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August 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.

Why South American Planting Intentions Could Influence Your Planting Decisions

Aug 29, 2012

 Our friends over at "Oil World" confirmed last week the same thing I have been hearing out of South America for the past several weeks, which is that more soybean acres are going in the ground at the expense of corn and wheat acres. Their thoughts are soy plantings in Brazil will push to a record high of almost 71 million acres. Almost 4 million aces more than last year. One of the main driving forces is the fact soybean prices have climbed by close to 20% during the past year, while corn prices are just barely above double-digit gains for the same time period. If all goes as planned this growing season, Brazil will actually overtake the US as the world's largest soybean exporter. Corn acres are expected to fall from about 37.30 million down to about 36.30 million. Some additional wheat acres are also expected to be converted into soybean acres. Same type of scenario is playing out in Argentina where soy planting looks as if it will jump from 46.19 million acres to almost 50 million acres. Corn area looks like it will drop from 12.42 million acres down to about 10.86 million acres. Wheat acreage looks as if it will drop from 11.44 million down to about 8.89 million acres. The point is more producers in South America are going back to soybeans. If the balance sheet stays tight and the backend rallies (NOV13), I am thinking producers here at home could end up making a similar decision. Several corn-on-corn producers have told me they would love to have the chance to to go back to more traditional type rotations. They understand the nitrogen benefits that beans bring to the soil, and most all producers have seen the yield boosts in corn following beans. The problem is soy prices rarely get high enough to justify the switch in acres. This year might just be the exception to the rule. With wheat prices high and insurance guarantees looking good, I have to suspect a large number of wheat acres will go in the ground here at home. I am also thinking with the Canadian Wheat Board out of the mix, wheat from up north may start to more easily flow our direction. Net-net, we might end up with a glut of wheat if the weather cooperates. South America is going to plant beans from fence row to fence row. Hate to point out the obvious but corn should continue to be King.  

 

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


 

Marketing From Here On Out...Are You Considering These Important Dynamics???

Aug 28, 2012

 

Producers from here on out have to carefully examine their INDIVIDUAL sets of circumstances. With such extreme variances in this year's crop you simply can NOT afford to follow the advice of any one analyst or advisor. As I continue to preach, "cookie cutter" systems simply do NOT work any longer. The equations for each operation are too complicated. There are simply too many dynamics and variables associated with each operation, region and crop. You have to take the information that is circulating and apply it specifically to your operation. 
 
Point being, if you have "Good Quality" corn this year with a strong test weight you may want to consider storing more bushels than normal, simply because it could be in high demand and limited supply as we move forward in the marketing year. Producers who are finding low test weights, aflatoxins and overall poor quality should be considering just the opposite. 
 
Soybean producers who are looking at an exceptionally strong basis in their area should be thinking about selling every single bushel they can right now and re-owning the board with some type of limited risk bull strategy. Why would you want to fight such a strong "inverse?" The MAY13 soybean contract is trading almost $2.00 cheaper than the NOV12 contract, it just doesn't make sense to store the bushels into a strong basis and inverted market. On the other hand, if the bean basis is horrible in your area you may want to consider storing a few extra bushels rather than selling out simply thinking if things get as tight as everyone is anticipating, you might see a nice pop in the basis. 
 
The bottom-line is you have to carefully examine your individual situation. Your decisions will have to be based on what type of available storage you have, what is the quality of your crop, how much cash flow are you going to need in the next 6-12 months? What is the basis like in your area?What are your alternative marketing options? What are your plans if the ethanol plant shuts down?what if the dairy across the street closes? These are all things that you need to consider as the CEO of your operation. Don't look for or rely on others to make that decision for you. Getting opinions and help in regards to market direction or timing is one thing, but only you can answer the important detailed questions and intricate dynamics that need to be addressed for optimal marketing results. 
 
***Remember, tough times don't last, tough people do!!!
 

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 the Early Harvest & Spreads Might Be Telling Us?

