USFR Weekly Recap - December 10-11, 2011

December 13, 2011 06:58 AM

DECEMBER 10-11, 2011

JOHN’S OPEN: Hello and welcome to U.S. Farm Report, I'm John Phipps. The normally low-excitement December supply-demand report fit in perfectly with dreary December weather. Al will have the less than thrilling numbers momentarily. Many of us are already looking toward the real heavyweight report in January. Unusually strong basis levels in much of farm country and the absence of huge outdoor piles of corn have raised some questions about where all this corn is we're supposed to have grown. At any rate, I sense a lack of interest in producer attention to markets right now. Maybe a dull, low volume trading period while we watch Europe isn't all that unwelcome. Let's get to those's Al Pell.

WASDE REPORT: Thanks John. World supply and demand numbers from the USDA on Friday were uniformly bearish. Ending stocks rose from November estimates, largely due to higher production in China, Canada and Australia, and lower exports from the U.S. For U.S. producers, farm price estimates for 2012 were lowered 20 cents in corn, 90 cents for beans, and 50 cents for wheat. Ending stocks came in at 848 million bushels for corn, 230 million for beans, and 878 million bushels for wheat. All were slightly above analyst predictions.

MF GLOBAL CORZINE: In Washington this week, the former CEO of MF Global apologized for any role he may have played in the collapse of his firm. Jon Corzine testified before the house ag committee this week. Lawmakers are trying to determine what and who caused the collapse of the company. It's one of the largest bankruptcy filings in history. There are also questions about how one-point-two billion dollars - which was supposed to be segregated from company funds - disappeared. Reading from prepared testimony, Corzine says he hasn't had access to some company information since leaving the firm. And he doesn't know where the money went.

FJ FORUM FARM BILL: Corzine and MF Global were hot topics at this year's Farm Journal Forum. Three of the top four members of the Senate and House Ag Committees attended - Senators Debbie Stabenow of Michigan and Pat Roberts of Kansas along with House Ag Committee Chair Colin Peterson of Minnesota. Besides MF Global, the three spoke about the 2012 farm bill. Stabenow praised the bipartisan work that allowed the two chambers to finish a draft for the super committee. Peterson says even though the committee failed, the bill could still get used this year. Senator Stabenow says she's not planning to release the final language of the so-called secret super committee farm bill. Both Roberts and Peterson say they think the public deserves a look.

CROP WATCH: Crop watch this week is a multi-state swing...The "NASS" office in Ohio says corn harvest has reached 80% in the Buckeye State. Last week farmers only had about a day of decent weather. Much of it will be harvested after the ground begins to freeze. Meanwhile in the southern plains, USDA says lingering snow is providing winter grains with beneficial moisture. There was an inch of snow around Lubbock, Texas. And from Buffalo County, Nebraska a grower says most of the fall work has wrapped in his area. His bean yields averaged 81 bushels an acre, but corn yields were generally 20-to-25 bushels below average. He says a July windstorm took a big bite out of his crop.

