.9 million sent the corn market spiraling on their last report. They estimated beans acreage at 1.9 million. I think we will see them make some changes to these numbers. If I had to bet I would say they will reduce the corn acres and raise the beans. They may also lower the wheat acres.
- Cattle On Feed report is out at 2:00 today. I am hearing the average "On Feed" estimate is 102.5%, the November "Marketings" around 110% of a year ago, and November "Placements" at 105.1%.
- There is some worry that Argentina may actually get more rainfall than many traders had originally anticipated, there is also some talk now of another small front coming through between Christmas and New Years.
- Overnight Moody's cut Ireland's rating by 5 notches, this seems very extreme and may cause some increased worries and concerns in the EU and cause the outside markets to work against us.
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