Aug 27, 2012

 

Spreads have been telling a little different story as of late. There is some speculation amongst the trade that "harvest" pressure might be starting to weigh on the inverse. With weak corn stalks and producers worried about ear quality, corn harvest is rolling along a little faster than many had anticipated. We are also seeing the soybean harvest down to the south gaining steam as well. Cash soybean markets for the week backpedaled a little with August CIF breaking about $0.30 to $0.40 cents towards the end of last week. This pressured the "Sep vs Nov" bean spreads, which might soon give us the opportunity we have been waiting for to get long this spread down around even money. We continue to stay long the "Nov vs Jan" bean spread, even though we have been giving back profits. I am actually starting to get a little concerned about the way this spread has been acting and may have to make an adjustment later this week. My fear is producers may simply opt to sell a large portion of their beans right out of the fields as they cross the scales at harvest. This could obviously pressure the basis for a while and actually cause the SX/SF spread to trade out to a carry for bit. I am just getting the feeling producers are liking the thought off selling $17 plus soybeans right out of the field...and I certainly don't blame them! What a fantastic price. I will be closely monitoring this trade the next few days and will update you in my "Afternoon Comments" if I choose to make an adjustment. 
 
Corn will need to start getting some help from soybeans if prices are going to move aggressively higher. I am a little concerned that producers to the south are not only going to see their earliest harvest ever, but possibly one of their absolute best. With very little storage and some terrific production we are starting to see a ton of corn down south moving into the hands of the commercials. The problem is the commercials down in these areas are starting to move more bushels up to the north than they are to the south. The export market is basically dead, therefore with a cheap basis and no where to store the grain it is being pushed to the north. As the early harvested, good quality corn to the south floods the market and is pushed up to the northern regions, we may start to see the basis loosen up a bit across the board. Ultimately this could cause a little temporary price setback. 
 
Beans are simply a bird of a different color as eventually you will have both the "exporters" and the "processors" fighting over a limited amount of domestic supply. In some areas, it wouldn't surprise me if you eventually see the basis run to $1.00 over, maybe even higher!!!
 

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


 

 

Counting the Bullish Cards In the Deck

Aug 23, 2012

 

I thought it was time to do a little review and examine a few of the more important cards that are currently in the deck. As you can see from the outline below, I believe the deck is currently stacked to favor the bulls. There are several "wild cards" that could ultimately change the outcome of the game and help the bears make a better hand, but you have to believe the bulls stand the best chance of drawing out to "Royal Flush."  For now, I just wanted to start with corn. If you would like more of the story in soybeans and wheat, Sign-up here 
 
