Thinking About Making Some Cash Sales???
Jan 19, 2012
With talk of more widespread rain falling in Argentina as well as in Central Brazil many, of the "weather bull's" have elected to move to the sideline. I wouldn't get too bearish, the 6-10 day looks as if it may dry back out with some additional heat.
Let’s also not forget, corn is starting to once again catch a bid up in Northern China, and some rumors are starting to circulate in regards to Chinese interest in US corn. There is also more talk about Chinese soybean crush margins turning positive, which could prompt China to look for more soybeans. Most traders now believe the US would be China's primary choice considering Jan/Feb shipments from Brazil are thought to be delayed by about 1-2 million metric tons. From what I am hearing, the heavy rains in Northern Brazil and lack of production in the South has slowed down both harvest and delivery of beans. This obviously has China concerned, and is pushing demand back in our direction. As I have mentioned, there seems to be a more bullish picture starting to evolve in the soybean market. Therefore, as a producer I would be hesitant selling over 50% of your 2012 production. I would also be patient with additional wheat and corn sales. I am think we might start to see US wheat become more competitive on a global scale. If this happens, the funds might bail out of their short positions and it might prompt a little rally.
We have made some good sales up to this point, and I have a hunch there might be some additional room to the upside in the coming weeks. In the near-term you have to remain patient and don't panic if the market breaks lower on reports of improved South American weather. Longer-term though I think we might start to see more interest in US exports and another leg higher. In fact there is talk this morning of South Korea buying more US corn (close to 800,000 tons in the past couple of weeks), China looking for more US soybeans, and Japan in for wheat. If your a spec trader, I have to believe a $0.20-$0.30 cent break may provide you with a legitimate buying opportunity.
Argentine corn production continues to be the topic of heated debate, as the "Bulls" argue that production estimates could end up much lower than what the USDA is currently estimating. If you recall, the USDA had at one point estimated the Argentine corn crop at 29 million metric tons, most recently that number was reduced to 26 million. Now many in the trade are thinking we should be somewhere between 20-22 million metric tons.
The USDA originally had the Argentine soybean crop pegged at 52 million metric tons, and recently cut their estimates to 50.5 million metric tons. Most in the trade still believe this number is too high, and firmly believe we should see a number below 50 million metric tons.
On the flip side I am hearing that wheat yields in Argentina are actually coming in better than you might think. Most still have the crop estimated at around 14 million metric tons, and since the USDA is at 14.5 million metric tons, I don't see any real concern.
Here at home, I continue to be asked about acreage projections, and in particular what I am hearing from all of our producers in regards to planting intentions. Honestly, I am hearing very little in the way of "changes" to the normal rotations. Every time I go out and speak I poll the producers in the audience about their intentions. Below are my early assumptions:
- Corn-On-Corn Producers - Most producers are making very few changes to their traditional rotations. Corn-on-corn producers seem to be the most fearful about a "wet spring." They really don't seem all that concerned about switching to a more traditional rotation like many have speculated. Some producers are making some small adjustments and going with more soybeans in low lying areas or acres that have been extremely wet in the spring the past few years. For the most part though producers seem to be sticking with what they have done for years. Yes, I think corn acres will be higher, but I question anything over 95 million.
- Short Supply of Corn Seed - Producers in the south seem to be grabbing up most of the shorter variety corn seed traits (trying to capture and deliver against the old crop inverse), or to be able to second crop beans. This is leading to some concerns and questions about availability of short-term corn in the northern plains. If farmers can't get their hands on the corn seed, they will obviously be forced to roll out more soybeans acres. We need to watch how this unfolds. Supposedly ample corn seed supplies will be coming in from South America, but with the current weather dilemmas who really knows.
- Wheat Winter Kill - Another thing we need to consider is that many producers will be planting soybeans behind wheat. With winter-wheat being planted in mass because of the high insurance guarantees up above $8.00, you have to figure a larger than normal percent of the wheat crop will NOT be harvested. We also have to pay close attention to the "winter-kill" numbers. The more I hear about winter-kill, or "unharvested" wheat, the more I am hearing producers talking about planting soybeans.
- CRP Ground - There is no question a large number of acres are coming out of the CRP program. From what I am hearing most of the acres coming out of the program are rolling into soybeans in many areas. CRP ground will certainly need to be monitored.
- Informa will give us their updated 2012 acreage estimates on Friday. Keep in mind Informa most recently estimated corn acres at 94.4 million and soybeans at 74.6 million. It wouldn't surprise me to see their soybean number increased and the corn acreage number bumped just a little higher as well.
To start this morning, the "outside" markets are providing some additional support. The shifting of the tides so to speak, in regards to the "outside" markets has encouraged me to become more bullish as of late. There are still a few more hurdles we need to clear before we can become more "wildly" bullish, but I certainly like the direction we are headed. Bottom-line, remain very cautiously bullish!
*You can't tell me "Money-Flow" doesn't matter, because from where I sit it means everything. Consider the fact that many in the trade are now estimating we are off to our WORST start in years in regards to "earnings," with over half of the companies reporting so far, NOT beating their expectations. On the flip side we are off to one of the "BEST" starts ever in the S&P500 Index. In fact it we a now seeing our best start in the past quarter century. The S&P 500 has advanced seven of the first eight trading days this year, something that has only occurred eight times since 1900. I know that sounds crazy, but with many of the money-managers now thinking US Stocks are one of the safest bets on the board, the money is obviously pouring in. I pointed out weeks ago, when money-flows into the stock market and traders are making good returns, it becomes awfully hard for the commodity markets to attract a lot of NEW buying interest. If you remember back to the stock bull run from 1997-2000 commodity prices were very subdued. Think about it this way, "If you are a money-manager and making 15-20% in the US Stock market, are you going to be looking for alternative type investments in more risky asset classes like commodities?" I doubt it! Just keep this in mind as we move forward, if this truly is the start of a new US Stock bull run, we may be putting a temporary lid on commodity prices in general.
Just wanted to tell everybody about our Grain Marketing Seminar we are having at the end of February in Kansas City, MO. You can come and hear me give my Outlook on crop prices for 2012 as well as hear some of the biggest names in the US Grain trade, Global Grain analysis, US ethanol industry, and more.
Click this link to find out more Grain Marketing Seminar 2012. Like this blog and want to read more, sign-up for our free trial of the daily report. Click here