Apr 17, 2014
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October 2012 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.

Soybean Demand Continues To Push Higher

Oct 30, 2012

Soybean bears trying to point out the fact that when the USDA raises yields from September to October they generally tend to raise yields in the November report as well. I can't really argue with this logic and in turn suspect the USDA number released next week in their November report will show another slight increase in US production. The bears are also talking about improving rainfall forecast for the Northern regions of Brazil as well. Bulls on the other hand continue to point to extremely strong "demand." In fact soybean export inspections this week were once again very large at 63.358 million bushel. We are now almost a full week ahead of the record fast pace we set a couple of years ago. Personally, I just don't see soybean "demand" slowing down during the next three months. China once again accounted for almost 75% of these export inspections. China simply can't seem to get enough, especially at these prices. Many bulls are now not only arguing that the USDA grossly underestimated the Chinese demand, but they have also grossly OVER-estimated the Chinese domestic soy production.  Remember, the USDA currently has China slotted in for about 12.6MMT's of domestic production, several in the trade actually believe that number could now be south of 10.0MMT's. Many soy bulls are also considering the fact North Carolina last week only had about 10% of their soybeans harvested, while Tennessee had about 48% harvested and Kentucky about 54%. You got it hurricane "Sandy" could put more than 250 million bushels of soybeans in jeopardy. The bears can argue all they want about improving conditions in northern Brazil and thoughts of record production, I just think at some point in time the "cash" soy market here at home is going to take off. There could certainly be some money-flow issues that continue to keep a lid on the flat-price, especially in the "back-end" but longer-term I think the bull spreads (like SK/SN) will make a move. Don't forget we have "First Notice Day" on Wednesday in the NOV13 soybean contract. There may actually be a few funds that are forced out of their long positions that simply opt NOT to get back in at this time. Perhaps waiting to see if we can catch a more bullish South American weather story. Technical traders are now on alert as the recent close in soy back below $15.50 is making a downhill run towards $15.00 a reality. Be careful right here in the soy market. 
 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report



 

Hurricane Sandy Shutting Down Financial Markets

Oct 29, 2012

 Hurricane "Sandy" is obviously going to be the topic of the day, as an estimated 60 million people could be affected in the mid-Atlantic region. Let me emphasize: Storm surge forecasters for NYC are now calling for 6-11 foot waves. Irene had 4-foot waves. This could be the biggest coastal flooding event in NYC history!  If hurricane "Sandy" itself isn't bad enough forecasters are predicting it will combine with two other storms in the coming days, creating what the weather guru's are calling the "perfect storm" or in honor of Halloween..."Frankenstorm." From what I am hearing the monster creation could bring close to a foot of rain, punishing winds extending hundreds of miles outward from the storm’s center. New York, New Jersey, Connecticut, Pennsylvania, Maryland, Virginia, Vermont, Massachusetts, Rhode Island, and DC have all declared states of emergency.  It could also dump up to 2 feet of snow in Kentucky, North Carolina and West Virginia. It is believed 1 in 5 Americans live within the storms path. The U.S. stock and options markets will be closed on Monday, and possibly Tuesday The CME Group say they will trade equity futures electronically Monday until 8:15am CST. I heard the Bond markets will remain open, but will close at noon. The Chicago Board Options Exchange (CBOE) has also announced it will close. All other electronic FUTURES and option markets will remain open, including energy, metals, and agriculture, with the usual scheduled break between 5:15 p.m. and 6 p.m. Several large financial firms have told traders to stay home. Bottom-line, volume could be extremely low in the futures markets to start the week and price swings could be dramatic on little to any market related news. On a brighter, note, data released late last week showed the US economy growing at a little faster rate than expected in the third quarter as stronger spending by consumers and the government offset falling exports and flat business investment. Basically, the 2% annualized pace of growth was stronger than the second quarter’s 1.3% rate. The problem is many analysts believe it is simply still too slow to speed up job creation. There is also some fear moving forward that the US economy doesn't have enough momentum or head of steam built up to push through the waves of minutia that are certain to be associated with the upcoming "Fiscal Cliff."  Just remember, if "money-flow" gets spooked the outside market winds will continue to blow in our face. As we advance through the week macro-market traders will be watching the Japanese rate announcement, the Chinese, US and European manufacturing numbers, as well as the monthly US employment data scheduled for release later this week.

