07-18-2012 08:06 AM - edited 07-18-2012 03:25 PM
Secretary of ag Tom Vilsack declared 39 more counties in 8 states as disaster areas earlier today, making folks there eligible for low-interest emergency loans. Is anybody here in any of the affected counties? Will you utilize the loans?
That's been enough to rattle the bears that were batting around the grains earlier today. Now, we've turned sharply higher again., but not quite like earlier this week: Corn's about 10 higher, soybeans are going on 25 higher and wheat's about 8 higher heading into today's homestretch.
Here's a shot at that $8 corn question: One trader just told me he thinks the market will sort of hover around below that mark until usda folks get out into the field early next month and start getting yield tallies based on actual field conditions, not survey data. Then, he said $8 could just come and go!
Well, the latest weather info to hit the trading floor in Chicago shows the rainfall dodging the driest parts of the Corn Belt, apparently, and traders are taking note, specifically in soybeans, sending that pit just into the black here as we near mid-session, while corn and wheat are still both lower. Here's a little more.
Our pal Kevin Penner sent me this a few minutes ago. Even though I think he's half nuts for going out and doing this yesterday when it was 100 degrees, he headed out to check out some fields. I was amazed to see these shots -- certainly don't look too terrible considering the conditions!
Part of this morning's note from John Roach:
"This week’s weather keeps traders talking about poorer crop ratings next week and smaller U.S. crops. But we are also hearing more talk about the demand problems caused by high prices. Chinese soybean crush margins and livestock margins have turned negative which is stimulating talk that China will not take all the corn and soybeans it has purchased. Their crops are good allowing them some flexibility in building stocks. Ethanol processing margins have also withered. Traders are uncertain about the likelihood of the EPA suspending provisions of the Renewable Fuels Standards requiring the use of ethanol in the U.S. fuel supply."
So, what do you think? What do you think will happen to this ethanol mandate?
It seems downright crazy to me that a few scattered showers in the forecast can be outweighing this kind of weather report when it comes to what's driving prices. Sure, there are some showers in the outlook, but taking reports like this one into account, how could this bring that much relief?
Well, there are a few more rainfall chances in the forecast, and traders seem honed in on that outlook (not to mention probably a few nerves about trading around record highs earlier in the week), and we're looking at a lower trade Wednesday. We're seeing double-digit losses in wheat and soybeans (10 and 12 cents, respectively, right now, in the nearby contracts) and nearby corn's about 6 cents lower.
It's going to be about 100 degrees again today in Des Moines. There are a few more chances for some pop-up thundershowers here and there, and those chances increase in the next few days, but that's all alongside a lot of heat. I did see one report from the Commodity Weather Group in Chicago that has a headline of "More than half of Midwest Under Greatest Stress Next 10 Days; Heat Peaks Saturday-Monday, Hottest in Western Midwest." Strange to me that this kind of forecast -- even though it does have a few showers in the outlook -- is enough to send the grains lower!
Heard a little yesterday about some bug issues -- namely Japanese beetles and spider mites -- popping up here and there. also am hearing that there are some nutrient issues, especially with phosphorous uptake. It's been applied, but it's not gone anywhere. So, there are some agronomic issues out there. But, considering the overall condition of the crop, moisture-wise, are you thinking about those types of things as much as you normally would be?
07-18-2012 08:54 AM
The market is just taking a break. Waiting to move higher as drought continues. When and if we get a serious rain forecast the market will overreact to the downside. This market is not for the weak, make a plan and stick to it!
By the way Jeff, doing a good job filling in. When is Papa Mike coming back to work?
07-18-2012 08:57 AM
Hey, Doc. Thanks for your comments! Mike's getting back into the swing of things now and he'll be back "on the grid" next week. He's going to roam some fields for us, though, so you might be stuck with the B-Team for another week or so! Ouch!
07-18-2012 10:44 AM
Got some feelers out to some traders for a real answer, but after watching the pricing the last few days, I'm not sure that we'll hit $8 this week. Seems like there's some major resistance at that $7.80 to $7.90 level and judging by how much traders have traded the news the last couple of days of fluctuating weather outlooks regarding rainfall potential, I wonder if they're just looking for reasons to stay back from $8. But, heck if I know...what makes you think they'll jump on $8 so quickly?
07-18-2012 12:11 PM
Hey, Joe. Just posted above here, but wanted to make sure you saw it for certain: Talked to a trader a few minutes ago who said he thinks we'll muddle around just shy of $8 until early next month when usda starts taking field samples themselves. Then, it could be Katie, Bar the Door!