Floor Talk December 16

[marketeye]

BREAKING NEWS:

THE FED RAISES ITS TARGET FUNDS RATE BY A QUARTER PERCENTAGE POINT. Crude oil whipsawed after the announcement.

The Fed said the rise in rates will be "gradual", due to economic conditions. With those words, it confirmed the "dovish" wording that the trade had expected. Not a lot of surprising market moves, as a result of the announcement. The moves are yet to come, but are believed to come. The market is now looking for signals in the fine details of the Fed statement.

What say you?

Mike

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I pieced this little diddy together for our Successful Farming magazine. It's about the local basis being the driver of your decision to move grain. What's the basis like in your area now? And is it moving grain?

Full Story: Grain Movement To Move Your Markets

Mike

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At the close:

At the close, the March corn futures settled 7 1/2 cents lower at $3.69 3/4. January soybean futures finished 4 3/4 cents lower at $8.62 1/2. 
March wheat futures closed 10 3/4 cents lower at $4.83 1/2. 
Jan. soymeal futures ended $1.90 per short tons lower at $269.90. Jan. soyoil futures settled $0.33 lower at $30.37.  
In the outside markets, the NYMEX Crude oil market is $1.27 lower per barrel, the U.S. dollar is lower, and the Dow Jones Industrials are 74 points higher.

Mike

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At mid-session:

At mid-session, the March corn futures are trading 6 3/4 cents lower at $3.70. January soybean futures are trading 9 1/4 cents lower at $8.58. 
March wheat futures are trading 10 cents lower at $4.84. 
Jan. soymeal futures are $2.80 per short tons lower at $269.00. Jan. soyoil futures are trading $0.67 lower at $30.03.  
In the outside markets, the NYMEX Crude oil market is $1.65 lower per barrel, the U.S. dollar is higher, and the Dow Jones Industrials are 39 points higher.

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At 10:20am:

All markets have turned negative. Meanwhile, the EIA announced Wednesday that weekly ethanol production went over the 1.0 million barrel mark for only the second time ever.

According to EIA data, ethanol production averaged 1 million barrels per day (b/d)—or 42.00 million gallons daily. That is up 7,000 b/d from the week before and the second time that production has broken the 1 million barrel mark. The four-week average for ethanol production stood at 989,000 b/d for an annualized rate of 15.16 billion gallons.

Stocks of ethanol stood at 20.3 million barrels. That is a 2.5% increase from last week.

Mike

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At the open:

At the open, the March corn futures are trading 1/2 of a cent lower at $3.76. January soybean futures are trading 1/4 of a cent higher at $8.67. 
March wheat futures are trading 1 cent lower at $4.93. 
Jan. soymeal futures are $0.60 per short ton higher at $272.40. Jan. soyoil futures are trading $0.44 lower at $30.26.  
In the outside markets, the Brent Crude oil market is $0.77 lower per barrel, the U.S. dollar is higher, and the Dow Jones Industrials are 134 points higher.

Mike

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At 7:15am:

Early calls: Corn 1-2 cents higher, soybeans 1-2 cents higher and wheat 2-4 cents higher.

Trackers:
Overnight grain, soybean markets = Trading higher.
Brent Crude Oil = $0.90 lower.
Dollar =Lower.  
Wall Street = Seen higher, with the Fed rate decision eyed.

World Markets = Europe stocks were higher, Asia/Pacific stocks were higher.

More in a minute,

Mike

[marketeye]

Hey gang,

It's time for some broader thoughts on the farm markets from one of my key sources in Chicago. I thought that you might find what he's thinking as interesting. In his own words:

"Post holiday's, we will be watching for the last 6 weeks of finishing SA main crops in soybeans and corn...with a prospect for new crop corn planting down the stretch in last half Feb.. watching to see if seasonal rains abate earlier than normal given strong el nino...if this happens weather could turn supportive for corn on smaller 2nd crop corn supplies next year in Brazil... but i would not take that too far just yet...
 