USDA weekly crop progress and conditions scheduled to be released today will NOT. Don't forget when they are finally released we should get our first look at US winter wheat conditions, where most in the trade are thinking wheat rated "Good-to-Excellent" will range between 45%-50%. As we progress through the week the trade will quickly start to focus on the November USDA report due out on Nov 9th. I personally doubt we see a ton of changes to the data, as I suspect the USDA will patiently wait on more accurate acreage abandonment and silage numbers before making their final acreage cuts. Keep in mind there will be a ton of private estimates and guesses being released the next several trading sessions so any extremes in one direction or the other could (for the short-term) directly influence price. 

As for today...stay out of the waters!!! The markets that remain open could be extremely dangerous and highly unpredictable with abnormally low volume.     

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


 

Freeze Warnings for Wheat across Southern Plains

Oct 25, 2012

 ***UPDATE***  Export interest continues to remain extremely strong for the US soy complex. Simply stated: we have the cheapest soy supplies in the world, and I suspect demand for the high proteins to remain in vogue. Please keep in mind, however competitive you believe we are in the Dec/Jan/Feb soy deliveries, we are just as "uncompetitive" from March 1st forward, when the demand clearly shifts in full-swing to South America. As for corn and wheat, even though things have improved, we continue to remain highly "uncompetitive" on a global scale. Most insiders suspect we will remain some $20-$30 per ton more expensive unless something major happens in the global landscape. I continue to hope that once we turn the page into 2013 and Black Sea, South American and European supplies are depleted we will once again become a major supplier, the problem is that window of opportunity may not be extremely large. Understand what I am saying here. Yes, we are becoming more competitive on a global scale, as sources are now reporting that Brazilian corn is being offered at just $25-$30 per metric ton cheaper than corn out of the gulf. Just two-to-three weeks ago the difference was about $55 per metric ton. The problem is even though we are getting closer...we are still NOT the cheapest by a long-shot! 

 
USDA reported weekly export sales data this morning showed no real surprises. Corn sales were once again below expectations but not horrible. Soybeans were a little disappointing as well. Wheat sales were actually above expectations. Details below:
 
  • Corn export sales reported at 142,300. The trade was looking for a number between 150,000 and 250,000.
  • Soybeans export sales reported at 522,000. The trade was looking for a number between 650,000 and 850,000.
  • Wheat export sales reported at 572,000. The trade was looking for a number between 250,000 and 450,000. 

 

Weather continues to be the basis for argument amongst both the bulls and the bears. Personally I am NOT getting that caught up in the weather just yet. Don't get me wrong, I have my eye on it, I am just not getting overly consumed. The bulls want to argue about continued dryness in Northern Brazil, where as from my perspective the extreme "wetness" in parts Southern Brazil and Northern Argentina may end up being a more important story. My hunch is that the dryness up around the Amazon will end up correcting itself, but if the rain continues to fall in the areas that are already experience too much moisture there could be a fairly large production setback. In fact, there are already stories circulating in the trade that flooding in parts of the Argentine grain belt has allowed fungus-based diseases to attack the wheat crops, in addition it is further delaying their soy and corn planting. As a whole however I wouldn't advise getting overly bullish or bearish the "weather" as of yet, it is still very early and the forecasts are looking more conducive for improvements in some of the areas that are in question... Best advice is to remain patient and let's just see how things play out.  

 
As for today, the trade remains in limbo. No real "weather" story to trade, "supplies" are ample enough to get us by (though tight), and the only real "demand" story continues to be in the soy complex. Reports out of China are that the soybean auction didn't go so well, only selling about 10% of the beans they had up for auction. The crushers were saying prices were simply too high for the "quality" offered. Some may view this as bearish near-term, but from my perspective this will push the Chinese crushers back towards the cheaper US supplies and help boost exports. Lets also keep our eye on the weather here at home over the next couple of days considering there are "FREEZE" bulletins in effect for the southern Plains wheat areas Thursday and Friday night. Never know, could certainly stress young plants. Moral of the story, by the end of the day "wheat" may end up showing the most strength, but I suspect soy and corn will eventually trade both sides of the fence as well with very little news influencing the trade. Don't forget Nov options expire tomorrow!   
 

We are making some moves in response to what the market is showing us. You can sign-up here to receive a 30 -DAY FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  


Macro Events That Could Impact Grain Prices

Oct 24, 2012

 

Outside macro markets have been applying a little pressure as of late. There are many ways traders are playing this out, so I thought I would list a few of the more popular cards associated with the sell-off. Below are few of the favorites being thrown around. Pick anyone to play out your hand. Just remember "money-flow" is vitally important for ALL investments. Any one or combination of these could have wide sweeping implications on the funds and their positioning or should I say re-positioning moving forward.
 
