As far as the Ag markets are concerned...I know I am on the right track when I am getting e-mails from the "wildly bullish," who are calling me a "sell-out," and the "wildly bearish" who are calling me a "candy @$$" for not just telling it like it is.
We have all heard the old adage time and time again in the investment world that "pigs get fat, and hogs get slaughtered." Simply meaning, if your a pig you want to eat, but you don't want to eat so much that you end up in the hog-slaughter. It is of my opinion, the same holds true in the investment world.
Being a "bear" in this environment is OK, just as long as you keep the longer-term perspective that the world is rapidly changing, and "demand" is growing by leaps and bounds. As the world tries to accommodate by ramping up production, we are going to have times of glut and times of shortages. As producers, we have to try and ride the waves, not getting overly bullish or overly bearish...i.e. NOT getting ourselves overly fat!
- A picture that shows feed wheat in the Black Sea region, and now wheat out of Australia being scooped up in large quantities by those who had been buying US corn. Japan, China, now possibly Mexico...
- I see Argentina being almost approved to export corn into China and Mexico. I see Ukraine corn adding to our competition as well.
- I see massive supplies and better quality soybeans being offered out of South America, prompting traditional US buyers to source more from South America and less form the US. We are now some 35% behind pace in export sales. I think we will improve, but still we will end up well behind pace.
- I see good weather and early planting in South America is going to allow them to offer soybeans to importers much earlier than they have in the years past. In fact, China is already booking late Jan early Feb beans from SA, whereas they most always book those shipments from the US.
- I see an early planted soybean crop in South America allowing for more second crop corn acres to be put in the ground. In fact, I am hearing in many parts of SA corn seed is sold-out as producers are ramping up to plant more second crop corn than ever before. Some talking that second crop corn production in Brazil could surpass the regular crop production this year.
- I see a US corn crop that could end up with 95 million acres being planted and possibly 14 billion bushels of production if weather cooperates. Keep in mind we are coming off two back-to-back poor production years. The odds of a third are far and few between (though some will argue things happen in 3s).
- I see Russian exports going from less than 4 million last year to almost 20 million this year. I see Ukraine exports jumping from close to 4 million last year to over 8 million. I see Kazakhstan exports doing the same.
- I see Australia getting ready to harvest a bumper wheat crop and driving price competition in the Southern Hemisphere lower.
- I see players in the EU like France (who was the world's second largest wheat export last year) loosing clients right and left to cheaper more convenient exporters. Leading me to believe they too will need to get more competitive in the weeks and months ahead.
- I also see an extremely nervous investment crowd. A crowd of Hedge Fund, Index Mangers and Swap Dealers who are deeply concerned about the European Debt Crisis and the contagion affects it may have on global banks. This is leading me to believe we will have fewer investors with big muscles to push the price rock up a seemingly steeper hill.
- I also see a speculative trading environment that is now more deeply concerned about the validity and safety of their capital than ever before, following the recent MF Global debacle. This also has the regulators on edge and looking to tighten the reigns in the commodity markets.
Thanks for reading, I hope this helps. Remember, this is only a small portion of my Daily Report that comes out every morning. For more of my thoughts on the Fight between "supply" and "demand," go ahead and sign-up for the 30-Day trial of my daily report, no obligation. Simply sign-up by click here Van Trump Report