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March 2012 Archive for From the Editor

RSS By: Brian Grete, Pro Farmer

Pro Farmer Editor Brian Grete takes time to talk with Pro Farmer Members about some of the key issues in each week's Pro Farmer newsletter.

Tight old-crop corn supports new-crop prices

Mar 30, 2012

Chip Flory

From The Editor

March 30, 2012

Hello Pro Farmer Members!

The USDA reports everybody was waiting for have come and gone and USDA certainly didn't disappoint the market. The lower-than-expected March 1 corn stocks estimate was enough to drive May and July corn futures limit up on today's close as speculative traders piled back onto the long side of the market. PF Sr. Market Analyst Brian Grete tracks the activity of speculative trading funds on a daily basis. He tells me funds bought an estimated 40,000 corn contracts today. That's 200 million bu. of new speculative buying in the corn market in one day. "It's the biggest day of fund buying I can remember," says Brian.

Funds also bought an estimated 15,000 contracts of soybeans and 10,000 contracts of Chicago wheat. That's a huge flow of money back into the grain markets. With all markets "sprucing up" the technical outlook, funds are expected to buy more when trade starts up Sunday night. Some are already looking for sharply higher corn trade again Sunday night... which means beans will follow and wheat won't be left behind.

With corn acres expected to be up sharply in 2012, the strength in corn today (and expected strength to start next week) is a bit of a surprise. The lower-than-expected March 1 corn stocks tally was "bullish enough" to override the negatives of the big acreage increase.

In April, USDA should estimate lower 2011-12 corn carryover... which essentially will lower the supply-side cushion for the 2012-13 marketing year. The stocks data suggests corn carryover this year of about 650 million bushels... 150 million bu. less than estimated in March.

Today's corn planting intentions indicates harvested corn acres of about 88.7 million. So... if the 2012-13 supply cushion is cut another 150 million bu. (via lower 2011-12 corn carryover), that's like knocking about 1.7 bu. per acre off the 2012-13 supply. While gains in new-crop futures we're well behind those in old-crop, the expectations of a smaller old-crop carry provided the support for new-crop.

The Hogs & Pigs Report released this afternoon fell right in line with pre-report trade expectations. There are some obvious exceptions... the Dec.-Feb. pig crop was up 3% compared to pre-report trade expectations of up 2%. That, however, did not translate into a 3% increase in market hog inventories, which were up about 2% from year-ago.

Another "miss" by market expectations were farrowing intentions. March-May intentions and June August intentions are off a bit from year-ago levels. If right, that would tighten up supplies for late 2012 and into 2013.

That's it for this week...


Frustrated about LFTB

Mar 23, 2012

Chip Flory

From The Editor

March 23, 2012

Hello Pro Farmer Members!

I'll admit... I got a little frustrated on the front page of Pro Farmer this week and let go with a bit of a rant. It is absolutely ridiculous that the same groups that question how beef is produced in this country are now complaining the industry does everything it possibly can to recover, harvest, utilize... whatever you want to call it... every piece of meat from a beef carcass.

This "pink slime" controversy is another crusade by those that question everything about meat. It's really lean finely texture beef (LFTB) -- meat that is mechanically removed from trimmings to use every bit of meat from a carcass.

It's somewhat hard to believe, but like we reported in this week's newsletter, industry sources say it would take another 1.5 million head of cattle each year to replace the LFTB's contribution to the food supply. That's amazing. If consumers think beef is expensive in the meat case now, just wait until the equivalent of 1.5 million head of cattle is removed from McDonald's, Walmart, Safeway and Kroeger. This is definitely a case that consumers and these so-called consumer-protection groups had better be careful what they ask for.

Of course, the groups crusading against LFTB are getting exactly what they want. Make beef expensive enough that it prices meat out of the average consumer's diet.

The headline I put on the story was "Get ready for more all-beef hotdogs." Packers and meat processors will undoubtedly make use of the LFTB in one way or another and hotdogs seems like the logical choice, right!?!

That's it for this week...