ROUND TABLE: Our round table guests this week are Mike Flores, and Andy Shissler and we had a supply demand report that came out on Friday and everybody is looking at it and Mike I know you are a speculative trader and you have said you don't pay much attention to the numbers. The bearish report you must be thinking something. I pay attention but don't believe them. I don't think we are getting accurate numbers. Regardless I'm a speculator and I have to live and die with that. The markets took on corn fairly well. Beans didn't do so well. They add a lot of supply to the soy but I think it's coming to the end of the down and I'm quite positive on corn. I think it's a good buy right now. You don't think it'll go further. I don't. I will go to you and yes. I know you have close relationships to people in China. One of the things that the report said they raised the amount of corn china had on hands. That true? You are smiling. You can believe everything that the USDA and China says but it probably won't do you any good. They say the crop is 191 which I know they had good crops in China and it was better than the last two years, there is no question about that. If you talk to people that actually buy the grain over there and what the farmers had, my numbers are in the 170s. We are a good 20 million-tons below what the USDA says. The odd thing is that the USDA sent people over a couple months ago. People forget things and the USDA said the crop was smaller and you know the Illinois crop was small. It's not very hard to figure out. They thought it was not as big as the 180 they were saying then but they throw 190 on the report. That's --China holding half of all the corn stocks around the world and the price is eight to nine dollars on the board and no corn stocks last year and now all this. I would be bullish corn and if you buy in to the global stocks being high you are wrong. Also, they suggested we would grow more in every other country in the world --in addition to us and plant more next year. So --looks like they are trying to set up a kind of bearish trend for next year in terms of corn and wheat. Is that true? Is that just me? I think the wheat is legit. Okay. We have put it in a lot of acres around the world. There is no question about that. There have been good crops, I think that is legit. South America is a question mark at this point. I know one thing, I buy a lot of high crop insurance when I have La Nina in the United States and it's setting in, in Brazil and Argentina that's dangerous saying they will have a super crop in the next two months, I saw our stuff here with La Nina. They could not have good weather and it could be a less crop. We start arguing about it is 1st of June you don't know until the end of August. Where are we going to go? Are you kind of bullish? 100% technically, when they get this far bent in one direction you get a reaction back and that's what I’m looking far. March corn could probably --in the next say month, six weeks -- could probably touch $6.50. I got cash corn I think there is going to be a significant bounce. So I guess what I'm trying to do is create for the producer out there, because is he looking at his next year's crop and coming holiday season, saying it doesn't look all that hot right now. What should we think about between now and the 1st of February next year? We are going to set crop insurance premiums in February, the numbers are 75% of the time are February prices, the way it's been recently it has been higher than decent. January and March has been higher than that. I believe pricing opportunities between here and there and we should be able to get revenue guarantees that you should be able to build a market plan off of then. I think it's a little early to be thinking about it and being ready for it. If you look at --down the line you say we will have to adopt the prices that corn is today and they won't be that crop potential we were talking about seven or eight dollar corn and a lot are putting cash rents up so that will make a difference. Yes it will. The new crop is only trading in the 60s or the $5.50. The profit levels are less but still there. Probably shouldn't pay $700 for cash rent. We will be back with more in just a moment. Mike for he's, we started out with you earlier because you are a speculative trader but that is a different kind of trading than most of a producer and a lot of people watch the show look at because they are basically supply demand and this kind thing. You look at technical aspects. What kind of technical aspects you looking at that lets you take the attitude that you have right to you now? I usually have 12 different indications, from timing -- lows being made now are based on what the marks are doing in the past. A lot of momentum, over sold indicators, weekly charts, monthly, try to get together where support should come in. Com pile that, when they all kind of start leaning too heavy in one direction we are ready to got other way. So, that's what I do. Basically all the numbers come out and the attitudes, does that take into consideration the outside funds and how much available? They have been backing off the market. I'm glad they are leaving. They have out flows of money in the markets right now and that's what caused a lot of this decline. They have so changed things, so many straight up moves and straight down and you just don't know where the market’s going to go based on money flowing out and it's not just the gray markets, even the stock markets are saying say yesterday are you down and now up. Hopefully that money that is leaving doesn't come back. All the way into august people talk about what the outside markets doing and about that. Since the tsunami that's my marking point. Since then it’s been crazy. Okay. Now I'm going to come to you because I know you work crop insurance, you work in the hedge business with a lot of producers, is the kind of information that Mike uses on a regular basis valuable to a producer making decisions and where should he put that decision in his marketing plan? Well, Mike and I were talking off camera, the technicalities are interesting sometimes and the whole community was convinced that there was a formation that was built that as the corn market was bouncing down like a ball once it hit 586 on march futures, if it hit that it was going to bounce down to five. Didn't happen. Maybe it'll next week, or the week after, I don't think so, you have to create these trap type of situations and that's what is stopping it from going down and starts the next thing. If you don't like selling the market when it's low which I don't you have to try to avoid those kinds of traps. You better have half your game in technicalities or you aren't going to do very good. Half the game, not dollars, are you talking half your mind and making decisions. Yeah. You need to behalf your game there as far as how prices go because you can seek out profits for your corn, places to do that. We have opportunities every year. You know the problem that you run into it --all the junk around you and between making your decisions, and --you get pushed into making sale it’s on the low when I don't think you should. This is not a time of year I normally sell anything. Usually looking for a price increase from here and for the price I'm going to increase from hopefully it's six dollars and that's where we have been told; maybe 650or maybe better. Normally this is the type of year you wouldn't sell any way because it's independent of the market year and the market is full and everybody is stored up and the price is normally low. And --if all the grain we sold off the farm to end users, a lot of that got bought into the first quarter. The end users didn't have to go crazy. Prices didn't get real aggressive to the upside when people have to make decisions the end users received you get to another quarter -- you don't have that urgency. I guess my question --as these prices went down and did go down are the end users going to take advantage of that and start to pick up sales? Probably should. Are you saying they should? We are at the low end of it. I would say identify the end user and making those decisions I would be buying. I think the stocks report in January will be bullish. I think they did buy and the corn out there got sucked up and I think our first place where we measure it if they tell the truth on the report you will see a couple hundred million bushel its swing back to feed on the next crop report. I have a hard time thinking with more cattle we will have less feed. More cattle? We have fewer this year. We have fewer cattle but it's 30 year lows on feed. Okay, good deal. We will be back with more in just a moment. .