  • As the US election draws near and the polls are showing an increasingly close race, many Macro traders may becoming increasingly more nervous about the "uncertainty" of the outcome...therefor taking risk off the table. Remember, "uncertainty" causes "fear" and fear cause traders and money-managers to move to the sideline. They may have been thinking Obama was a sure winner or Romney was a sure winner...now all of a sudden no one is sure about how any of it is going to play out. 
  • There also seems to be some concern regarding reports that Bernanke recently said he would NOT go for a 3rd-term if President Obama is re-elected. Keep in mind, Romney has already said he would NOT re-nominate Bernanke if elected. Along with Bernanke saying he will step down as the Fed Chairman, Treasure Secretary Timothy Geithner is now saying he will step down in early 2013. Not that these are "bad" things, but they could cause the market to be worried and concerned about the "unknown" and the fact we could see higher rates and possibly less easing by the Bernanke / Geithner replacements. 
  • Despite what the polls have indicated there is talk that the market had been thinking and or hoping since early summer that Republicans were going to win the White House. Now with election less than two-weeks away and more uncertainty than ever, the trade is backpedaling a bit, especially after two improving performances by Obama in the latest debates. 
  • Some will argue the funds are liquidating a portion of their commodity risks on thoughts that Romney is going to win and in return the US dollar is going to start surging higher. I am not so sure I am on the same page with this one, because a Romney win would push the stock market higher, not lower like we have seen the past couple of days. Remember, the market believes Romney is the more "Pro" business candidate and win should benefit the US stock market. 
  • A few additional "wild cards" are the fact that both presidential candidates are talking about getting tough on China. The macro market traders absolutely hate the idea or thoughts of any type of trade-war breaking out between the world's top two economies. There is also some fear that if Obama wins, the increases in the "capital gains tax" and or "dividends tax" could cause a massive selloff as investors see less opportunity in investments. Lets conclude by saying there have also been some recent whispers by the likes of "SocGen" that Greece and possibly Spain are back on the edge of becoming "MAJOR" destabilizing European factors once again. Once the US earnings season is behind us the talking heads in the media may once again turn their cameras back to the problems in Europe...this could obviously weigh on the macro markets.   

 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


Have You Priced Any of Next Year's Crop???

Oct 23, 2012

 

Producers continue to ask questions in regard to next year's crop (2013/14), and I continue to preach getting "SOME" sales and or hedges in place on a small portion of your estimated production. From my perspective pricing or building a floor on 20-30% or estimated production in both corn and beans sounds prudent. Especially with corn prices at such extremely profitable levels, sales can be made on the board in the SEP13 corn contract with prices above $6.60. We are holding our current 2013 wheat sales at 45% priced waiting for a rally back above $9.00 in the DEC13 contract to price another round. Understand that I am NOT saying prices are going to go straight lower from here, because I doubt they will, but as "risk managers" we have to take profits off the board when the opportunities present themselves.  From a speculative standpoint I actually think prices could work higher on stronger demand out of Europe and some South American weather hiccups. 
 
I am little nervous longer-term about holding huge risk in light of the higher prices encouraging more and more production. I am not sure I am in total agreement with the recent Informa acreage numbers, but you have to respect their research. They do a very thorough job, and what they are telling us is that they are expecting an additional 590,000 corn acres are going to go in the ground next year (97.5 million acres). They are also telling us an additional 2.8 million soybean acres are going to go in the ground (keep in mind last year was a record at 77.2 million acres). They are also thinking an additional 1.1 million wheat acres will be planted. The only real reduction they are anticipating is in cotton, which they believe will decline by about 2.3 million acres from last year. Moral of the story, obviously no one knows how production will end up, but I can assure you more acres are going into the ground. Higher prices have always encouraged more ground going into production. The "weather" will need to cooperate in order to see a bumper crop, but with so many acres being rolled out you could shave 15 bushels per acre off of our trend-line yields and still end up with a crop north of 13.0 billion bushels. As I have mentioned several times, getting some sales on the books for 2013 is smart risk management. In these waters stay away from those recommending the "extremes." Meaning those recommending "zero" sales or recommending an inordinate amount of your estimated production be booked. Just keep in mind global corn reserves are expected to fall to the tightest levels in almost 40 years, so don't get carried away with the early sales.  
 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


 
 

Price Volatility in the Grains Looks to Continue

Oct 22, 2012

 ***UPDATE***

USDA Crop Progress numbers showed 81% winter wheat planted vs 5-year average of 80%. The kicker is that only 49% is reported as "emerged" vs the 5-year average of 56%. Basically we are seeing significant wheat emergence delays due to extreme dryness; SD traditional is 80% emerged at this time of the year, in yesterdays data the USDA showed SD just 13% emerged. MT is now 31% behind schedule, NE 29% behind, OH 18% behind, CO 16% behind, OR 14% behind, WA 7% behind, CA 6% behind, ID 3% behind. Below are some additional highlights of the report: 
 
