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June 2013 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.

Raise in Corn acres? Are you serious?

Jun 28, 2013

 Corn tested major technical support at the $5.11 area Friday. As suspected, the USDA was apprehensive in making any major cuts to corn acreage and the bulls are noticeably disappointed. "Resurvey" of some sort is obviously around the next corner as Iowa corn acreage is ONLY reduced by 200,000 acres, Minnesota only reduced by 300,000. Keep in mind the net fund "long position" is now the smallest it has been since 2010. IF there were to be some type of bullish "weather" story pop up they certainly have enough fire power sitting on the sidelines to cause a massive splash!  The problem right now is the forecast into early-July looks to be very good for many key US growing regions. I suspect Monday's "crop condition" report will show another uptick and more downward pressure will be applied. As stated the past several weeks, continue to keep hedges in place. I am afraid we are still nowhere close to seeing the bottom of the barrel. Once the $5.00 level is breached the bears will quickly try and make the push towards the $4.50 level.  For a FREE 45 day trial to my report CLICK HERE .

Brazil's soybean yield could inch higher...

Jun 24, 2013

Brazilian farmers starting to say they might not plant near as much second crop corn next year. Prices have hit their lowest point in three years, to roughly $2.50/bushel.  The decline is in part a reflection of Brazil's weak currency, the reel, which is at a 4-year low. The other pressure comes from a typical depression in prices that occur every year at harvest.  This years second crop will account for 55% of the countries total corn crop, whereas ten years ago it was only about 25%. The value of the crop at this point is well below production costs, which could cause farmers to look at some alternative secondary crops.  If they opt for faster maturing crops, they could modify their soybean growing season, possibly planting longer maturing soybeans and skipping trying to harvest during January's rainy season, which could result in higher yields.  

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Strap in...this week could be a wild ride in the grains!!

Jun 24, 2013

 Wild weather patterns, USDA uncertainty and July deliveries should make this an extremely volatile week in the grain and soy markets. Producers should be looking to make final catch-up sales before what could be "game changing" data by the end of the week. Some type of floor in DEC13 corn between the $5.50 and $5.70 level still seems to make a lot of sense to me. A similar type of strategy in NOV13 soybeans, with a floor of some sort in place looks to be a smart play. There are just too many extreme dynamics in the marketplace right now to be taking "unprotected" risk. Below are just a handful of reasons why we need to proceed with caution and extreme respect for today's volatile markets.: 

 

  • Money-Flow - More big banks looking for ways "out" of commodities rather than "in." Players in the game continue to consolidate as funds shut doors due to lack of performance. The rocking of the boat could be extreme in both directions as many who have been in the commodity boat look for ways to exit. 
  • US Fed What is the Fed's next move?  How will that move ultimately effect commodities? In particular how will the US dollar react and how will that in turn  help or hurt US Ag exports? 
  • China - Liquidity issues, shadow banking and thoughts that the Chinese government is trying to transition into more "consumer" based spending is cause for concern. How fast will the remaining lower-class transition into the rising middle-class? Any stumble by the Asian giant and global supply quickly overwhelms global demand. Pace of expansion and contraction will ultimately dictate volatility and greatly influence Ag prices.  
  • South America - Production and technological improvements are long-term bears, but logistical concerns, political problems and rising inflation makes for extreme uncertainty in South America.    
  • Black Sea - Russia, Ukraine and Kazakhstan production rebounding. Cheap supplies begin to attract many former US buyers. Increasing geopolitical tensions between US and Russia might soon start to become a more pressing Ag issue Must be monitored.    
  • India - Rapid rise in lower-class to middle-class ultimately makes India more of a driving force than China.  Glut of government wheat inventory once again being released for exports, possibly changing global trade dynamics.   
  • Japan - What had been for years the worlds second largest economy is starting to slip from the ranks. Can Japan hold on?  Will Ag demand increase or will they continue to slide?  
  • Middle East - Egypt, the worlds top wheat importer, has been facing extreme political turbulence and change. What will be the outcome?  Global energy boom could have major long-term implications for oil export dependent countries in the Middle East.  How will Saudi Arabia and other OPEC nations survive if global crude oil inventories skyrocket? More importantly what happens to their Ag demand, and how will they pay for it? 
  • Global Production - With three major highs (2008, 2011, 2012) in the past five-years (unprecedented), and some extremely profitable gross margins, Agriculture has attracted many new participants around the globe. This burst in production and participation will create serious waves as supply and demand search for balance and equilibrium. 
  • USDA Data - Major changes both here in the US and globally have presented the USDA with some extreme challenges. With these challenges have come highly unpredictable data sets.  More farm storage, ethanol usage, DDGS, more global participation, more demand from countries like China (where data reporting is suspect) all make for a more difficult task of estimating supply and demand. In return the market seems to be more frequently caught by surprise.   
  • Global Weather - Extremes in weather might be an understatement for what we have seen in the past five-years. The question is are we just in the beginning phase or period of more intense weather extremes or are we head back to more normal patterns? With global demand continuing to push higher as the population surges towards 9 billion, weather will become extremely important, at times producing panic like buying and selling. 