  • US Corn Quality - Bullish Card - I continue to hear more concerns about "quality." Low test weights (low 50s), poor sugar, poor starch, low kernel depth, aflatoxins, etc... This card has not been flipped over as of yet. There is talk circulating, but until we get deeper into harvest the full extent of the problems will not be revealed. I am thinking this could be a big bullish card as we move forward.
  • US Corn Yield - Bullish Card - It has been dealt from the deck the past three months but continues to find its way back into the pile. My bet is we see the USDA once again lower yields, especially if the weekly "crop condition" estimates don't start improving. Many respected sources looking for the current 123.4 USDA yield estimate to fall south of 120 bpa. Wouldn't rule out a more extreme type move to 115 bpa. 
  • Total US Corn Production - Bullish Card - The current USDA estimate of 10.779 billion bushels seems high based on the harvested acres, the amount of silage cut, the yields, etc... Thoughts are we might eventually see a card come out of the deck that reveals a sub-10 billion bushel crop. 
  • US Corn Exports - Bearish Card - South American surplus and supplies are going to continue to weigh on US exports. Poor quality may also damper exports to some degree. One could argue an uptick in Chinese buying could turn this card bullish, but as of right now I have to label the card as bearish. 
  • Ethanol Mandate Reduction - Bearish Card - The powers that be in Washington are being pressured by voters and the media to waive the current RFS and reduce the ethanol mandates. If dealt out of the deck it would initially be interpreted as bearish. My thoughts are the card is buried fairly deep, along with the upcoming elections right around the next corner. I am also concerned that even IF it is dealt from the deck it will do very little to make more corn supplies available. Could actually tighten up or shrink the availability of DDGS and place more pressure on soymeal. 
  • US Weather - Bullish Card - Conditions may have improved the past few weeks for many areas of the country but we are still experiencing massive drought like conditions in several key growing regions. Talks are after this week we will return to more drought like conditions. There are also some talks that harvest weather could soon become a major concern. Many producers are talking about extremely weak corn stalks and ears that are missing kernels down by the butt of the cop (not the tip). The fear is any type of wind or hail could cause the ears to drop. An early freeze would devastate the bean crop. Moral off the story, the US weather card has the potential to be a massive bull. 
  • South American Production - Wild Card - Brazil is poised to see their best year ever in regards to corn exports. Moving forward however there is some fear that increasing ethanol demand and decreasing acreage (more acres going to soy) might limit exportable corn supplies moving forward. As for soybeans, there is no question more acres are going to go in the ground this coming season. More importantly though the trade will be watching South American weather, political constraints, logistical issues, labor concerns, etc...Palnting a record crop does not necessarily mean they will harvest a record crop or be able to get a record crop out of their backdoor. This card could definitely be a game changer. If had to give it an edge, I would give it to the bulls. The trade is already anticipating a record crop on record acreage, for the most part all we can do from here is get worse. Some type of weather hiccup, planting delays, harvest delays, drought, etc... Seems to be a little dry starting off. 
 
Again if you are looking for the soybean, wheat or Chinese corn production "cards" 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 the link below and get started. 

Van Trump Report

Producers, It's Time to Be Honest

Aug 20, 2012

 

Producers should take some time this week and ask yourselves a few very important questions. Many times it is not so much knowing or understanding where the market is heading, but rather knowing and understanding your own personalities, traits and tendencies that will influence your "next" decision.

 

 

  • Question #1 - How many bushels would you like to have sold for cash flow purposes, delivery dates, quantities, etc...? 
  • Question #2 - How long are you comfortable storing the remaining bushels, and at what prices are you willing to start selling those bushels? Be specific. 
  • Question #3 - Will you realistically pull the trigger on sales at $7.00 if you didn't pull the trigger at $8.00, $7.75, $7.50 or $7.25??? Be honest with yourself. If your going to beat yourself up over missing the highs, then don't be afraid to sell now, these are great prices.

 

For many of us, the biggest mystery is not WHERE the markets are headed but rather how we will react before, when or after the markets get there. My point is you have to be honest with yourself and recognize and understand what your "NEXT" move is likely going to be. For me, on the speculative side, I have had to force myself this entire time to stay long soybeans. I simply knew that if I took all of my long positions off the board, I would probably miss the entire move. I knew I would be too stubborn to get back in on the highs of the rally. Point being, if I would have taken profits on all of the NOV12 bean contracts I was long from the $13.20 area at $14.00, more than likely I would have never gotten back in because I would have been waiting for a pull back or simply refused to buy back in on the new highs. I am staying in some of my long soy positions right now even though I think prices may temporarily break during the next couple of weeks on improved weather conditions.  I am afraid if I liquidate my "next" move could get me in big trouble. It's like when you buy a stock at $50 and take profits on it when it goes to $100. You know it is a great company, but you are waiting for a pull-back before you get back in. You try and get cute and pick a little extra money. The next thing you know the stock is at $150 and you absolutely refuse to pay this much, remembering back to when you paid $50 per share. A few months later the stock is at $200 and you are still on the sideline waiting for a pull back. A few more months go by and the stock is at $400, then $500, then $600. Sound familiar??? Unfortunately that was the way I played a majority of my Apple stock. I was simply too stubborn to buy back in when it was making new highs. My point is you have to know your own tendencies and personalities. If you are not going to make a sale up here at $8.00 then at what price will you pull the trigger? If you don't pull the trigger now and the market slides to $7.50 will you actually make a sale or will you be to pissed off at yourself for not selling above $8.00 and stubbornly hold on? What will you do if...