JOHN’S WORLD: The current controversy over the malfeasance at MF Global and the handling of client funds has thrown a twist into the many over-regulation tirades. The commodity futures trading commission is receiving a lot of heat over the missing money, and why they failed to prevent it. One reason might be because the commission hasn't really been getting a lot of love from congress or farmers in recent days. This summer a bill to slash the CFTC budget 15% was pushed by legislators seeking to prevent more oversight of the unregulated and enormous derivatives market. The result is an unsurprisingly contradictory message to regulators. We want them to police financial activity but without adequate staff or budget and without hindering trading. In the case of MF Global, it is clear what many farmers are hoping for is government funds to make their trading accounts whole by focusing the blame on the CFTC. In short, the dream is minimal regulation with unlimited free insurance. But even former Fed Chairman Alan Greenspan has admitted one of his biggest misjudgments was thinking financial markets could self-regulate. As markets get bigger and faster this becomes even less likely. We aren't doing business just with people we know and trust anymore. And the problem is always "those other guys". A more pragmatic attitude about market rules and regulatory agencies is one prerequisite to global markets that work.

Hello and welcome to U.S. Farm Report, I'm John Phipps. All it takes is a little snow, a few Christmas carols, and a new calendar on the fridge for it to sink in that the year is almost over. While most of you, I'm sure have added up your profits and losses, my desk is still waiting for me to create order from chaos. I blame Jan. Since building her a greenhouse this summer, I have been busy completing work on the greenhouse support structure on which it leans - a modest 1800 square foot woodworking shop. There is simply too much fun too close to my house for my waning attention span to duty. But my appointment with my banker looms, and even I am mildly curious about how 2011 really turned out. Let's get started with the headlines and Al Pell...

TEXAS HERD CULL: Thanks John. Texas is known for its big sky's and massive herds of cattle. But come 2012 those herds are going to be noticeably smaller. New numbers show drought has reduced the cow herd by some 6-hundred thousand head. The 12% drop is the second largest in history and the biggest since the dust bowl years of the mid 1930's. Many producers couldn't find hay or pasture for hungry cattle. That forced ranchers to sell out or pick through the bunch in heavy culling. Many cows headed for slaughter. Economists say the reductions across the southern plains will lead to strong 2012 prices for ranchers, but also higher prices for consumers.

SMITHFIELD CRATES: The world's largest pork producer says it will phase out the use of gestation crates at its facilities by 2017. Smithfield foods has been criticized for breeding sows in crates that restrict the animals' movement. The Humane Society of the United States filed a complaint last month saying Smithfield was not moving fast enough to stop the use of the crates.

RESTAURANT BIZ: Consumers are holding tight onto "food-service" dollars. Marketing research firm "NPD" says continuing high unemployment and low consumer confidence kept restaurant visits flat in the first three quarters of the year. NPD says quick-service restaurants account for 78% of all restaurant visits. Casual and mid-scale dining restaurant visits are both down 2%.