 

Don't miss out on my breakdown of the USDA's Quarterly Grain Stocks report this Friday, should be a big one...

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What to watch for on today's SOYBEAN close

Jun 21, 2013

Soybean bulls are obviously concerned about increasing outside macro market pressure, in response, profit taking and liquidation was yesterday's theme. There is also some concern about the recent setbacks in both India and Brazil's currencies, as both are hitting new lows, making their exporters all the more attractive. Just look at yesterdays dismal USDA weekly soybean export sales number of 161,100 metric tons vs expectations of between 350,000 and 600,00 metric tons. China's dismal growth isn't helping matters either. As we know, high expectations have been placed on the growth of their middle class to keep soybean demand high, but if that growth doesn't end up happening at the rate the market has been anticipating, or "spending" really starts to dry up on liquidity issues, it could have a very negative effect on prices.  Analysts have already been saying the USDA's estimate for Chinese soybean imports is way too high, the latest worries just give the bears more credence to their argument. Question is, to what degree and when is that expectation going to be reflected in our current price? Technicians are keeping a close eye on nearby support thought to be around the $12.80 area, which has been breached in the overnight session. I would advise doing the same. A close below this level on the week may prompt further long liquidation by the "tech" crowd.  Trade continues to question USDA's next move in Friday's report: How far will they raise domestic crush numbers? Will they cut exports? Will they find more bushels, saying they underestimated last years crop, and by how much? For an inside look at what is driving the grain prices,CLICK HERE, for my full report.

US Stocks/China Growth: Risk off for Grains?

Jun 20, 2013

US Federal Reserve kept monetary policy on "hold," but presented an optimistic economic outlook, that will keep the debate alive about "tapering" the $85 billion a month in asset purchases. In a nutshell it seems if "inflation" rises to the 2% Fed target and "unemployment" falls to 6.5%, the Fed will at that juncture start to discuss RAISING short-term interest rates. As of right now however that seems to be a million miles away. More nearby however may be the "tapering" of the $85 billion in asset purchases each month. Since the Fed can no longer take the Fed fund rate much lower it has opted to use "asset purchases" to further stimulate. When will these monthly purchase STOP has become the topic of heated debate. From what I heard from Bernanke, in a perfect world, monthly asset purchase will be no more by the time unemployment falls to 7% and the inflation rate has stabilized around 2%. Bottom-line, the Fed wants to take their foot off the gas pedal as the car is picking up speed...but by no means do they want to put their foot on the brake. And if "consumers," for some reason elect to hit the brakes (stop spending) on their own accord then the Fed may be forced to once again hit the gas pedal. As you can see, this has become a very tough juggling act, and just how the Fed plans to get the proverbial "Genie" back in the bottle will remain the topic of great speculation and the driving force of the market for several weeks to come. Moral of the story, we have seen severn consecutive days of triple digit swings in the US stock market...expect extreme volatility to continue in the coming weeks as the Fed tries to shift gears. I should also point out that Chinese manufacturing data released overnight fell to its lowest levels in the past nine-months.  The thought of Bernanke and crew easing off the throttle and the Chinese economy continuing to struggle is causing a "risk-off" mode across the board: Crude Oil down $3.00; Gold down over $90 per ounce to NEW 2-year lows; Silver down $2.00+ to levels not seen since late 2010; the S&P down $30, US dollar higher!!! To get my detailed report, CLICK HERE, Thanks.

 

Bulls beware!! Bird Flu confirmed in Arkansas

Jun 20, 2013

 BIRD FLU REPORTED IN ARKANSAS - From what is being reported a chicken in Scott County AR has been confirmed with avian influenza and state officials have quarantined poultry within a 6.2-mile radius around the infected bird's farm. The Arkansas Livestock and Poultry Commission said Wednesday that the chicken tested positive for H7N7 low pathogenic avian influenza. The agency is coordinating its response and deciding on additional testing with the U.S. Department of Agriculture. Only the USDA can officially confirm avian flu cases. Officials said recent flooding in Scott County was conducive to the spread of the virus. Chickens get avian flu from infected waterfowl or contaminated water. The Arkansas Health Department says there is no public health threat and that properly cooked poultry won't spread the disease to people.  For a FREE 45 day trial to my report CLICK HERE .