 

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!

                                                                

 

The Van Trump Report

Record Corn Silage Could Cut 4-5 Million Acres

Aug 16, 2012
      
 

 

Corn bulls may soon start talking about how much more "silage" is going to be cut this year compared to last. We are hearing producers all over the country taking about cutting more for silage than they had anticipated just a few weeks back. One e-mail recently floating around stated, "Decided to silage the corn and cut water expense. $75/ton making 26 tons." The point in this is $75 x 26 = $1950 by 225 is over $8.50 a bushel.  To say the least, these numbers may be very conservative. I have heard of several producers reporting unharvested wheat straw priced in the field around $65 per ton of dry matter (DM) and good corn silage pricing in around $160 per ton of DM. Some field estimates now place the dollar value of drought-stressed corn silage in the Midwest between $90 to $150 per ton of dry matter. If you want to read more about corn silage check out the article, "What Value Will Corn Silage Have" written by Peggy Coffeen, dairy and livestock editor at Agri-View. Or if you would like to find out how much silage you can expect to get out of your field check out this link: "Buying and Selling Corn Silage." The point of all this is that corn producers might end up cutting more fields for silage than any of us have anticipated.  Now I want to tie this together with today’s news out of the FSA.  If you hadn’t yet heard, the FSA just shook things up saying certified acreage data for 2012 actually indicates planted acres for this crop year is likely some 3 million acres "HIGHER" than what the NASS had last estimated.  They are talking we could see an extra 1.2 million soybean acres planted and an extra 500,000 - 1 million acres of corn planted.  I just want to reiterate that this number has not taken into account the dismal growing season, nor the acres of corn we could lose to silage. I am hearing talk out of analysts that say if there’s record silage cut, this could jeopardize another 4 - 5 million harvested corn acres.  As I said, corn cut for silage could turn out to be a wild card and could have the folks over at the FSA and the USDA reducing their final harvested acres numbers as we move through harvest.  

 

We are making some moves in response to what the market is showing us. You can sign-up here to receive a 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  


 
 

Is This the Next “Black Swan” to Hit Agriculture?

Aug 15, 2012

    

If you are looking for the next curve ball or "black swan" type event... here you go! Germany's second largest bank "Commerzbank" has joined "Deutsche Bank," "DekaBank" and now Austria's "Volksbanken" in removing their farm commodity investment products from their investment portfolios. You heard me right, a handful of the world's largest banks have decided that rather than facing the stiff media scrutiny and criticism associated with agricultural commodity speculation they would simply bow out gracefully. In a statement released yesterday, the folks over at Volksbanken said, "Volksbanken Investments will not offer any new products in this area and will withdraw all of its offerings in this sector." At the end of last week, Commerzbank decided to restrict "food-related" investments by stripping all agricultural products from its multi-million dollar commodity index fund. To put it bluntly, the banks simply do not want the negative press from the media as they blame higher food prices on excessive speculation. I am not saying ALL big banks are going to pull out of agricultural commodity type investing, but as food prices move higher and higher, I have to assume the talking heads will push their witch hunt deeper into the banking sector. If the banks start feel more negative press and pressure from the media, there is a chance we could see more and more of them forced to the sideline. This is certainly not conducive to an environment that will create more money flowing into agricultural commodities. Even though the fundamentals are bullish we have to keep our eye on ALL of the balls that are up in the air, especially those that may ultimately affect "money-flow."
 