  • Corn reported at 87% harvested which is below what the trade was anticipating but well above the 5-year average of 49% harvested by this juncture. 
  • TN 98% of corn harvested; MO 97%; SD & MN 96%; TX 95%; KY, NC & KS 94%; IA 93%; IL 92%; ND 91%; NE 89%; IN 72%; WI 66%; CO 64%; PA 58%; OH 50%; MI 48%
  • Soybeans now reported as 80% harvested vs the 5-year average 69% harvested. 
  • MN, SD & ND 100% complete; IA 96%; NE 95%; MS & WI 94%; LA 92%; IL 80%; MI 77%; AR 75%; IN 69%; OH 63%; KS 59%; KY 54%; MO 50%; TN 48%
  • Rice 90% harvested vs the 5-year average of 87%
  • Cotton 38% harvested vs the 5-year average of 39% 

 

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. 
 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


 

 

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. 
 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


What Will Push Grain Prices In the Next Few Days?

Oct 19, 2012

 Outside markets are somewhat mixed to start the morning on what is the 25th Anniversary of the 1987 US Stock Market Crash. It seemed as if Google was trying to kick-start another crash yesterday with such a huge earnings miss on an early release. There were also disappointing earnings out of McDonalds and Chipotle as well. US employment numbers were weaker yesterday, but there seems to be more positive data being released in regards to the US housing sector.  As far as the energy market is concerned I thought it was interesting to hear  Goldman Sachs now predicting an end of a "sustained increase" in crude oil prices that started a decade ago, basically saying that the oil market will find a new equilibrium around $90 a barrel (Brent Crude price) due to rising oil supplies from the US and Canada. This is an important change considering Goldman was highly influential and one of the first to anticipate the big jump in oil prices back in 2005. The bank has maintained a bullish view on oil prices since, and from my perspective seems to be turning a little more bearish. Overall the "outside" markets are mixed this morning, but if more concern hits the US stock market I could see some additional risk being taken off the table as we head into the weekend. 

As for today, the trade is trying to get there hands around a ton of interesting dynamics below is a brief overview: 

  • South American Weather??? The trade desperately wants to see that "early" beans will be available to take the heat off US exports. There is some talk further delays in planting and more extreme heat may make that a more difficult task than some analyst want to believe. 
  • Europe??? What exactly is happening in Europe?  We saw Strategie Grain cut production estimates yesterday. We are also seeing the EU import large amounts of corn out of Ukraine, and hearing rumors that they are very low on feed wheat. Some thoughts circulating they will eventually be feeding higher quality wheat, which would take them out of the export game and put more pressure on US exports. Others believe they are going to import twice as much corn as the USDA currently has estimated.
  • Ukraine Exports??? The Ukraine confirmed their wheat export bans for mid-November. There is also some talk that they are close to being out of corn. Some thinking the Brazilian basis has pushed higher because of more limited supplies out of Ukraine after heavy EU and Japan purchases. If Ukraine is out of the game South American supplies could start to get more expensive.
  • US Corn Exports??? Obviously they have been horrific, but there is some talk that Europe could need a lot more corn than the USDA has anticipated. This along with other world interest could ultimately tap South American supplies. There is also concern that South America will be forced to load soybeans rather than corn and buyers in Japan, South Korea and other parts of the world will have no choice but to buy US supplies after we turn the calendar to 2013. In return maybe the USDA's current export estimates (which are at 30 year lows) are actually understated. 
  • What about next years crop??? The Informa acreage numbers are scheduled to be released at around 10:30am CST. I suspect there will be some comparison to their last estimate which showed US corn acres projected at 97.5 million acres with a 162.2 average yield, essentially a 14.6 billion bushel crop vs. this year's current USDA crop estimate of 10.706 billion bushels. Keep in mind this is close to a 4.0 billion bushel jump. Their soybean numbers last time showed acreage jumping to 79.87 million with an average yield of 43.8 bushels per acre, essentially producing a crop of 3.45 billion bushels vs. this year's current USDA crop estimate of just 2.860 billion bushels. These numbers seem insanely high based on the uncertainty of weather moving forward. Unfortunately the trade likes to start hopping for the best, but as producers we have learned through the years to prepare for the worst. Moral of the story, use the rallies to eliminate a small portion of your risk and to lock in profits, just don't get carried away...there are still a ton of cards in the deck we have not seen.