Weather Market: How will it Play Out?

Jun 19, 2013

Weather wise there was some excitement form the bulls as a much hotter and drier pattern looks to get established latter this week. Many of the bulls are arguing this pattern could eventually push well into mid to late-July. A period that is being critically monitored due to a large portion of the US crop "pollinating" during this tight window (July 15th - July 30th). As most of you know, betting on longer-term weather forecasts rarely pay good dividends. Certainly the heat looks to be around the next corner, but how intense, how long it sticks around, and what it ultimately does to saturated soils remains a major question mark??? Just be careful getting yourself all bulled up about longer-term heat and dryness. Keep in mind the market is still trying to digest too much rain. With the soil moisture profiles vastly different form last year. I am thinking it will take the trade a considerable amount of time and "proof" to get overly excited about excessive heat and drought like conditions. For my report CLICK HERE and I will send you my full report.

Uncertainty in crop conditions continues to linger...

Jun 18, 2013

 Corn bulls may be excited to hear that some big yielding acres in both IA and MN are still "unplanted." Several sources in the industry thinking some 850,000 plus corn acres in IA and some 540,000 acres in MN are still "unplanted."  Trade also looking at the fact 16% of the IA corn crop is already reported in "Poor-to-Very Poor" condition (CO 16%; IL & TX 11%; MO 10%; KS 8%). Also keep in mind, as of this past Sunday, there were still more than 5.5 million corn acres not yet "emerged" in parts of IA, IL, MN, ND, and WI . Moral of the story, lots of early "uncertainty" in new-crop corn still gives the bulls something to cheer about despite bearish balance sheet projections and improving overall "crop conditions" in several states.

As for the nearby JUL13 contract, which has gained close to $0.30 cents on the SEP13 contract in just the past 10-tading sessions, may continue to gain steam as export inspections came in stronger than anticipated. Keep in mind "First Notice Day" for the JUL13 corn contract is June 28th (same day as the big USDA Quarterly Stocks report), while "Last Trading Day" is set for July 12th. Many traders pointing out the fact the MAR13 contract went off the board at around $7.40, the MAY13 contract went off the board at around $7.20...trend crowd seems to be looking for JUL13 contract to go off the board around $7.00. Personally I am a little concerned, since I am hearing stories that spot basis bids in some areas are starting to fall. Actually there are reports  of some end-users already rolling bids to Sept and NOT offering anywhere close to the recent premium associated with the July contract??? As I continue to preach, be careful holding these old-crop bushels for too long. If nothing else try and get that big basis premium locked up. Click here to receive my daily report and I will send it directly to your email each day. Thanks 

Soybean Complex: Which Way do we Head Now?

Jun 18, 2013

Soybean traders debating the USDA's most recent "planting progress" estimates, bears are thinking the 85% is too low considering the improved weather window. Bull's on the other hand thinking the 85% estimate could still be too high. Hard to swallow the USDA's report of Michigan being 100% planted. When producers from the state called into the office saying they still have 20-40% to plant on top of several patches of "re-planting." Also interesting to note is the fact there is still thought to be over 26 million soybean acres not yet "emerged." Over 4 million in IA alone are not yet emerged, almost 4 million in the Dakota's, another 3 million plus in IL, close to 2.5 million in MN, another 4 million plus between MO and KS, etc... Same song and dance, with old-crop supplies so extremely tight the trade is apprehensive to take away the recent "weather premium" that has been added. Bulls want to actually see that the crop is planted and in good condition before giving up on another run above $13.50 in new-crop.  

I should also point out yesterday's NOPA crush numbers where much better than the trade had been looking for.  Most insiders thought the crush numbers were going to come down from April's 120.1 million bushel estimate, instead the May crush was reported at just over 122.6 million bushels. Mixed was the fact that meal exports actually fell from April's 506 million tons down to just under 426 million in May. On the flip side soy oil stocks actually dropped. Bean bids remain "unchanged," as there remain questions surrounding near-term export and domestic demand estimates. Producers can continue to hold final 5-10% of production, just make sure you keeping the basis locked and your price floor in place. Only real thing to speculate on is a price squeeze of some sort on the board. Bull-spreaders and product spreaders should proceed very cautiously, easy money is gone and game could change in a blink of an eye. Several respected sources continuing to eye better risk-to-reward ratios in being long NOV14 vs. short NOV13 contracts. Might not be a bad play for producers to consider as well (make sure you talk it over with your advisor and understand all of the associated risk with spread trading).