PEARS: Have you ever walked thru the produce aisle and "thumped" a melon to see if it's ripe? What about a pear? The pear bureau northwest says 84% of pear shoppers are un-aware on how to tell when a pear is ripe. So the pear marketing organization has launched a campaign to educate consumers about the proper steps. It's called "check the neck". Pear bureau northwest says simply apply gentle thumb pressure to the neck - or stem. If it pushes in a bit, then the fruit is just right.

HEARTLAND SOCIAL MEDIA: A dairy farmer near the Alabama-Mississippi state-line is very "social". From Facebook to Twitter, he uses just about every form of social media to get the word-out about American agriculture. In this report from Mississippi State, Leighton Spann has more on a farmer who's bridging the gap. If you'd like to follow will's blog, head to We'll post a link on our home page for instant access.

POTATO BOWL: You're familiar with the rose, orange, sugar, and cotton bowls. But what about the potato bowl? This year college football will pay tribute to spuds at the "Famous Idaho Potato Bowl". The bowl game was formerly known as the "Humanitarian Bowl". The Idaho potato commission is the premier sponsor of the game. And it's getting the word out about the state's premier crop. They grow 12-billion pounds annually, enough to fill five football stadiums. The game will be played December 17th at Bronco Stadium at Boise State University. The Ohio Bobcats will take-on the Utah State Aggies.

LA CITRUS HARVEST: For citrus growers in the bayou, harvest season is now in full swing. In this report from the LSA Ag Center, Tobie Blanchard visits groves in the heart of Louisiana's citrus-growing region. Thanks Tobie. When we come back, it's time for Tractor Tales and our Country Church Salute...please stay with us.

TRACTOR TALES: Al is back now with tractor tales...John, we head north for this week's classic iron...This 1949 Farmall "M" was a pretty popular tractor in its day. For one farm family in Minnesota, this work-horse was modified to fit the needs of their property. Do you like antique tractors? You can now download segments from both you-tube and Facebook...just search for "tractor tales" and watch away.

CHURCH SALUTE: Today's Country Church Salute goes to the First Baptist Church of Barnard, Kansas. The church is celebrating its 125th year of ministry. The church was first organized in 1886. It took a few years, but the congregation built its first church building in 1901. The new existing church was dedicated in 1960. Congratulations to the First Baptist Church of Barnard, Kansas. Our second salute goes to St. Pauls Lutheran Church-Artesian in Waverly, Iowa. It's celebrating its 140th anniversary this year. St. Paul's was organized in 1871 with 30 charter members. In 1885 a new church - which remains standing today - was erected. Services were conducted in German until 1918, when they added English-speaking services. The present membership is 135 members. Our thanks to Lester Leisinger for sharing the good news about St. Paul's Lutheran in Waverly, Iowa. As always we want to learn about your home church as well... Salutes can be sent to the address on the screen. Stay with us - the mailbag is next.

MAILBAG: Time now for our weekly look inside the farm report mailbag....George Poch works with his local soil and water conservation district, and when I remarked farmers were outgrowing the farm bill, he reminded me of some less controversial expenditures that would be affected. "The latter part of the 2011 USDA's budget year zeroed out funding for this organization, which was a real disappointment for me." You raise an important point. I have been at several meetings where experts were asked by farmers what to expect from the government in the next few years, and the answers rarely ventured far beyond direct payments, crop insurance subsidies, and ethanol. But every proposal I have seen floated as a way to cut the Ag Department budget has serious decreases for conservation programs. Even farmers themselves seem as a group willing to short-change conservation in order to save more favored subsidies. The problem here is most of us have gotten used to being paid to be good stewards, even though we take credit for efforts that were made possible by a carrot from the federal budget. Will we continue to plant filter strips, protect marginal ground, and hold the topsoil in place? I hope so, but those who work in conservation are not as optimistic. My priorities would be to fund conservation programs first and crop subsidies not at all. Regardless, the almost certain cuts will take the measure of our claims to be the real environmentalists.
As always, we want to hear from you, send comments to or leave us a voice mail at 800-792-4329.


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