Corn and Soybeans bulls have been excited to see several new cards hit the table the past few days: Very strong export sales data; Increasing dry-weather in some key production locations; Escalating fears of an early freeze; What appears to be bullish FSA Certification and Preventive Plant numbers. In and of themselves each card initially seems to be a winner, but considering they are somewhat of a card from a different suit,
the verdict is still out as to whether we can pair them up with something we are holding in order to truly make a winning hand. Lets review:
Export Sales Data - No denying the fact weekly export sales have been fairly strong on the price break. The question is with the lofty USDA export estimates already penciled in, and large supplies in South America that will "EVENTUALLY" make their way in to the marketplace, will US exports continue to keep this brisk pace. I am very uncertain. Yes, Brazil continues to have trouble getting supplies out of the country, but the bushels are not disappearing. Meaning, you have to believe the bottleneck eventually frees up to some degree.
Increasing dry-weather - Yes, the east is wet and the west is dry... But it hardly seems like there has ever been a summer where some portion of the US area hasn't had an issue or concern with abnormally dry conditions. I am NOT arguing the fact we are extremely dry in some areas, but with the massive amount of acres in production this year you have to wonder as a percentage of those acres planted are we really all that dry? With a large portion of the near-term rains taken out of the forecast (beside parts of northern MO and southwest Iowa) the trade has become extremely concerned we might not see any significant rains until late August. No one obviously knows for certain how it will play out, but we will need to pair up a few more dry weather cards moving forward if we are to see any substantial setbacks in TOTAL production.
Early Freeze - Certainly sounds reasonable to me, especially considering the late planting dates, cooler than normal temps, limited sunlight, already abnormal nighttime lows, etc... The problem is it still hasn't happened. Meaning we need to catch a couple of more cards to make a hand. Not only do we need a sub-30 degree print, but we need it in a area of heavy production and we need it to be somewhat widespread... Then we might have a winning hand.
FSA Numbers - This is very mixed bag of nuts. Some sources view it as wildly bullish presuming the "harvested acres" in both corn and soybeans are going to plummet. Others (including myself) are very hesitant, believing that the FSA numbers are being misinterpreted. Yes, the "certified acres" were surprisingly low, but we have to remember there was an extension handed out, so those counties who didn't report may not yet be represented. Thoughts are "certified acres" by the FSA move higher in the mid-Sept report. There is no question the 3.4 million corn acres enrolled in "preventive plant" and the 1.6 million bean acres in and of itself seems bullish, but we have to be patient and see how ALL of the pieces (NASS data included) eventually fit together. Remember, not only will the FSA numbers be revised each month thru-Jan, but the "prevented plant" acres are acres that were never actually "planted." Meaning they were more than likely accounted for by the USDA via the June farmer survey. Be careful getting wildly bullish off these numbers. I am sticking with my previous guess that corn acres could drop by 1-2 million, bean acres could end up 500,000 acres lower or 500,000 higher (real wild-card), and wheat acres will more than likely drop by 500,000 to 1 million.
I could go on-and-on, but I think you catch my drift. Yes, we have drawn a couple of nice cards from the deck, but we are going to need to catch something on the "flop" before we can start raising our bets. Personally, I am going to continue to "check" my hand and play it safe. Don't get me wrong, as producers, we are holding better cards today than we were a week ago, but we are still a long ways from drawing-out.
What I am trying to say is that those producers who have made NO sales and are essentially going "all-in" will need to be lucky rather than good in order to come out unscathed. The bears are simply to large in quantity to "bluff" this time around. Yes, they may move out of the way temporarily to see if we can draw a couple of more bullish "wild-cards," but my hunch is they are sitting on a much stronger hand and are simply electing to slow play it. Meaning "IF" the we don't draw the cards we need quickly, they will raise all short side bets and the "bull-trap" will be set! Be extremely careful here if you are thinking about "raising" or calling any "all-in" type bets. Smart players will be using the rallies to further "REDUCE" risk in 2013 and to make catch-up sales in 2014.