Make sure you understand, bearish traders are becoming more concerned about price appreciation in nearby soy contracts, because "meal" premiums in China are continuing to decrease as more and more South American supplies hit their shore. There is also some speculation that the USDA might come out and say US soy production last year was "understated" by 15 to 25 million bushels, essentially offsetting the thoughts of any increases in domestic crush estimates. The "crush" number looks to be one the USDA has no choice but to increase, how they choose to offset this number is the question...further lower exports or magically find more bushels??? Maybe both! For an inside look at what is driving the grain prices,CLICK HERE, for my full report.

Something to consider if you need to secure diesel fuel...

Jun 17, 2013

Hassan Rowhani surprise victory this weekend as the new Iranian President has the trade wondering what exactly this means moving forward. Rowhani, who was never considered a frontrunner ended up winning by a landslide. In fact just a week ago, Rowhani was seen as overshadowed by candidates with far deeper ties to the current power structure. Word is during his campaigns he talked about establishing a government in which he would save the country’s economy, end the current radicalism, and hire back moderate forces to help reconcile with the world and ease international sanctions over the nuclear program. Keep in mind "international sanctions" have pushed Iran's inflation to more than 30%, and caused their national currency, the rial, to  drop by more than 50%. While this appears to be a step in the right direction, it does not translate directly into power in Iran's Islamic system. The ruling clerics and their protectors, the Revolutionary Guard, still maintain control over all key decisions such as nuclear efforts, the military and foreign affairs. 

There is also some concern in the trade as news circulates that the US has  officially authorized weapons aid to Syria Rebels. The full scope of the assistance authorized by the White House is still unclear. But the administration could give the rebels a range of weapons, including small arms, assault rifles, shoulder-fired rocket-propelled grenades and other anti-tank missiles. Russia has stepped forward and criticized the US decision to arm Syrian opposition fighters. And in turn say they plan on following through with sale and delivery of $900 million in S-300 air-defense missiles that had been ordered by the Syrian government. With two heavy weights clearly lining up in opposite corners, the crude oil market has managed to push itself to new 9-month highs.

UPDATE: Iran recently annouced that they will be sending 4,000 Revolutionary troops to Syria to fight alongside Syrian President Bashar Assad's forces.   

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Lets play the corn market out...

Jun 17, 2013

For argument sake lets assume production is "moderately" tapered back from earlier estimates (say to 145-155 bpa). If this ends up being the case, then it will eventually become ALL about "DEMAND."  As we are aware, this could be where we struggle to gain traction.  My thoughts are it all hinges on "price." Most in the industry are currently questioning the USDA's demand estimates, believing they are overly optimistic, especially the 1.3 billion bushel export estimate (high by 200 to 400 million) and the feed usage estimate. I would agree with the bears, at our current "price" the estimates simply seem too high.

But if prices where to fall sub-$4.50 like many bears argue, then the USDA's "demand" estimates could be right on target. A lot will obviously hinge on China and whether or not they try and rebuild government surplus on the break.  My hunch is not only will China, but other importing nations will also try and increase supplies on any major price break sub-$4.50. Bottom-line, without some type of EXTREME production setback, you can shave 700 to 800 million bushels off "production" but still be left with a new-crop ending stocks number of over 1 billion bushels. With this being the case, prices well above $5.00 are still too high to attract enough demand to squeeze the balance sheet.  

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Keep your eye on fertilizer prices in the road ahead!!

Jun 14, 2013

Planting delays are NOT the only thing concerning producers in regard to "yield." Fertilizer, or lack there of, seems to be a concern in many growing regions. The problem is the small planting window created a huge demand for fertilizer in a very short time period. It is being estimated that US farmers planted about 42 million acres of corn in one week last month, almost twice as much as we would normally ever plant in one week. With many ag retailers forced to draw supplies out of the Gulf or Canada producers are seeing unusually long delays for key crop nutrients like urea and liquid nitrogen. The crop can hang on for a while without any fertilizer, but if producers are forced to wait too long the plant will certainly see some stress and top-end yields could be reduced. Believe it or not many inside the industry think it takes more than 60-days to get fertilizer from its origin into the farmers hands.

Point is, you might be seeing a jump in fertilizer prices, not due to lack of supply, but rather logistical constraints. Remember, our goal is to try and stay one step ahead of the crowd, make sure you are skating to where the puck is going to be and not where it is currently at.  