If I am "counting cards" I have to give the edge to the bulls right now. I simply see more cards in the deck that could ultimately push prices higher in the coming weeks than I do bearish cards. However, I remain deeply concerned about "money-flow." Understanding just how important money-flow is and how much we need it in order to see higher prices, I am constantly monitoring its every move. If the large money-mangers and global bankers (as I mentioned in the opening paragraph) start to feel more negative pressure from the media and talking heads about so called "food speculation," we may see some of our biggest and baddest soldiers, who have been fighting for the "Long Side," forced out of the battle. With fewer soldiers and ultimately less ammunition on our side we could end up having a much more difficult time moving the price lines beyond $9 in corn and $17 in soybeans. Fundamentally all arrows point towards higher prices, but as we have come to learn in this high volume fund driven area, "money-flow," or should I say, possibly lack there of, will ultimately determine if prices move higher. I remain cautiously... 
 

For the rest of this story and more insight into what the Hedge Funds and money managers are looking at, sign-up here to receive a RISK-FREE trial of my Ag Markets commentary.  In this daily report you will get my thoughts on where prices are headed and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets.  Just click here -  Van Trump Report  


What Happens If and When the US Runs Out of Soybeans?

Aug 13, 2012

    As you may already know, soybeans improved slightly in this week's Crop Progress report. The "Good-to-Excellent" rating was pushed 1% higher to 30% while the "Poor-to-Very Poor" rating was pushed 1% lower, and now stands at 38% of the US crop. Most of the improvements are due to improved temperatures and decent rainfalls across the midwest last week. 

 

Soybean balance sheets longer-term are increasingly more difficult to solve. You have to believe with Chinese crush margins starting to turn positive and a more dire shortage of meal in Brazil, China and other parts of the world, we are on the brink of a major shortage. What I am trying to tell you is that with crushing plants in Brazil closing down (no beans to crush) and the world continuing to hold out their hand begging for more high protein, this market could absolutely explode! The bears can sit and talk all day long about the improved US weather models, but is that really going to matter in the grand scheme of things. US soybean production below 3.0 billion almost ensures a global shortage of soybeans and extreme price rationing will be needed. So the the difference of 35 to 38 bushels per acre really has no long term affect. Any way you slice it, the world is going to be in short supply of meal. The bears can also jump up and down all day long about the record number of soy acres going in the ground in South America. My question is when we sell out here in the US (which it is going to happen), and the entire world is on Brazil's doorstep begging for soybeans and meal, how will they possibly get the supplies out quick enough to those in desperate need. You know the logistical nightmares that importers have to deal with out of South America. It's not an issue when you traditionally have the US available to back up orders if the supplies don't get out of South America. Understand what I am telling you, the US is not going to be there to back up South America. South America will be left to supply the world with soy exclusively on their own. I know they have come along way with production, but I don't see a snowballs chance in hell they can logistically get the beans from the fields, to the ports and out the door in a timely fashion to supply the entire world with need inventory. Let me ask another question. What happens when the US runs out of soybeans (which we will at some point in 2013) and we are forced to import supplies from Brazil? Do you really think soybeans imported into the gulf will make there way up to Illinois, Iowa, North Dakota, etc...? There is no way. Crushers to the south will be bidding and gobbling up every bushel that comes into the country. Livestock producers closer to the ports will have first right of refusal. Those to the north will simply be left to fend for themselves. What will they feed when corn is in limited supply, the ethanol plants have been shut down and there are no DDGS available??? My hunch is if and when that time comes, soybeans in those parts will be like gold.

We are making some moves in response to what the market is showing us. You can sign-up here to receive a 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  


 

WASDE: What Producers Need to Know

Aug 10, 2012

 

I wanted to bring you the highlights of this morning's WASDE report.  I know there's so much information given in these reports that it can be overwhelming.  That's why I wanted to just hit the major highlights in an easy to understand and un-intimidating fashion.  Here they are:

 

 

