Thoughts from the road, prior to the USDA Supply and Demand Report
Sep 10, 2009
Hello from the road! SunOpta invited me to speak at their field day in Hope, Minn. There was a good turn out and, as one would expect, their primary concern was the near-term price outlook.
As many of you know, I’ve given outlooks at several events during the last month and a half, with an estimated attendance of more than 2,500 people if added together. I like to ask what percentage of the corn and bean planted crops have been sold/priced. While it is not a scientific survey, I estimate about less than 25% of the crowd have 100% of their expected crops sold/prices, while over 70% of the crowd have sold less than 1/3 of their expected 2009 corn and bean crops sold. When pressed a little harder, they admit there is a significant amount of old crop corn still around this late in the season.
Implication: If there is anything I’ve learned in my years in the market it is, when the producers are holding big inventory and hoping for higher prices, normally the market fails to cooperate! I sense producers are putting up bins as fast as they can and making plans to store to next year. Why? If they sell now, they are selling below the cost of production, they believe prices are simply too low, and if they are going to take a loss, they want to postpone it as long as possible.
So where are we in regards to the rally that everyone is hoping for? I’ve been working under the assumption since early August that, if the late nature of the crop is a concern, we would have to have a solid frost in the market sometime in September. Now that we are almost into the second week of September, the time is quickly ticking down for the weather bulls. In fact, I believe this week is a critical week for the 10- to 15-day range weather forecast to start indicating some solid risk of frost. If you have been reading our weather updates, you will note there was some risk last Friday, but only a low probability. While there will be some cool nights during the last week of September, right now it does not look as if it will frost. More than likely we are going to squeeze by with most of the crop. Granted, there are some fields that could be hurt by a late October frost date but overall not enough to drastically lower the big crop that going to be confirmed in this week supply demand report for corn and beans,.
Implication: Time is about up, use any bounce over the next 10 days or so to get any old crop and new crop corn that you need to price between now and next March sold. I continue to believe the downside risk between now and mid-November is more than 40 cents on the downside for corn and $1.00 for beans while the upside for corn is less than 15 cents for corn and 50 cents for beans.
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