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Higher US Hard Red Wheat production???

Jun 13, 2013

 

Wheat traders, myself included, are left somewhat scratching our head as the USDA opts to bump HRW wheat production estimates here in the US higher rather than lower. I wasn't looking for any type of major reduction, but I am having a hard time figuring out just exactly where the big HRW improvements have come from. Sure, some guys down South are seeing better than expected yields, but I am also hearing more and more from producers who are having to "zero" out fields. I guess as wheat has proven time and time again you can never count it down and out until the final bell rings. On the flip side the USDA did raise their wheat export numbers, I am assuming on due to the recent Chinese interest in SRW wheat. Producers who have been apprehensive to make sales may now have very options as the USDA starts to "increase" production here at home (not further decreasing), and the Black Sea region is just days from harvesting a much more plentiful crop when compared to last year. Despite production downgrades by the USDA yesterday, Russia and Ukraine are still expected to export 6-8 million metric tons more than last year. Bottom-line, without a major bullish US production story, the only real "bull-card" left in the deck right now is some type of smoking-gun in China.  My worry is that with several bearish cards in the deck (Australian production numbers increasing, Black Sea harvest quickly approaching, US HRW wheat not completive in global marketplace, India back in the exporting game, Canadian export competition increasing, EU production rebounding to some degree, etc..) we are more apt to see these bearish cards being dealt than we are the Chinese situation being revealed. Therefore, I am of the opinion producers should continue to use any type of bullish weather scares or Chinese headlines as an opportunity to reduce more long-term risk.  To recieve a 45-day free trial to my daily report CLICK HERE 

September corn continues to be a major question mark??

Jun 12, 2013
Some say there will be a major push to higher ground as supplies tighten, while others believe Sept ultimately goes off the board (more traditionally) at a discount to Dec. Below are a few thoughts I have been hearing and something to consider if you are concerned about how this old/new Sept contract is going to play out.
  • Ethanol margins obviously continue to fuel demand for old-crop corn. The question is will margins remain strong enough to entice plants to continue bidding up price. One concern is the fact Brazilian ethanol supplies are rumored to soon be landing on US shores. I haven't been able to get an exact handle on the amount, but talk is somewhere between 200 and 400 million gallons could soon be coming our direction. When it shows up is another question. If it is delayed, and plants can continue to operate at these very lofty profit margins, then I could see the Sept contract continuing to be bid higher...guess is sometime into mid-August. From that point forward you have to imagine South American imports and early US corn will help offset demand.  
  • Producers talking that harvesting corn "early" is still their plan. Many saying that drying corn at 30% moisture is still worth doing considering the premium. There is also some speculation that with producers being forced to harvest late planted corn early this season, trying to beat the cold, we could surprisingly see a jump higher in overall yields. Thoughts are producers the past couple of years have left corn in the field too long...not wanting to incur drying expense, this in turn has shrunk yield to some degree. Being forced to harvest the corn a little earlier may provide higher test-weights and yields.  
Moral of the story, the SEP13 corn contract may continue to gain on the DEC13contract, at least until South American ethanol supplies start showing up. Profit margins at ethanol plants are the best they have been in a long time and this should allow many plants to continue bidding up for corn in the near-term. My thoughts are once these margins begin to tighten, on higher corn costs and competition from imports, plants may simply opt to close the doors for some extended summer maintenance.  Ultimately waiting for new-crop supplies to become more readily available. Rolling old/new bull-spreads forward into the "Sept vs. Dec" might pay dividends the next 30-60 days, but just be careful holding old-crop bushels for too long... The party could end in a real hurry with Brazilian ethanol on the way. Keep in mind Brazilian ethanol imports not only pencil into California but also into the Gulf! 
 
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Crop Production Report Estimates

Jun 12, 2013

Below are the latest trade guesses and estimates for the broader numbers that will be released today:  


US Ending Stocks 2012/13
 
June #
May USDA #
Avg Guess
Range of Guesses
Corn
???
0.759
0.759
0.684 - 0.919
Soybeans
???
0.125
0.121
0.080 - 0.140
Wheat
???
0.731
0.733
0.715 - 0.751


US Ending Stocks 2013/14

 
June #
May USDA #
Avg Guess
Range of Guesses
Corn
???
2.004
1.795
1.175 - 2.200
Soybeans
???
0.265
0.268
0.185 - 0.344
Wheat
???
0.670
0.640
0.501 - 0.713


Global Ending Stocks 2012/13

 
June #
May USDA #
Avg Guess
Range of Guesses
Corn
???
125.430
125.975
124.500 - 128.200
Soybeans
???
62.460
62.105
60.500 - 63.000
Wheat
???
180.170
180.395
179.800 - 181.395

