Current Marketing Thoughts
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Will We See Ideal Weather Conditions Next Spring?
Oct 22, 2012
Weather traders may want to take note that according to NOAA scientists, recently released data shows the globally-averaged temperature for September 2012 tied the "WARMEST" September since recordkeeping began some 132 years ago in 1880. It also marked the 36th consecutive September and 331st consecutive month with a global temperature above the 20th century average. If you are thinking things improved here at home, think again! The average temperature for the contiguous U.S. during September was 67°F, thats a whopping +1.4°F above the long-term average. The January-September period is now going in the record books as the warmest first nine months of any year on record for the contiguous United States. I know everyone wants to talk about yields that need near "perfect" conditions for next year's crop and record production, just be careful getting caught up in the rhetoric...we are still as far away as we have EVER been from conditions being "normal" or "ideal." Throw on top the fact extreme winds as of late have been ravaging the soil and zapping even more moisture out of the ground. It will certainly be interesting to see how things play out, just keep the adverse "conditions" in the back of your mind when the trade starts to talk about record production for next years crop. Pricing a small portion of your estimated production at these extremely profitable levels makes a lot of sense, but just don't get carried away. We are by no means guaranteed a winner in regards to the weather.
Extreme price volatility in the futures market looks as if it will continue. From a producers standpoint it looks to me like the smartest play moving forward with your existing production is to simply store your remaining "unsold" bushels rather than selling the "cash" and re-owning the board. The way I see it the board will be much more volatile than the cash in the coming months. There is no telling what type of event could spook the fund traders or the managed money who remain massively long. My guess is if the prices on the board break the basis will strengthen even further to help absorb the setbacks. Seeing that most producers are in good financial standings I suspect once the bushels are locked away prying them loose will take some additional work and incentive. I currently have "ZERO" re-ownership in place. I believe owning the cash bushels and having some type of floor in place is a smarter move. It just seems to me that this is going to be one of those years where it is more beneficial actually having the "cash bushels" rather than owning it on paper. I feel that the strength is going to come in the basis. Producers wanting to actually make sales at this level may want to consider sellign the board and holding the actual cash crop until further into 2013.
As for today it looks as if the markets may start to add in a little more South American weather premium. There are more rains forecast for RGDS and South Parana in Brazil. On the flip side there are just a few showers forecast for central and northern Brazil this week along with above normal temps. Bottom line, soybean planting could continue to be delayed because of extremely wet, flooding type conditions in some parts of the country, while more dry and hot conditions could delay planting in other regions, wheat harvest is being questioned as well. Also keep in mind there were some heavy weekend storms in Argentina, possibly a few more early this week, with some reported flooding. Here at home continuing dry and windy conditions in the forecast could spark a little more fear regarding an ongoing US drought. The USDA's weekly crop progress report is running out of excitement with the data released today expected to show the soybean harvest 80-85% complete, and the corn harvest close to 90-93% complete. Talk of continued Chinese demand, slowing US producer sales, and suspect weather in South America should help keep the downside risk in the trade somewhat limited.
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