I just went over farm program stats for last year... the county my family farms in received 89 dollars an acre the max in corn.. roughly if you simply used ARC county and Revenue insurance with no forward marketing you would have received the equivalent of $4.40 a bushel for corn.. not too bad if everything is paid for... if you are paying 275 dollars rent..which was considered county avg.. then not so great.. next year by my rough estimate you would get roughly 4.05 a bushel... and in 2017 and 2018... avg subsidy price drops to $3.70 near the PLC price.. So rents have to come down a fair amount or farmers will be hurting by end of program..
 
New net revenue above subsidy starts above the Dec price established in Oct at 3.82 futures.. and for next year above $4.05....so expect a 10-20 cent rally to find cash grain movement... basis is helping a little... but we are sitting on a lot of grain world wide... I am a 3.90-3.55 sense of future prices... for new crop i am a seller above 9.00 in November beans and above 3.95 in Dec corn.. ..  downside risk into next year is $7.80 for soybeans next year.. and $3.35 for Dec corn... these low prices would be a function of rising dollar....de stocking of grain in Argentina, and perhaps even China to limit rallies.. but require you prove good weather..to finish crops in South America... and have a good planting season here...
 
The baseline numbers for new crop out of USDA last week were conservative.. their total acreage was low for corn and soybeans... last year we had 4.5 million acres in prevent plant...if you have a better Spring we could add an additional corn and bean acres..on top of already large stocks..
 
The farm community should realize that the 2008-2013 was a bio-fuel bubble.. it is one of the few times we have sustained futures prices above the cost of production... for most time in modern agriculture.. most commodity prices have cleared at below cost of production with the difference being made up by subsidy...  hard to justify land prices for average CPR in my mind above the 5k an acre range.. rising interest rate won't help sentiment either."

How do you respond to his thoughts?

Thanks,

Mike

[luisvieira]

Hello Mike,

This news from agrosouth-news.com will be really market-impacting:

Reports from the press of Buenos Aires revealed that the government of Argentina will devalue the local currency by 6 P.M. this Wednesday and unify the exchange rate, a measure that was long demanded by local farmers. Some economists estimate a dollar between AR$ 14 and AR$ 16. The result of the initiative  combined with a prior elimination of the export tax for most grains might be a strong sales of agricultural products in the coming days. There is an estimated stock of over 20 million tons of wheat, corn or soybean in the country to be exported soon.

YES, massive grain stocks being liquidated in the next days.

[timetippingpt]

zzzzzzzzzzzzz....Luis....are you a reporter or a chearleader or maybe Darth Vader (no hope Luke...give up...give up...selll!!!!!!!!!!

No farmer is going to be the first to dump his grain if everyone else is. A carry will quickly develop in the market and the flow of grain will normalize pretty quickly. Plus there is not a date when the tax comes back...so why rush to the exits? Why would anyone think the argy currency is going to stabilize? Never has before 🙂

[luisvieira]

time:thetippingpoint,

I'm based on the facts and on what I've heard from some analysts. A lot of corn and wheat growers are not well in Argentina and will need to sell. Most soybean growers have a healthier financial situation, but still is a significant improvement. Consider also that the corn export taxes reduced from 20% to zero plus a double digit devaluation of the local currency. After losing a lot money, would exchange this improvement for something that will not be guaranteed that will still improve?

The reports say that the cereal exporters are promising US$ 10 billion on exports in the next three months.

[ehoff]

It may not be what farmers actually do but the trades perception. The macd's appear to be Rollin. 

[timetippingpt]

I wanted to bring this back NOT to give Lius a rough TIME....but rather to point out how incredibly bearish the news is at the lows.

Just a classic example, and the news will be just as bullish at the highs. Why I read yesterday that ARG was going to loose

100,000,000 mil bu of production. While I hope it doesn't happen to the colonialist who own everything done there, it seems a

really crazy high number.

This whole event was easy to see coming. Not the irrational spike hihger in volume and open interest, but certainly the fact

that it was TIME for a recovery.