 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


 

My Thoghts on 2013 Acreage and Production

Oct 18, 2012

 

Informa is scheduled to issue an update to its 2013 acreage estimates this Friday at 10:30am CST. I believe these numbers could prove to be vitally important to the trade, as they will provide the blueprint and framework for US crop production next season. My guess is corn acres will be close to 95 million once we are all said and done, even though there should be a much larger quantity of wheat and soybean acres. A lot of analyst are predicting a reduction in corn acres down to 93 million because of the increased soy and wheat acres, sorry I just don't see it or hear it from talking to producers across the country. There is no debating the fact that higher prices have pulled more acreage into production. Sure the corn-on-corn guys are talking about going to a more traditional rotation, and the guys in Missouri and a few other areas are talking about double cropping wheat followed by soybeans, but the guys up north in the Dakota's, Wisconsin, Minnesota, etc... are having a terrific run and will continue to plant more corn acres. What about the producers down South who are going to plant fewer cotton acres in order to plant more corn and soybeans. Yes, I also believe we will see close to a 20% jump in total SRW acres as well. Bottom-line, total planted acreage is going higher!
 
Production acres, in my opinion, will also be going higher globally as well. The huge windfall of money being generated by producers globally is prompting more and more acreage to be cleared and put into production. As the old adage goes, "there is no better cure for higher prices, than higher prices..." The most frustrating part of it all is that we taught producers in parts of South America, Ukraine, Russia, Australia, Mexico, etc... how to produce better yields, how to grow and harvest bigger crops. We also showed them how to best market and export their production, now all of a sudden we have more and more of our own clients knocking on their doors for supply. We can't say that we didn't see it coming. Do you realize for the first time ever Brazil’s 2012/13 crop should put their country in the lead for soybean production and exporting!     
 
I am not getting "bearish" as of yet but I have reduced my corn and wheat ratings to "neutral" and soybeans down to a level "1" bullish rating for the time being. We have to listen to the market, and right now there is a terrific demand story still alive in soybeans, but supplies both here at home and abroad seem to be getting larger, at least in the trades eyes. I am not giving up hope on a weather story out of South America because there is still a ton of time, I am just limiting the amount of my wager. The trade is stuck on the fact that US soybean yields have gone from what many analyst and producers were thinking would be 32-35 bushel per acre average up to 38-40 bushel per acre average US soy yield. Lets not forget the trade is also thinking South American soy production could go from around 115MMT's last year to over 150MMT's this year baring any major weather setbacks or complications. Which in my opinion could be a tall task. Nonetheless, the markets are content on playing the weather as "near perfect" until notified otherwise. 
 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


 

Why Soybeans Are Playing Quarterback Right Now

Oct 17, 2012

   

Soybean "demand" continues to be an extremely powerful story, but in and of itself it simply does not have enough strength right now to lead us higher either. Yes, I believe the the USDA is underestimating almost every aspect of the soy demand balance sheet. I believe exports are going to be larger than anticipated, not only on stronger Asian interest but also on stronger European and global interest as well. I also believe the domestic crush number is understated as well. The recent jump from 1.5 billion to 1.54 billion is simply not enough, keep in mind last year the domestic crush was estimated at 1.703 billion. If ethanol production continues to slip (and DDGS production falls even lower), you have to believe the livestock industries demand for meal is NOT going to subside any time soon. In my opinion, to say soy "demand" is a bullish story is an understatement. The problem once again is that we can not put together both a bullish supply and bullish demand story.  The "demand story is strong, but unfortunately we continue to have a bearish tone to the "supply" side of the equation, as the bears believe the US soybean yields are closer to 40 bushels per acre and total production maybe closer to 3.0 billion bushels. Let's also keep in mind, there is talk that total South American soybean production could soon exceed 150MMTs.
 
I hate to be the bearer of bad news, but to drive prices up this steep of a mountain we need "TWO" extremely strong and healthy legs. Right now we have corn and wheat with an injured right leg (demand), and soybeans with an injured left leg (supply). I am afraid with the competition so stiff and the environment so rough, playing on a banged up wheel is simply not going to get the job done. From my perspective, the soybean market has to play the position of Quarterback on our team, there are no other real alternatives right now. Beans seem to be the only one on the field that can run, throw and be a scoring threat at any given moment. Unfortunately for soybeans there are a couple of things that need to happen before we see beans get back to being our leader. 
 
