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04-06-2017 09:43 AM - edited 04-06-2017 09:46 AM
It is for sure doom and gloom in commodity production these days
And we keep asking ourselves for hope that the markets will get better....
Well I can't point to that because the big traders in the markets have the upper hand on controlling the price we recieve.
And the local marketing elevators have exercised their "nuclear" option to guarantee them protection in a volatile world market....
Basis large on flat bread they call it at Subway....
But this week we see a normal reaction that says the market also believes commodity prices are pretty cheap.
Study the export sales reports this week..... With 22 weeks left in the marketing year soybean sales for export passed usda's projection for the year.
Corn is very close to passing but will take another week.....
Ethanol usage is way above projected levels and is growing on exports as well..... But keep in mind that is another way corn is exported and does not show up as an export....
These are things that should be happening when prices are low..................... and they are....
What should be happening as well is ending stocks going down.......... This is the reason usda needs to project a record crop for the next year,,,,,,,no matter what the acres say. Even if we need to show an acre shift back in April and an increase in soybean yields on the fringe where it is planted.
Our wonderful Price control Bureau
04-06-2017 09:47 AM
Either the USDA is telling the truth as they see it or they are not.
If they are projecting real numbers as they see it (and they see it better than anyone else in the world) then ending stocks are not going to go down very much for the next year. What we do about what the market does about that is up to us.
If they are making the numbers up, then we should get rid of them. Maybe get rid of all of USDA. But in the meantime, what numbers would you like to see them publish and would you promise to sell if those numbers came out or would you change your mind and hold out for even higher prices?
Final question - is raising commodity crops a commodity business or are we guaranteed a profit?
04-06-2017 10:28 AM
04-06-2017 10:32 AM - edited 04-06-2017 10:34 AM
Once the export numbers get past the USDA predictions, I would look for them to raise the yield and/or acres on last year's crops......or
lower feed and residual usage...............This will make their carryout numbers accurate once again.
The house always wins.
04-06-2017 11:16 PM
Nothing published a month early can be anything more than a projection based on ever changing assumptions.
04-07-2017 12:02 AM
History shows that usda seldom changes the projected acres. Yet we discuss whether or not they are acurate on their projections
So obviously something else will have to change to hold the projected carry.
But when the export numbers come up we all know they are along with ethanol numbers, numbers based on some actual inventory collected data.
Something else has to change to hold the carry if exports are 20% under projected. Same for ethanol use.
I know you don't like the inference that usda is leading market direction. But they do and need to address it even if it is unintended. Now they are the primary driver of market movement. Accuracy ... let's hope so.
But the ineptness of other governments of the world does not validate the usda process as being as accurate as it could be.
We are not trading corn or beans, we are trading what a government agency will print. That is not reality. The futures market should be trading offers to sell and offers to buy, but in reality it is trading speculation and most producers see that as something to avoid during pricing.
04-07-2017 07:59 AM
There are no reasons for acre predictions before the crops are even planted, other than to stabilize the market prices. It's just another tool they use to keep the food supply ample and affordable. FSA and crop insurance acre numbers are set in stone with ACTUAL certified numbers. They certainly could use these numbers and be far more believable AND accurate.
04-07-2017 08:50 AM
sw.....you might want to review the actual cash market for grain. You will find that the user
of the product has all they need...thus basis levels are wide. It is far more accurate to
argue that the massive long investment fund position has kept Chicago prices far above
realistic levels...this is why elcheapo is $1.50 under on wheat. The futures did not
decline as far as the real cash price did. The cash price is set by local buyers who do,
or who do not need, product to use today.
Sure, you can complain that users are screwing you during a time of surplus, and they
can argue that the $8 corn screwjob they got in 2012 was of greater pain.
04-07-2017 09:33 AM
Exactly my point futures are trading usda releases and do not reflect actual grain transactions.
I'm sorry but I do not accept "it is the best source of information in the world" as worthwhile when it is based on the lack of information in the world.
All usda is doing is facilitating a casino that does not reflect actual trade activity... as you point out. yet basis is varrying as much as 60 cents per bushel in a 70 mile distance...... and the charges to get it out of storage grow also.
Yet as we type there appears to be no oversight of the process. It is suprising to me there have been no legal actions taken yet.
Your explanation of basis being a correction of the failure of the futures process makes full sense to me. I wish the SEC would consider it.