By the way, my son Thomas did great at last weekend's steer show. His steer Tank was third in his class! Not good enough for a run to place in the overall market beef placings, but we were really happy. Tank weighed 1050 last weekend and is gaining almost 4.7 lbs. per day. He's an easy-keeper with a great attitude! (Tank that is... not necessarily Thomas!)

A lot of acreage talk this week.

Mar 16, 2012

Chip Flory

From The Editor

March 16, 2012

Hello Pro Farmer Members!

I had several conversations this week about potential corn plantings with a wide range of people... from PF Members to buy-side equity analysts out of New York. There is a flat-out assumption that corn planted acres will reach at least 94.5 million... with really good odds of getting to 95 million this spring. Some guys in Illinois are even getting a head start on it and stuck a few acres in the ground yesterday and today. I've got to believe this goes against their better judgment... probably just a "test" or "experiment" to see what happens. If it works, it should work really great and they'll have some 2012-crop corn to sell into a tight 2011-crop market. If it doesn't work, they'll be replanting.

With record-breaking temperatures across the Corn Belt, it's really tempting to ignore the calendar (and the crop insurance go-date) and to start planting corn. But, there's little doubt we'll have some freezing temps yet this year. I don't think we'll see a "cold snap" in March... the forecasts are in general agreement of above-normal temps through the end of the month. That would probably give the corn being planted now a chance to emerge just in time for an early-April dip into the 20s... or even teens. Well... at least the replant would get done in a timely fashion if that happens!

However, I also heard more and more talk that if corn acres do push close to 95 million this year, there's not going to be much seed available for a replant. It could be that corn planting will be a one-shot deal this year, so making sure conditions are right to give the crop it's best chance is really important.

Another conversation I had this week was with a crop scout that's really concerned about insect pressure on this year's seed. He's doing his groundwork now, but he fully anticipates recommending a seed protection on every seed his clients put in the ground this spring... just something to think about and to have a conversation with your agronomists about.

That's it for this week...

I hope everybody has an enjoyable (and safe!) St. Patrick's Day! I'll be celebrating at another steer show this weekend! (I think my son has caught the bug!!) Oh... and everybody pull for the Iowa State Cyclones to knock off Kentucky on Saturday night! Go Cyclones! CyclONEnation! March Madness!!

Did China buy old-crop corn?

Mar 14, 2012

Chip Flory

From The Editor

March 9, 2012

Hello Pro Farmer Members!

It was a rumor-packed market for corn today. After USDA gave us an unchanged 2011-12 corn and soybean carryover estimate, rumors circulated that China was in to buy about 600,000 metric tons of old-crop U.S. corn. We should find out early next week if China actually made the purchase. If China did buy U.S. corn, it's like the result of a couple of factors.

First, it's dry in China's primary corn production areas. We'll produce another Crop Tour newsletter next week and take a closer look at Chinese crop conditions, but 2012 crop concerns in China might be enough to encourage importers there to step-up coverage.

Second, Chinese importers have said they'll import feed (not just from the U.S., but from any source) if the price is below domestic prices and cheaper to get to feed mills in the southern part of the country. Well... if that's the case, we've discovered a 25-cent drop old-crop corn futures is about enough to encourage some Chinese buying.

Third, the market was all jazzed up about a recent study by Reuters -- in conjunction with some Chinese consultants -- that USDA and the Chinese government overestimated 2011-crop corn production. How much? By 6.8 MMT to 24 MMT. Yeah... that's quite a range. The official estimate for China is 191.75 MMT, but if the Reuters study is right, the crop could be as "small" as 167.75 MMT. Which, by the way, is very close to the earliest estimates of 2011-crop corn production that were released about a year ago.

We've said it before, but it's worth saying again. Any corn China imports in 2011-12 is "gravy" in this market -- what's really important is the long-term trend around China. It wasn't that long ago that China was still exporting as much as 600 million bu. of corn to other Asian markets. Now those markets have to look someplace else for those feed needs -- and that place is here in the U.S.

Keep an eye on Chinese activity, but we also need to focus on stepped-up demand from traditional buyers like Japan and South Korea since they can't get supplies out of China.

That's it for this week...

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