As a Soybean Bull You Are Essentially Betting On Two Select Scenarios: 
 
  • Weather issues in South America - Any type of weather related hiccups or production setbacks in South America will undoubtedly provoke a huge move to the upside in soybeans. This will obviously pull both corn and wheat higher and will be our quickest road to higher prices. All that has to happen is for forecasts to start showing more reasons for doubt. We do not actually need a weather crisis, we just need the market to believe there is true potential for a weather crisis and prices will push higher.  
  • Logistical issues in South America - Even "IF" the South American weather cooperates, there is still the concern and issues involved with getting the beans to the ports and out of the country in a timely enough fashion to satisfy the world's needs. This bet is a longer-term play and one that might not come to fruition until the 2nd quarter of 2013 or at a time when US suppliers are more fearful about actually running out of soybean supplies. Once we reach this stage of the game, I would suspect the market could become extremely nervous and prices could push higher reflecting the uncertainty. 

 

As for today, the bulls continue to wait for some type of additional bullish supply side news from the soybean trade hoping it will lead the Ag markets to higher ground. The problem is as each day passes more and more traders are loosing interest with a soy story that has been unfolding for a larger part of 2012. Understand what I am saying here, if your a producer who is still holding unpriced or unhedged bushels you are essential betting on some type of South American weather problem. If the South American weather doesn't become an issue, you still have some hope though simply because the trade will be uncertain whether or not South America will be able to supply the world with the large number of soybeans needed in order to fulfill demand. If neither of these cards are turned over, then your hand is essential dead. Meaning do not not pass "go," do not collect $200, thats basically game, set, match for this bull market. Prices will continue to drift lower and we will continue to make lower highs and lower lows until we see an entirely new story and set of circumstances emerge. The question though now becomes...

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Why Am I Long the Hog Market???

Oct 16, 2012

 Q. Why Am I Long The Hog Market???
A.
 I felt there was real value in being long the hog market, especially the deferred contracts at prices at or below 80. The April contract was below 80 for only a brief period of time back in May, while the Feb contract was under 80 just a couple of weeks ago. While US pork supplies may seem fairly abundant there are actually several bullish cards now in the deck that will actually drive prices higher as we move into 2013. Obviously the higher grain prices have forced some global liquidation of supplies. Even though US liquidation has not been significant we do believe liquidation in other countries may soon become a much larger problem. If you remember back to the past couple of times grain prices surged higher demand for US pork also surged higher. Not only are we thinking demand from China will pick up but so will demand from Mexico, Russia and other US importers. Making the US market even more enticing to me is the fact that we are seeing some significant liquidation in Canada and some changes that could really damper European exports, who are one of our main competitors for pork heading into China and Russia. With out diving to deep into the wood pile, I am being told the EU Commission will soon implement a union wide sow-stall ban on (supposedly as early as January 1st, 2013). Thoughts are this could cause a 3-7% decline in European pork production, which would be equal to about 2-3 billion pounds of pork (basically 1/2 of the entire US exports last year). Moral of the story...not only is Asian demand pushing higher and higher, but some of our larger competitors and global suppliers might not have as much available supply to offer, essentially making US pork even more attractive. I am not sure about the day-to-day swings, but I like the thought of owning hogs into the spring and early summer of 2013. 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


Horrible Grain Export Sales Data This Morning

Oct 12, 2012

 

USDA also released export sales data this morning, all three major US crops below expectations... VERY POOR SALES DATA!!! Corn a complete joke. Below are specifics:
 
  • Corn export sales reported at 14,200. The trade was looking for a number between 300,000 and 450,000. Last week 327,00 was reported. 
  • Soybeans export sales reported at 523,700. The trade was looking for a number between 700,000 and 900,000. Last week 1.3 million was reported. 
  • Wheat export sales reported at 279,900. The trade was looking for a number between 300,000 and 500,000. Last week 307,000 was reported.
 
Asian cancelations (South Korea canceling corn and feed wheat, along with China canceling a cargo of corn) has the trade second guessing yesterday's rally. Thoughts are rationing maybe closer at hand than some have anticipated. I am not on the same page, but the market is definitely giving back a large portion of yesterday's gains. We are simply not going to see big corn export numbers because of the cheap supplies out of South America and Ukraine, that is why the USDA continues to slash US export estimates. We are already anticipating some of the lowest corn export numbers in the past 30 years, so I don't think this is any real surprise. There is some talk this morning that some significant Argentine corn sales may have been made to US buyers, which adds to the Brazilian corn purchases coming into the country. 
 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


Will Tomorrow's Report Bring a "LIMIT" Move in the Grains?