Global Ending Stocks 2013/14
 
June #
May USDA #
Avg Guess
Range of Guesses
Corn
???
154.630
149.571
141.510 - 155.200
Soybeans
???
74.960
73.512
68.200 - 76.000
Wheat
???
186.380
185.144
179.800 - 188.500


US Wheat Production

 
June #
May USDA #
Avg Guess
Range of Guesses
All Wheat
???
2.057
2.034
1.872 - 2.109
All Winter
???
1.486
1.467
1.401 - 1.523
Hard Red Winter
???
0.768
0.752
0.676 - 0.815
Soft Red Winter
???
0.501
0.505
0.492 - 0.517
White Winter
???
0.217
0.210
0.200 - 0.217

 
 

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Don't rule out $13.50 soybeans...

Jun 07, 2013

 Soybeans bulls continue to believe the market will eventually test the early 2013 new-crop highs set at $13.50^6 on February 4th.  Bears might be laughing, but as of right now I wouldn't rule this out of the realm of possibility. Especially as more and more producers talk about soybean acres that simply are NOT getting planted. After being on the phone extensively the past few days with producers across the country, I am definitely second guessing my original thoughts of 1 to 1.5 million more bean acres going in the ground. In fact I am starting to wonder if we will even reach the USDA's current estimate of 77.3 million acres planted???

Moral of the story, I am becoming more bullish as each day passes. The recent "major" tumble in the US dollar is also reason to move towards a more bullish tilt. Do realize the US dollar has now setback to levels not seen since early-Feb. I know many traditional "Supply & Demand" traders will tell me I am nuts, but when the US dollar first started to stumble (around May 23-24), it was the exact same first time NOV13 beans decided to break out of the upper-end of their trading range at $12.40.

My point is, several stars are starting to move into alignment. Not that they are there as of yet, but certainly moving in that direction (i.e.): bullish production headlines based on weather complications in the US; talk of the Brazilian soybean crop estimates moving lower (CONAB cutting another 200,000MT's from its estimate, now more than 2 million metric tons below the USDA); more bullish technical patterns stirring the interest of trend-following funds; a weakening US dollar fueling thoughts of a more "risk-on" type environment.

Bottom line, bears need to be careful dragging their feet. Yes, "rain makes grain," but remember, "planting in the mud makes the crop a dud.."  Click here now fill out the basic information and I will send you my full report.

Is warmer/drier weather on the way??

Jun 06, 2013

Weather forecasters are starting to indicate a possible change in the current "pattern." With hotter, drier conditions and a more typical summer "ridge" possibly on the horizon, "weather bulls" are starting to reconsider their long positions. I am still seeing rain in the forecast, but temps in the lower US Plains, expanding to the north, the Delta and the western corn belt areas may soon start to see 100 degree plus days right around the next corner. I suspect eventually summer will arrive, the question however is, how much damage has already been done?

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Why I'm holding off pricing new crop corn?

Jun 05, 2013

Corn supply estimates, in my opinion, have to start being tapered bad. Planted acres look as if they will be trimmed back by 3-5 million, and yields will more than likely be moving lower. My gut tells me "harvested" acreage will eventually end up being somewhere around 86 million. In addition the 158 yield currently being estimated by the USDA seems to be more like 155 or possibly even sub-150 on continued moisture problems in key producing states like IA, MN, IL etc...  Bottom-line, despite bearish talk of China finally purchasing Argentine corn, the bird-flu virus hurting demand, Brazil producing another record crop, Ukraine supplies being much more competitive, and so on, I am going to continue staying in a "holding pattern," opting not to price any additional new-crop bushels until more cards are dealt from the deck.

Right now, and for the next 60-days, I think it is ALL about US "weather" and "yields." With 45% of our cash sold and revenue insurance in place, I feel comfortable calling all bets in order to see a few more cards. I would actually move to an even more bullish bias "IF" the corn market could find a solid "demand" story. Below is a simply guide to where I think prices could go according to yields. Keep in mind this formal hinges on harvested acres falling to 86 million. Yields are listed in ranges, Example: a yield in the 150 range will more than likely keep prices between $4.50 and $6.00 depending on what end of the range yields ultimately fall. Hope this gives you a little better roadmap.

