What I picked up from the road!
Feb 18, 2009
Very slow price action today after yesterday’s hard breaks. Everyone seems to be holding their breath now to see if the Dow can hold the November lows. If they are broken on good volume one must be prepared for a general new round of long liquidation and new selling in almost all markets. I would say right now it’s a solid flip of the coin and that’s scaring everyone.
What did I pick up from the road? As you know I’ve been speaking to a lot of producers across the Midwest over the last month or so. Here are some of my observations:
1. Producers still have a sizeable amount of old corn and beans in the bins to price.
2. Producers are not in the mood to dump at current prices.
3. Cash flow is not really that tight right now and producers are going to be able to hold unpriced inventory into summer.
4. A very low percent of 2009 corn and beans have been priced. A few clients have priced more than 25% of inventory but the numbers are very small.
5. The on-farm cost of production for corn and beans including crop insurance, storage, marketing cost and basis is significantly above current price levels.
6. If producers can get a summer rally, they appear to be inclined to store inventory unpriced all the way into spring of 2010 in the hope of demand recovery and inflationary pressure.
7. While the producers’ marketing plan is basically bullish, their overall opinion about the economy and subsequently the future is dismal at best. This is where the inconsistency in their game plan develops. You can’t be bullish about commodity values but believe the economy is getting weaker!
Bottom line: Producers have now gone into the hope phase. Hope there will be a weather event, hope that inflation will lift speculator excitement about the market, hope….
Final comment: We are now in the crop insurance season. We realize it’s a big financial expense but taking out an 80% CRC crop insurance program on beans could really give you a solid financial reward. By having the insurance in place and then selling the cash the potential for returns will be huge. If you have any questions about crop insurance give Rowland a call here at UMS at 1-800-832-1488.
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at firstname.lastname@example.org or email@example.com.
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