Trying to Assess the Damage

June 17, 2008 07:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Next Bullpen will be Wednesday, June 25th.... I'm out of the office for a bit.

Trying to assess the damage... This is a big job! But USDA's teams will be out to determine what kind of acreage damage and crop damage has been done to this year's crop. The first "ballpark" figure will come on June 30 via USDA's Acreage Report. But of course this will be just a benchmark, as more flood damage has occurred since the surveying period. The first survey-based Crop Production Report will be in August... but even then, it will take several more months (harvest data) before we know the true extent of this year's crop damage.

We know damage has occurred... just how far from trend yield will be is the question only time will tell. Weather moving forward is very critical. It's certainly discouraging to check out some of the analog years forecasters are talking about... 1947, 1983, 1993... spring flooding followed by summer drought. As a result, the markets will remain HIGHLY sensitive to weather developments through the season. Additionally, agronomists are talking about the need for a larger growing season... as they hope a late frost can allow for some yield recovery.

But as far as "area" is concerned... the following map provides a pretty good "footprint" of where the flood damage is concentrated. I'd really like to show you the graph at this link... but I just can't get the version of the image I need to post here. I think this image paints a pretty good picture of where the major flooding has occurred.

(click on image for larger view).

Keep your comments coming. Always good to have conversation with you and input on what you'd like to talk about. E-mail your comments/question to me by clicking here. Please include your location.

Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 2 to 4 cents higher. Nearbys were 3 1/2 cents higher overnight on continued crop concerns. Futures posted a high-range close yesterday, reopening upside potential. Supply concerns will continue to limit near-term downside risk to profit-taking. With bullish attitudes, traders should look to buy even a modest price dip. December corn futures posted an inside day of trade. Contract-high resistance lies at $7.91. To the downside, the first level of strong support is at the June 11 gap from $7.15 to $7.03 1/2.

Soybeans: Mixed. Nearbys were steady to 2 cents lower overnight, with new-crop mixed. After a mixed start yesterday, soybean futures gained upside momentum and finished sharply higher, with new-crop leading gains. Traders are trying to sort through details and how much of an impact floods are having on the crop. Traders know the damage has been extensive, the question is exactly "how extensive." The first test to that will be the June 30 Acreage Report, although it will only serve as a benchmark, as flooding continues and more acreage is lost.

Wheat: 2 to 5 cents higher. Futures were firmer overnight on spillover from the corn market. After a weaker start, wheat futures found spillover support from neighboring pits and closed mostly around 20 cents higher yesterday. Additional support came on weather concerns, as flooding is delaying harvest efforts and causing crop quality concerns in soft red winter wheat country, while heavy rains in Oklahoma are also delaying harvest efforts of the hard red winter wheat crop.

Cash cattle expectations: $1 to $2 higher. Most traders started the week expecting steady to possibly firmer cash cattle bids. Given a smaller showlist than last week and strength in the boxed beef market, however, those cash expectations have increased. Most traders are now expecting trade later in the week around $95, which would be $1.50 to $2 above the bulk of last week's cash cattle activity in the Plains.

Futures call: Firmer. Futures are called firmer on strengthening cash expectations and spillover from recent gains. On top of strengthen in the beef market, the technical picture also got a boost yesterday as new contract highs were posted fort every contract from August forward.

Cash hog expectations: Steady to $1 higher. Cash hog bids are expected to remain steady to firmer across the Midwest today. Packers are working with profitable margins and some are ramping up Saturday kill plans as they look to make up for lost time due to recent flooding.

Hog futures: Firmer. Futures are called to open firmer on spillover from yesterday's gains and from cash improvement. However, upside potential could be limited as futures moved off session highs into yesterday's close. Traders will be watching the cash market very close to gauge near-term upside potential.

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