  • Corn yield reported at 123.4, trade was looking for a 127 yield 
  • Corn harvested acres reported at 87.361 million, trade was looking 86.5 million 
  • Total Corn Production reported at 10.7, trade was looking for 11.025 billion 
  • Ethanol Usage dropped by 400 million to 4.5 billion bushels. 
  • Corn Exports dropped by 300 million to 1.3 billion
  • Corn ending stocks cut from 1.183 billion in 12/13 down to 650. The trade was looking for a number closer to 660 million
  • Old crop corn ending stocks went from 903 million last month to 1.021 billion. Trade was suspecting a slight jump higher so no real affect. 
  • Chinese corn production now estimated at 200 million compared to last month's 195 million and last year's 192.78 million.  What a joke... They also lowered their corn imports to 2 million metric tons down from 5 million.
  • Ukraine corn production reported at 21 million compared to last month's estimate of 24 million metric tons. Market was hoping for 20 million
  • Soybean yield reported at 36.1 compared to 40.5 in July and 43.9 in June
  • Total Soybean production reported at 2.692. The trade was looking for a number down around 2.81 billion. 
  • Soybean ending stocks estimated at 115 for 2012/13, this compares to an estimate of 130 last month. Trade was looking for a number around 111
  • Old crop soy ending stocks reported at 145 compared to the 170 million estimated last month. 
  • Winter wheat production reported at 1.012 compared to 1.670 in July. Trade was looking for a number around 1.668
  • Russian wheat production reported at 43 million tons this compares to last month's estimate of 49 million and June's estimate of 53 million. The trade was looking for a cut to 43 million. 

 

With the USDA report now behind us and the "weather" story starting to become old news, I have to believe the trade will start to focus more heavily on "demand." From my perspective, once the South American corn supplies dry up and the world no longer has access to "cheap" corn supplies we should post another leg higher. I believe the US crop is going to continue to get smaller and the world is going to be left with very few alternatives. I personally doubt the Chinese will harvest the numbers currently being thrown around, and I believe there is more to their corn shortage story than we know. 

 To hear my thoughts on how producers should be marketing in response to the WASDE number, continue to watch AgWeb.com for more of my updates.  If you would like more in-depth marketing help, you can sign-up here to receive a FREE, NO-RISK 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  

What Producers Need to Know Ahead of Tomorrow's USDA Report

Aug 09, 2012

   

Tomorrow morning's USDA report is slated to be one for the ages. The USDA is looking at a next to impossible task of estimating the US corn and soybean crops. I continue to talk to producers each and every day that are seeing a vastly wide range of results from field to field and from seed variety to seed variety. With many producers not being 100% certain about their own production, I find it terribly hard to believe the USDA is going to be extremely accurate with their figures. We are going to need hard data from harvest to get the real picture. Unfortunately, that is still a ways off. Obviously the production numbers will be lowered aggressively in corn and to some degree in soybeans, the question is how will the market react? My guess is if the corn numbers are conservative the bulls will immediately start to predict more cuts in the coming months. I honestly doubt any type of long-term sustained break in corn prices are upon us. Producers looking to make more sales or lock in a "fall harvest" insurance price should remain patient and pull the trigger exclusively on the rallies. Do NOT panic and sell into a knee-jerk type break that could be associated with tomorrow's report.
 

USDA report estimates and what the trade will be looking for: Remember, this will be the first one taking into account actual "farmer surveys."