Oct 10, 2012

Corn traders are trying to determine just how much corn "supply" the US is going to produce. The range of guesstimates is from as little as  9.9 billion bushels to as many as 11.2 billion bushels. Bulls are obviously arguing the crop is sub 10.7 billion and further demand rationing will need to be done in the months ahead. Bears are arguing the crop has improved and total production is actually north of 10.8 billion bushels. In addition, they are claiming no further demand rationing needs to be made. Prices are already too high, as is apparent by the falling number of bushels being used for ethanol production and the potential for US corn exports to fall below 1.0 billion bushels. The bears are also urging us not to forget the extra corn supply that is being shipped in from Brazil in much larger than normal quantities all along the East Coast. Even though the bears make a compelling argument, the spreads and the cash market seem to be telling a story that actually favors the bulls. If there was plenty of quality corn available and so little demand, why are the spreads so tight and the cash market still so strong? I am not saying we need to be wildly bullish at this juncture, I am just saying something doesn't smell right. I continue to believe there is still some price appreciation left in this market. Therefore, a 10.8 number might not be viewed as all that bad either.

Soybean traders across the board seem to be thinking come Thursday we will be digesting an extra 125-135 million more bushels of soybeans as the USDA pumps up the yields. The trade however seems to already be trading a US soy yield number that is now north of 38 bu. per acre, almost 3 bu. per acre above the previous USDA estimate of 35.3. Therefore an additional 125-135 million more soybean bushels might not be all that bearish. Point is, we could see a 37.5 bu. soybean yield estimate viewed as neutral to bullish. My only fear is that traders will immediately add another bushel to the yield estimate, thinking we could see an even further increase before year-end, as this is the normal USDA move. If they bump yields higher in October, they tend to follow suit by bumping them even higher again before year-end.
 
The point I want to make out of all this is that not only are the production, yield and acreage estimates all over the map, but more importantly how the trade will react to these numbers once they are released is also a complete mystery. With the funds still aggressively long, we are almost certain to see a "LIMIT" type move no matter what the numbers are. Make absolutely certain you can comfortably handle the massive swings that could occur during the next several days as the market attempts to readjust and funds slosh around in the waters, creating major waves.
 
Personally, I believe the trade is underestimating the "RISK" still associated with the South American crop, especially considering they have only just started planting their corn and soybeans. Unfortunately, we don't get a say in the matter and are left to play the cards we are dealt. Moral of the story...I want to be bullish, but I have to respect the power of money-flow and honor the fact I have been knocked down and have struck out several times trying to hit the nasty curveball often thrown late in the game by the USDA. Always better to be safe than sorry! I would suggest swimming in and getting as close to the shoreline as you possibly can without completely getting out of the water.
 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


 

Outside Markets' Influence on the Grains

Oct 04, 2012

Last nights US Presidential debate being proclaimed by many political analyst as the best since the debates began some 30-years ago. The press and most in the media proclaiming Romney the clear cut winner, but still questioning if it will be enough to overcome his current deficit in the polls. The sad part is an estimated 111.3 million people watched the Giants beat the Patriots 21 to 17, but less than half that many watched the debate....   

The Bank of England and the ECB have both decided to leave key interest rates "UNCHANGED." Europe is somewhat stable this morning as Spanish bond yields ease,  there are some rumors brewing however that the next round of Greek bailout money may be held back until November. This ultimately could bring the European debt concerns back into the "headlines." Lets not forget last months FOMC minutes will be released this afternoon at around 1:00pm CST.  Many traders will be looking for hints as to what will happen January 1st when "Operation Twist" officially comes to an end, and what specifically will cause QE3 to be adjusted. If the employment picture continues to become more clouded, what will be the Fed's next move? If the US housing market start to give back it's recent gains, what will be the Fed's next move?  What if the US stock market starts to be pulled lower by problems in Europe, and a slow down in Asia, what will be the Fed's next move?  We also need to keep our eye on "money-flow." We have seen a large amount of money moving into the gold sector, but in return money has been flowing out of the Ag's and Energy sectors.  
 
Crude oil prices continue to setback and are starting to become a more serious concern for the fund managers and those caught on the long side. With US crude stockpiles now climbing for a fourth straight week and the Chinese economy looking as if it is suffering further declines there could soon be a glut of global oil supplies. The trade is also thinking there could soon be some type of Iranian sanctions and the fact US crude oil production has reached levels not seen in the past 15-years.  Be patient still, but if your looking to lock in some of your on-farm diesel fuel, crude oil prices below $80 per barrel may provide just the opportunity.  As for tomorrow morning, all eyes will be glued to the monthly US employment numbers. Yesterday's ADP employment numbers showed payrolls  increasing by 162,000 in September. This was better than most analyst were expecting and may indicate a better jobs number on Friday. As of right now most are still thinking the monthly US government number will be around 115,000 but I could see that number pushing higher in light of the recent ADP data. A good monthly employment number and confirmation that the Fed is prepared to do more easing if problems occur could certainly prompt a "risk-on" type trade environment. Bottom-line, it would not surprise me to see the funds add some risk heading into the weekend. 
 
