Published on: 14:51PM Apr 05, 2010
The sun is shining in Indiana but the weekend rains are simply making the grass grow but allowing limited fieldwork. All eyes are now going to turn to the corn and bean production areas in the U.S. with the following questions on their mind: When will the crop get planted? How fast will it germinate? How much heat will we have going into pollination?
The report last week helped the market in that it did not indicate planted acres much outside of trade expectation. The problem, however is that the acres don’t add up and the general expectation is if given the planting window more corn and beans will eventually be planted. The second question is with fertilizer and other related costs down but the corn price being down as well will producers work harder to get more bushels produced since they still have very high cash rents and other cost to cover.
Finally, as the stocks report suggested there is still plenty of old crop corn and to some degree beans and wheat around. Will the producer hold on to inventory in the expectation of a summer bounce? If the bounce does not occur and we do produce a decent crop, one can only imagine how far we will go below the cost of production this fall for many producers.
Our position is unchanged. We are holding onto all hedges placed in the past. We will be selling all unpriced inventory between May 15th and July 4th. Our expectation is Dec corn will have a very hard time getting back above $4 and Nov beans will find it extremely difficult getting back above $9.50. Basis is expected to widen for both corn and beans as we move into fall. If you have off the combine HTA sales in place, you need to be very aware of your risk and act accordingly.
Bottom line: Rallies are to be sold rather than dips to be bought.
Flash comments: Hogs appear on pace to make new life of contract highs. Finally, profit is coming back into the books. I strongly encourage all produces to start thinking about profit margin. We all know by fall some hog expansion will start along with the low corn prices. If you are interested in locking up profit for your hogs for the future, this fall would be a good time to focus on locking up the hog/corn relationships.
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