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11-19-2010 09:25 AM
Not that I have a clue, one way or the other.
Was visiting with some large producers, the interesting games seems to be upside objective. $6.50 to $7.50 seems common. What if doesn't happen?
Ten days ago my budget spreadsheet said $180/acre profit over all costs for corn after beans. At the sell off lows it was down to $45.
I sold 25% of APH at 5.45 and 12.20. Will probably stand pat for a while.
Too early to know about revenue guarantees but if the spring set was around this price and I got a subpar ((90% or APH) yield and averaged $5 CZ I'd roughly break even after all costs, I think.
Not a bad picture but certainly plenty or room for regret in both directiosn.
11-19-2010 09:55 AM
There are lots of things to think about. With harvest getting done so early in most places I could beleive USDA has already posted numbers pretty close to final yields with possibly a little adjustment in December. That leaves only two potential surprises for the December report. Wheat plantings and export projections.
Some rumors that wheat plantings may be up 10 million acres. If true would this be seen as limiting 'new' corn acres and could that be bearish for beans with a potential for second crop plantings.
Exports I beleive are the wild card. Will USDA think the higher prices have slowed the pace of exports enough to lower their predictions?
Outside markets continue to rattle the funds contributing to wild swings in other commodities driving the grain complex away from the it's own bullish supply demand fundamentals.
With so many surprises still to come in the broader US economy and world economies new factors will enter the equation and probably driive chartists crazy in both directions.
I think the simplest thing to do at this point is to turn off the computer until after Thanksgiving.
11-19-2010 10:21 AM
I'm looking at a head and shoulders formation in the making right now. If we don't make new highs on this shoulder and turn lower, then I'd have to agree the highs more than likely have been set. Coincidentally, the dollar index appears to be making the same formation. Last night, corn traded up to the moving average and shot lower from there. The funds giveth, and the funds can taketh away. Yesterday's thin trading volume is a little unnerving as well. Maybe we're reaching a point where the funds start to sell rallies rather than buy dips. I've had a hunch that many of them will take profits before the end of the year.
11-19-2010 02:22 PM
If the highs are in, then is the rationing over? We've heard about demand, demand, demand! Do we have enough of a short crop left to reach the next harvest? Not panicking here.
11-19-2010 03:18 PM
This is a good question, and I'm not sure if I know the answer. However, the export sales numbers started to diminish once Dec. 10 futures got over $4.50-$4.60. A lot of the feedlots around here went from a 25-30 percent displacement of corn with distillers up to 40-55 percent displacement. I don't think the endusers got caught with their pants down like some would like to believe. From what I've gathered, many were pretty well covered from levels quite a bit lower than we are currently. The other thing is the fact that the money is running the show. The futures market doesn't dictate whether one runs out of corn or not. This is what the basis will do. The funds could easily take a buck or so off of this market, but I highly doubt the basis will stay as wide as it currently is if they do. This is the biggest difference between the runs of 08' and this year have been when compared to 96'. In 1996 even though we were setting new all time highs, we also had a positive basis. This year, we witnessed the most negative basis I've ever seen in my career. From a technical standpoint, there are some similarities between the Dec. 08 chart from June 1 to July 23 and the Dec. 10 chart from Oct. 1 to now. We haven't broke through the support line yet, but we've knocked on a door a couple of times now.
11-19-2010 06:17 PM
If everything goes on cue, the highs are in ....till October 2011. It`ll chop around all winter and spring, then bottom out next summer "Oh my God! Biggest crop ever coming! LDPs this fall!!". About September you`ll hear dribbles of poor yields in the Delta...then BAMO!! $7 corn and $15 beans. It`s time to take vitamin D shots and head back to the closet I really don`t have a clue of what`s going to happen, I`m lettin` it ride til fall. Do opposite and you`ll be right.
11-19-2010 10:01 PM
From my perspective one has to look at the trends that got us to this point. Have they changed? Where would that change come from? We are very early in the marketing year. And have the ending inventory figures changed (so far, I think not).
We are still quite close to the effects of the last government report. I expected the water to be roiled and counter moves to appear. It's normal. The extent is the only issue IMO.
So far, I don't see any significant changes in the trends. Another week or so and i think the major trends or support will be evident. Doesn't mean things can't change to some degree, but I assure you that mountains of beans or corn won't suddenly appear or disappear. And China won't suddenly quit buying one way or another. They need beans, they will buy them. Financial issues may affect these things, but ultimately won't change the status quo - which is increased purchases into the future. The Chinese put greater value on food than financial pain from tightening credit. They can do both - and will.