 

  • $8.00 (+) = 86 mil acres @ 120's bpa = 10.3 to 10.9 billion bushels
  • $7.00 to $8.00 = 86 mil acres @ 130's bpa = 11.2 to 11.9 billion bushels 
  • $6.00 to $7.00 = 86 mil acres @ 140's bpa = 12.0 to 12.8 billion bushels 
  • $4.50 to $6.00 = 86 mil acres @ 150's bpa = 12.9 to 13.6 billion bushels 
  • $3.50 to $5.00 = 86 mil acres @ 160's bpa = 13.7 billion to 14 billion plus 

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Will corn acres keep dropping?

Jun 04, 2013

 Corn traders continue to contemplate acreage numbers, in particular how much will ultimately get "planted." My best guess as we sit here today is somewhere between 7 to 8 million acres of corn are still not in the ground as of yet. In the end 3 to 5 million corn acres may simply NOT get planted. Most suspect those in the central corn belt will continue to plant until mid-June, while others have already given up hope. Because of this, several analyst are already dropping their planted acreage estimates to between 93 and 94 million acres vs. the current USDA estimate of 97.3 million acres.

Ultimately, depending on how you want to do the math and how creative you are with the balance sheets, you are still looking at a very sizable carry. That is "IF" the growing season plays out with no major weather related hiccups. Something we haven't seen in the past few years. I personally believe there is a much greater chance for corn yields to suffer than I do bean yields. Producers continue to tell me how hard is it to keep up with the nitrogen losses, leaching and side dressing. With this in  mind producers need to continue being patient with their marketing program and temporarily pausing makes the most sense. Those who need to get caught up (to around 45-55% sold) should do so with prices still above $5.50, but beyond that level I remain hesitant.

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Crazy weather whiplash!!!!

Jun 04, 2013

THIS WAS THE WETTEST SPRING EVER RECORDED FOR IOWA!!! 141 years of weather record keeping and not a one with more moisture. This was the third coldest spring in Minnesota history and the wettest every for southeastern Minnesota. Just 90-days ago 70% of the state of Minnesota was considered to be in a "severe drought" today that number is below 3%.  Unbelievable rebound in moisture, now the question is will the spigots abruptly shut off or will continue to get more regular rainfall? As Hurricane Season Starts, US is facing heightened risk. More Americans living on or near the coast, coupled with a peak in the natural hurricane cycle, and warmer than normal sea surface temperatures, may set the stage for a very active hurricane season. Wild weather remains the theme: In New York, a trace of snow fell on May 24th — later than ever before recorded—in Syracuse and Binghamton. Southeastern Minnesota and far southwest Wisconsin picked up 2 to 3 times the normal amount of rain in May.  Wildfires are breaking loose out west. Southern California is reporting a fast-growing wildfire has spread to 30,000 acres, expanding by 50 percent in the past couple of days. It has destroyed six homes since it broke out last Thursday. In world news, Spain's manufacturing jumped to its best level in two years with an increase to 48.1 from 44.7. The question now being asked is, "Has Europe finally bottomed?" If so then is China officially on the mend? Moving forward, "macro" traders seem eager to see the latest monthly employment numbers, set to be released Friday morning, and hear the latest rhetoric from several US Fed officials slated to speak at various events this week. I am not looking for any real surprises, and suspect the US stock market will eventually post another round of NEW all-time highs as the trade continues to ponder, do we move from "quantitative easing" to "quantitative squeezing?"  There is some hope in Washington that leaders might make a little more progress towards approving a NEW "Farm Bill" in the next few weeks.  To hear about what will move the markets next click the link below and I will send you my full report..daily.

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What the corn planting delays mean for your operation??

Jun 03, 2013

Corn, especially new-crop continues to be a follower. This is hard for many (including myself) to understand considering it is the corn acres that are most in question??? Reports over the weekend talk about record turnouts in Minnesota for producers considering "preventive plant." Some reports circulating indicate 500 producers at one insurance meeting. There is now talk in the trade that 3-5 million acres of corn might not get planted. Most in the industry seem to believe a delay of one week generally equals about a 1-3% cut in intended corn acres. A two-week delay (past mid-May for most) farmers will generally only plant about 95% of the corn acres they have planned. Simple math then tells us with the USDA currently estimating 97.3 million corn acres, a 3% to 5% reduction would be equal to to around 3 to 5 million acres. In many parts to the corn-belt you may only have another 5-7 day window, while producers in the southern parts of Missouri and down into the Delta seem to have already thrown in the towel on thoughts of getting any additional corn in the ground (most focused now on soybeans).