USDA export sales data released this morning showed sales well above expectations in soybeans, in-line with expectation in corn and below expectations in wheat. Below are the details: 
 
  • Corn exports reported at 326,900. The trade was looking for a number between 200,000 and 400,000.  Last week we had 400 reported. 
  • Soybean exports reported at 1.306 million. The trade was looking for a number between 700,000 and 900,000.  Last week we had 799,500 reported.
  • Wheat exports reported at 307,000. The trade was looking for a number between 400,000 and 600,000.  Last week we had 426,000 reported.
 
 
Grain and soy traders seem more confused than ever. Are we trading "supply," trading "demand," trading the "macro markets" or perhaps the "technicals"??? However, you want to play the game and solve the "Price" mystery we have a variety of clues to consider right now. Below are a few of the highlights: 
 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


 

Lower Grain Demand and Increased Soybean Yields

Oct 02, 2012

 

Grain "demand" however continues to be heavily debated. The recent USDA report showed us that "feed usage" was NOT being rationed as much as many had anticipated during the most recent round of higher corn and wheat prices. Even though this is bullish data, we have to keep in mind "feed usage" numbers are only reported quarterly, while "exports" are reported weekly, in many cases even daily. My point is the trade may be somewhat conditioned to respond more frequently and more emotionally to "exports" since they are so often in the headlines. With corn exports constantly being reported as "poor," it makes it extremely tough mentally for bullish traders to stay excited about overall "demand." Certainly we can sit here and rationalize on paper the fact that corn exports are really not all that big of a deal, but emotionally in your head it's hard to get overly excited when you see South American supplies not only being sold to our biggest US corn importers, but also seeing our own end-users import cheaper corn from South American suppliers as well. Remember, trading and overall money-flow is not solely predicated by the actual fundamental supply and demand numbers, there is also a great deal of human emotions involved in buying and selling. My point is, if the larger traders continue to believe "demand" is in question (to any degree) then very few will be willing to be net flat price buyers. 
 
 
Soybean markets continue to digest thoughts that not only are last year's soybean production numbers in the US being increased (as reported in this past Friday's USDA report) but so are this year's soybean estimates. Most analyst are now thinking the USDA's current 35.3 bushel per acre yield estimate could be 2-3 bushels per acre too low. Throw on top record production being anticipated for South America and you can see why many are starting to pencil in a much more palatable number in their balance sheets. In fact, Goldman recently lowered their 12-month soybean price outlook down to $13.50 a bushel. Keep in mind, this is down about $2.50 a bushel from the last forecast. Depending on what the latest trade estimates show us during the next couple of weeks, we may continue to stay under some supply side pressure. I should also note there were some rumors flying around yesterday that China might be thinking about imposing value added taxes on meats, poultry and eggs which could ultimately curtail demand and possibly ease feed usage to come degree. I continue believe there is more room to the downside as "supply" has not yet accurately been defined. My thoughts are we are going to end up with more bushels in the October report than what the USDA last estimated. I continue to believe near-term technical support is right around the $15.35 area. If this level doesn't hold I am afraid the soy market could quickly tumble to the mid-$14's. In any regards, I have to imagine that final push during the next couple of weeks will mark the fall harvest price lows in soybeans. Be cautious, but it might be time to think about dipping a toe back in the waters. 
 
As for today the trade seems to be anticipating another round of somewhat more bearish crop data coming from FCStone, Informa, StatsCan, CONAB and the USDA during the next seven trading days. Thoughts are not only will yields improve to some degree but so will planted acreage estimates both in North America and South America. In an effort to stay ahead of the potentially growing production numbers the funds continue to use the rallies to lighten the load, exactly what they have doing the past few weeks. The "technical" picture is certainly becoming more clouded as well. As I have mentioned time and time again this is NOT the environment to be chasing rallies. Producers should have made all of their 2012 sales by this point, now content on storing a small portion of their bushels in anticipation of an early 2013 rally.   
 

For the rest of this story and more insight into understanding your marketing tendencies, sign-up here to receive a RISK-FREE 30-Day trial of my daily Grain and Livestock commentary. So many advisors want to tell you exactly how to market your crop, I want to teach you to better understand the markets and how you should respond.  If you are looking to be educated and not just told what to do, simply click here and get started!

Van Trump Report


 
 
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