  • Corn Yield - This is obviously the big one. Most seem to be looking for a 127.3 yield number. This seems like it might be a little extreme for the USDA at this point. Keep in mind, they just went from a 166 yield number down to a 146 number last month. Another 19 bushel cut might be asking a little much. A 129 number or higher will certainly disappoint the trade, while a 125 number or lower will have the bulls running.
  • Corn Harvested Acres - This is the one I really want to see. Just last month the USDA was estimating 88.9 million harvested acres. The trade seems to be looking for a number just below 86.5 million acres. Unfortunately, I think we are trading a number right around 85 million or even a little lower. My point is if the USDA doesn't cut at least 3 million acres, the trade will be extremely disappointed.
  • Corn Production - Last month the USDA had us at 12.970 billion bushels, a cut of 1.82 billion from their June estimate of 14.790. This time around most seem to be thinking the USDA will cut another 1.94 billion, placing total US corn production at or around 11.025 billion bushels. This sounds like another massive cut, but with many in the trade already penciling in a sub 10.5 billion bushel crop, the trade might not be all that excited.
  • Ethanol Usage - There is talk that the USDA could lower corn used for ethanol in the 2011/12 balance sheet by 50 million bushels. While lowering yet again their 2012/13 ethanol usage numbers by another 200,000 to 400,000 bushels.
  • Corn Exports - This number, similar to ethanol could be further reduced in both old and new crop balance sheets. The 2011/12 exports could be cut by 25-50 million. While the 2012/13 exports could potentially be cut much more severely.
  • Corn Ending Stocks - All I am saying is don't be surprised. If the USDA raises their 2011/12 corn ending stock number. I am guessing the 2012/13 ending stock number will fall from the recently reduced 1.183 billion mark down closer to 800 million. I could definitely pencil in a lower ending stock number for 12/13, but knowing the USDA rarely likes to go below this imaginary line my best guess is somewhere around 800 million.
  • Chinese Corn Production - Last month the USDA was estimating Chinese corn production at 195 million compared to 192.78 million the previous year. Now all of a sudden there is all of this talk about a bin busting crop in China and thoughts that the USDA might push Chinese corn production higher into the 198 to 200 million range. I am not saying the USDA won't push the Chinese corn estimate higher, because I am sure they will, I just question the accuracy of the information coming out of China. I have talked to several individuals that have been inside China the past few weeks and no one is reporting a "record" type crop. Average, yes...record, NO!
  • Ukraine Corn Production - The USDA last forecasted Ukraine's corn production at 24 million metric tons. Now all of a sudden the trade is wanting a cut of 4-6 million. My guess is it will take a reduction below 20 million tons to excite the bulls.
  • Soybean Yield - The USDA shaved their estimated soybean yield from 43.9 in June down to 40.5 in July. Most in the trade believe we will see another round of similar type cuts and a drop to 37.75 bushels per acre is now a reality. The recent rains and improved soil moisture levels in some areas has many in the trade thinking the USDA will not cut the soybean yield this far this early. They might be right!
  • Soybean Harvested Acres - This one is a little tricky. I continue to hear talk about how the harvested acres need to be reduced by between 500,0000 and one million. The current USDA estimate is calling for 75.3 million soybean acres to eventually be harvested. The trade however believes this number should be down closer to 74.8 to 74.3 million.
  • Soybean Production - The USDA lowered their soybean production totals from 3.205 billion in June to 3.050 billion in July, now the trade is calling for a drop to 2.81 billion. Many in the trade believe we have already priced in a 2.8 billion bushel crop and it will take a lower number to really excite the trade. I just don't think we are going to get it. In fact, I am not all that sure we are going to see a cut below 2.9 billion on this report. I still remain bullish soybeans longer-term I just don't think you are going to see the entire picture painted in this report.
  • Soybean Ending Stocks - There is some talk the 2011/12 ending stock number could be cut from 170 down below 150 million on higher exports and higher domestic crush estimates. I am not really in this camp as I believe a large portion of the existing old crop exports may simply be rolled into new crop sales. Therefor some of the bulls might be disappointed. As for the 2012/13 numbers, I am just not sure we are going to see the USDA move below the 130 number they threw out last month. I know many analyst are penciling in a "zero" or in some case "negative" carry. I am telling you now, the USDA is NOT going to make that kind of move. In fact, it wouldn't surprise me to see them leave the ending stock number unchanged even on lower production numbers. My hunch is they will simply lower export and crush estimates on thoughts that higher prices will ration demand. Once again this could be viewed as bearish and might produce a knee-jerk reaction to the downside.
 

This is just a quick summary of my thoughts on corn and soybeans.  If you would like my full summary ahead of the report, you can sign-up here to receive a FREE-NO RISK 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  


 

 

Is US Corn Production Below 11 Billion Bushels?

