Given the carry in the corn market, Bob Utterback says he suggests focusing on selling old-crop corn via the July contract. "However, the charts are flashing caution—there's a chance for a breakout to the upside. As a result, I would buy deep-in-the-money puts rather than sell futures at this time.
"Regarding basis, I think it is prudent to remain open unless you are going to have to sell during January or February," he says. "I think basis on stored grain could improve all the way into June.
"The only cautionary note would be if you get the opportunity to lock up a strong basis, because if the market does bounce up next spring, basis recovery may not be as fast as one would like," he says.
For soybeans, Utterback notes, "USDA's November report suggests that the situation is getting increasingly negative. Domestic supply is up, as is expected South American production."
Key Market Factors
> Record-slow harvest finally got under way; will drag on
> Technicals indicate some strength could develop soon
> Weak basis through year's end
Percent Sold and Market Value on Nov. 1, 2009
Click here for Adviser Track Records Table
—Linda H. Smith
Basis Takes a Hit
In mid-November, basis in many areas weakened considerably as serious harvest finally got under way, reports Kevin McNew of Cash Grain Bids. "Barge rates were up sharply, jumping 20¢ to 30¢/bu. across major river markets. That took its toll on basis as well. Expect basis to continue under heavy pressure the next few weeks, not only on nearby bids but also for delivery in the next few months." —Linda H. Smith
Is a Tsunami of Climate Lawsuits Approaching?
Two Circuit Court (2nd and 5th) rulings have allowed civil lawsuits against oil and utility companies for their role in climate change. Agriculture should be concerned, several attorneys say.
"Several things are significant about these cases. First, in the 5th Circuit case, size didn't seem to matter—any emitter of greenhouse gases or producer of fossil fuels can be sued. Second, there is no law spelling out a safe threshold for various greenhouse gases, so there is no way for producers to know they are under the limit," says Peter Glaser, chair of the Climate Change Practice Team at Troutman Sanders LLP.
"These cases can have far-reaching implications," adds Gary Baise, a principal at Olsson Frank Weeda Terman Bode Matz, PC, who specializes in ag environmental issues. "Not only could confinement animal units be targeted, but also producers who apply fertilizer—nitrous oxide emissions from anhydrous ammonia are 200 times more potent than carbon dioxide, which isn't even a real pollutant."
Joel Cape of Frilot LLC in New Orleans says the 5th Circuit case has some unique properties, however. The plaintiffs alleged that pollution caused global warming, which led to a rise in seawater and more volatile weather, contributing to the severity of flooding and resulting property loss. "It may be a little more difficult to show direct damage, say in the Midwest, where more of agriculture is centered," he points out.
In addition, he says, there is a chance that climate change legislation will address some of this. However, Baise doesn't believe legislation will pass this year, at least.
"These are some of the most interesting cases to come down in a while," Cape says. "They raise many issues. It will be interesting to see whether they continue forward." For more details, see Magazine Extras at TopProducer-Online.com. —Linda H. Smith
Doha Round Conclusion Near?
After nearly a decade, the Doha round of trade talks for the World Trade Organization (WTO) may finally reach a conclusion.
"The trade negotiations have just about gotten to the point that if it doesn't happen soon, it may never happen," says Michael Whitehead, executive director of food and agricultural research at Rabobank. "If Doha falls over, the WTO itself could be in big trouble. It could become a toothless tiger."
Relatively little talk coming out of Washington regarding trade is a positive sign, Whitehead says. He believes that means there are actual negotiations taking place and a resolution could be imminent. "It could still be derailed by each of the main players feeling pressure from their domestic constituencies," he says. —Greg Vincent
USDA Secretary Tom Vilsack and the Justice Department's Attorney General Eric Holder announced in August that the two departments will look closely at antitrust concerns in agriculture. The primary focus will be on consolidation in the meat industry and the seed technology sector. Vertical integration is high on the list of potential targets, as well.
Meeting dates and locations will be announced by Dec. 31, but Jim Wiesemeyer of Informa Economics believes the first three hearings will be in March. Proposed locations for these meetings include Iowa, Wisconsin and Colorado, with more hearings to follow.
"You'll have to see who they hear from at these forums. This summer, they'll summarize what they think they heard and make proposals needed in the competition or antitrust areas," he says. "They may even look at previously approved mergers." —Greg Vincent
Brazilian Infrastructure Will Boost Production
Several factors have recently limited Brazilian soybean expansion. That may soon change, says Marcelo Monteiro, executive director of Aprosoja, the Mato Grosso soybean growers' association.
At the Soyatech Global Soybean & Grain Transport Summit in New Orleans in early November, Monteiro said a developing rail system, coupled with improvements in the state's highway system and a focus on using 2,640 miles of navigable waterways currently not in use, will open opportunities never before realized.
A north–south railroad that will run through the heart of the mammoth soybean-producing state is scheduled for completion next July. It will open new opportunities to ship products to ports on the Amazon River through the port of Santarem, accounting for a transportation savings of $53/ton. From the state capital of Cuiabá, a major highway is being built to the Tapajós River that will open water access to the same port. "That's a savings of $150/acre," Monteiro says.
An east–west railroad from Mato Grosso to the seaport in Vitero will result in a $40/ton savings when it is finished within five years.
Peter Goldsmith, a University of Illinois economist and executive director of the National Soybean Research Laboratory, says these infrastructure changes stand to boost Brazilians' production tremendously, but there historically have been challenges moving from planning through to completion. The funding mechanism is often public, and policy direction can change over time. —Greg Vincent
Top Producer, December 2009