Corn bulls are also becoming more concerned about "emergence," especially with the forecasters predicting a wetter June. With nitrogen leeching and side-dressing a concern, the high-end of the yields could soon be in jeopardy??? Before you get overly bullish just keep in mind this rally is a "supply" driven rally, which can react much differently than a "demand" driven rally. Simply stated, with prices rallying, it wouldn't surprise me to see the USDA start to back of their demand estimates, even in old-crop. If that were to be the case you might start to see ending stocks swell in old-crop, meaning additional carryover bushels could offset any type of yield loss or production setbacks being forecast in new-crop. Don't forget new-crop demand estimates are also considered very "optimistic" at this point in time and obviously based on LOWER corn prices. I am certainly not a corn bear, in fact I have been "neutral-to-bullish" for a few weeks. Below are a couple of direct statements I recently made regarding "new-crop" corn. Lets not get trapped here, but lets be cognizant of what is taking place.  

Tuesday, April 23rd I wrote: "I am starting to think the market could be getting out over the tips of it's skis just a bit. Meaning we could be getting a little ahead of ourselves to the downside in new-crop. Yes, I certainly understand the longer-term "supply and demand" side of the equation, along with the implications associated with a 150-plus yield crop and sub $4.00 corn. The concern however that I currently have is that a large majority of the crop is still sitting in the bag, and there are a ton of weather related "wild-cards" being added to the deck each day. I am certainly NOT saying to lift any hedges or re-own previous cash sales, but investing a little revenue in some type of bullish "short dated option" strategy (just-in-case) might be a smart play."

Thursday, May 9th I wrote: "As for new-crop corn I am actually starting to become a little more "bullish." Certainly not yet to the point of irrational exuberance, but yes I am thinking about sharpening my bull horns. I know a move more towards the bullish side of the fence may sound strange, especially considering all of the bearish rhetoric, but as I talk to more producers I am starting to become more concerned about our overall acreage and "yield potential." Yes, I know its early, and that the USDA generally doesn't give much credence or yield reduction to a late planted crop, but from where I sit today a sub-150 type yield is certainly not out of the question."

Moral of the story, continue to sit tight with 40-50% cash sold. For the first time in months, I elected to reward the recent rally in new-crop (2013) corn with a small 5% cash-sale, with prices just above $5.60 last week. This brought our "cash-sold" position to 45%. With heavy near-term technical resistance at or around the $5.70 area, producers who need to make "catch-up" sales should heavily consider. For me, I am going to hold off and wait to see if new-crop prices can push through the $6.00 level before pulling the trigger on another round of sales. During the next 60-days, from my perspective, anything is possible??? With close to 50% sold, at good profit margins, producers should feel very comfortable being patient right in here and letting things play out a bit. Producers should continue to use the weather rallies to help reduce risk!

To hear about my next cash sale click the link below and I will send you my full report..daily.

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Soybeans Remain Strong Before Report

Jun 03, 2013

Soybeans continue to lead the market, fueled by another round of massive rains over the weekend, cooler temps in the forecast (causing concerns about it drying out), and a wide variety of opinions regarding new-crop production and old-crop demand. Some sources will tell you new-crop soybeans are considered "LATE" after June 1st. Insurance companies however tend to pay out full-guarantees on beans planted up toJune 15th. Others believe Spring has simply been pushed back and soybeans won't have "yield-drags" unless planted past late-June. Regardless, the ruckus in the market has started to pique the interest of the trend following funds, especially now that NOV13 beans have closed back above their 200-day moving average, something that hasn't happened since early-Feb. Technical bulls are now throwing around talk that NOV13 beans could test the $13.50 range (testing the 2013 high) before settling back into a more traditional pattern of trading. To say the past week has been extreme is an understatement. In the past seven trading days we have added almost $1.00 per bushels from the low to the high! This is clearly a "supply" driven rally based on weather fears. With this being the case, I am of the opinion producers should continue to use a "scale-up" marketing type approach. Simply meaning to continue trying to reduce risk on the upside momentum.  If you would like to get more detailed information on what is driving the markets, CLICK HERE for my daily report.

As for those still holding old-crop soy bushels, be careful, as rumors continue to circulate that the Chinese are making more cancelations. Because of this many in the trade believe the USDA will soon be lowering their old-crop export estimates just a touch (10-20 million bushels). One saving grace though is "meal" demand. We surprisingly (here in the US) continue to make big export sales to countries such as the Philippines, Venezuela, etc... With this in mind there is reason to believe the current USDA crush estimates are actually too low, and may need to be bumped higher by 30-40 million bushels. Net-net you could actually see the old-crop balance sheet tighten a bit, that is unless the USDA magically finds some additional old-crop supplies...don't rule out the unthinkable!


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