Aug 06, 2012

    

Bullish traders have been placing bets for weeks on thoughts that the US corn crop may ultimately fall below 10.5 billion bushels. But from where I sit I am starting to think it will be tough for the USDA to deliver such a bullish number in the report this Friday. Yes, the USDA was extremely aggressive in their first round of cuts, and there are those in the market that believe they will be even more aggressive this time around. Just look at what Informa said on Friday, they believe the USDA will cut their yield estimate to 120.3 bushels per acre and deliver a total crop production number of around 10.338 billion bushels. I sorry, I am just not so sure I am in that same camp. In fact, if the USDA delivered a "total" US corn production number below 11.0 billion it would really be a shocker to me. My point is even if the USDA cuts another 1.2 to 1.9 billion bushels from total US production, we are still well above some of the numbers that bullish traders have already digested. Bottom-line, I believe we are going to have to see the USDA cut production numbers to levels well below 11 billion bushels to get a sustained push to higher ground.  To get corn prices up to $9.00 per bushel I think we are going to need to see the USDA eventually cut "harvested acres" to 85 million or lower with a corn yield at or below 125 bushels per acre. I think a USDA corn yield estimate between 126 and 128bpa will push corn prices up closer to $8.50. My guess is anything less will do very little to drive prices higher for any sustained period of time, in fact we may actually see some long liquidation and profit taking on thoughts the US crop has stabilized. Moral of the story, I think it might be tougher than we think for the USDA to excite the "bulls" in this Friday's report. I certainly don't want to be "short," but I think you should be very cautious with your long positions.   
 
USDA's August report is just four short trading days away (Friday 7:30am CST), there is little doubt in the trade they will be making another round of sizable cuts to production. Some analyst believe the USDA's current corn harvested acreage number is at least 5 million acres too high. The USDA is currently at around 89 million harvested corn acres and the trade seems to be thinking we could end up with less than 84 million harvested corn acres. The USDA is currently projecting total US corn production at 12.97 billion bushels with an average yield of 146 bushels per acre. Now all of a sudden we have reputable source projection a sub-10 billion bushel crop on a sub-120 bushel yield. My question now is can the USDA deliver a number that will somehow NOT disappoint the bulls??? My Initial thoughts are..."I doubt it."  
 

We are making some moves in response to what the market is showing us. You can sign-up here to receive a 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  


 

Short-Term Outlook for US Corn Demand

Aug 01, 2012

     

Corn traders are not only uncertain about "yields," but now seem to be extremely uncertain about "demand," especially with so many groups appealing to Washington for a reduction in the "Renewable Fuel Standard." Remember, the "RFS" requires 13.2 billion gallons to be produced this year. That places minimum corn usage at about 4.7 billion bushels. If the trade feels that number will be slashed sometime soon, we could definitely see some additional long liquidation. Moving forward into 2013 corn usage is lated to jump to around 4.9 billion bushels, a number that is also being carefully watched. Even though it seems high unlikely that US officials will make a move any time soon on the subject, just the thought of reductions has the ability to send some corn bulls running for the exit sign. There is also some talk amongst the "tech" crowd  that the corn market is starting to look extremely tired. Special attention was noted yesterday as to how the corn market posted new highs on less volume and less open interest, often a sign of a market that is loosing steam. I would concur. Until we have more bullish data to digest traders will find it hard to add to their length at these lofty levels. 
 
*Talking to farmers around the country: Hearing some good yield numbers out of "Central Arkansas" on early planted corn, some 200-240 type yields on good irrigated ground. Kentucky producers reporting yields as low as 20 bushels per acre on harvested ground to as high as 115 with test weights running about 55. Some corn already being harvested in Illinois producing 115-125 type yields with test-weights around 50 and 25% moisture. Producers in Nebraska reporting a lot of "silage" being cut on dry land acres, while irrigated acres seem to be hanging in there. 
 

We are making some moves in response to what the market is showing us. You can sign-up here to receive a 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  


 
 
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