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07-03-2012 05:56 AM - edited 07-03-2012 06:47 AM
NOTE: Today's market will be shortened, due to the Fourth of July Holiday. The markets close at 12-Noon.
The CME Group Tuesday announced that its June agricultural commodities volume averaged 1.4 million contracts per day, up 15 percent compared with the prior-year period. It's interesting to note that open-outcry volume was down 23%, for June. Also, Globex volume dropped 10%. Both are down about the same amounts for the quarter, as well. So, what does this tell us, if anything?
Food & Fuel For Thought: Hold on. We're in for quite a ride, for this first half of July. And the foreign buyers are smelling trouble too. Let me list the bullish items that just keep piling up:
--South America's drought made us the only soybean 'store in town'. Now, our store's lights are dimming.
--No break in heat for the entire Corn Belt through July 8. And, no real widespread rains seen until later than that. Although, I will say there are whispers that the new weather models show a cooler, wetter second half of July.
--Goldman Sachs sees corn even a $1 higher than it is now in 2012, soybeans to knock on $16.
--No hay, or less-than-expected means livestockers will use more corn and wheat. Bullish again.
--The funds are getting long corn and soybeans. That alone pushes the market higher than the sky.
--McLean County, IL is not getting rain. The market will not rest until McLean County gets rain.
--China is about to make a clean sweep of whatever old-crop soybeans we have on the shelf.
--Beans after wheat plantings are not growing. Bullish again.
--Wheat harvest was fine. But corn yields are dropping every minute of every dry day. Wheat will follow corn to the moon.
--And on top of all of this. And perhaps the most bullish of all on this list is the farmers' behavior. The U.S. farmer is not selling old-crop, when the end-users are asking for it. Some believe farmers don't have it to sell. Some believe the farmers will just wait out this hot/dry weather rally.
--International Grains Council Monday lowered world grain stocks for the end of 2012-13 by 9.0 mmt to 360 mmt. This is the lowest since 2007-08. That estimate considers feed demand to increase by 6%. And, smaller exports in the Black Sea raises the likelihood of more U.S. grain exports in 2012-13.
Early calls: Corn 8-10 cents higher, soybeans 15-16 cents higher, and wheat 7-9 cents higher. Today's market will be shortened, due to the Fourth of July Holiday. The markets close at 12-Noon.
Overnight grain, soybean markets=Trading sharply higher.
Crude Oil=$1.38 per barrel higher.
Wall Street=Seen opening flat, on a shortened trading day. The market will be closd tomorrow for the Fourth of July Holiday.
More in a minute,
07-03-2012 06:08 AM
This morning, there are some nice rains from southern Minnesota to Michigan. Here's the latest from the Freese-Notis Weather Inc.'s radar:
Now, if they would just drop down into Illinois and Indiana, a lot of folks could breathe a sigh of relief.
07-03-2012 07:05 AM
Mike, with your list of bullish items, I'm wondering why we are not at "moon" levels already?
One other reason that farmers are not selling old crop.......They just may be holding that old grain to cover their new crop sales.
07-03-2012 07:22 AM
Sure would be nice to get some of that rain! Mike we need a good 2 inch soaker to even do any good these days. My corn is between knee and shoulder tall and tasseling. (depending on soil type and hybrid) I doubt there will be any corn to harvest on my farm this year, but hopefully we can get some heavy rains soon to save the soybean crop. We got 2 tenths Sunday.... Maybe a change in weather pattern??? I remember the beginning of this year when everybody was bearish... Even with low ending stocks nobody seemed to believe we could have 3 dry years in a row.... Hopefully we are seeing the grand finally of dry years this year!
07-03-2012 08:31 AM
I am going to come at this at a different angle. I am a end user. I do not grow much corn but I do use a large amount every year. You guys have every right to be bullish this market, it is ugly out there. I live in south west Michigan and we are hanging on here this morning but we do need rain badly. North of here they have had more rain and things look pretty good. The reason I say to be careful is the livestock/poultry inustry. Hogs are good right now but look afew month's down the road, there is no way 7-8 dollar corn is going to work. The chicken and turkey industries are already there, they are both in the red already. So yes you can be bullish but demand destruction could happen and alot of that may never come back online.
07-03-2012 08:54 AM
Gobbled up, could you explain why demand for corn would not return in the feed sector when prices inevitably moderate? Every chicken producer is going to be broke with 7-8 dollar corn and they won't be there to fill the barn when corn is 4-5 again? Just trying to understand your line of thinking. Thanks.
07-03-2012 10:25 AM
I have a little old crop corn. My coop isn't at $7, but that'll buy most of it. In 1988 according to what I was reading. the corn yield was down 27% from trend line. Now if you use 20% lose this year because of better hybrids more irrigation, expanded corn belt area, We are looking at a final yield of around 133 bushel an acre.
07-03-2012 10:33 AM - edited 07-03-2012 10:38 AM
The area is expanding and right at pollination. Irrigated quarters in NW KS are in many cases cooking on the south side. the rest of it has to be hurting with day after day of 100+ with a breeze.
There are starting to be cows with a bale ring with a bale of hay in it around here as the pastures NEVER put out this year... the same with the hay ground, what little is left as a rule was "light". The hay thing is going to go critical shortly...
CRP was opened in some of NW KS last week ...very little worth chasing over for hay as it is already sparse and brown dormant.
10 more days of this and 120 will be too big an estimate, including here on my river bottoms. In '88 they came in around 80bu, Hill ground did 25 or less. Getting to be hot spots in the fields around here.
A week ago there were still field tiles running, now few are.
This will be year 4 of chity weather here the first three were too wet and now...
Mother Nature loves to average by extremes.
07-03-2012 11:55 AM
DW, I would love to share my logic. The grain farmer has done very well over the last few years however the high priced corn and meal has done a number on the livestock/poultry farmer. I am not looking for a pity party just stating the facts. The hog guys were in the red severly just a year ago, the chicken guys were worse off than the hog guys and the turkey guys not to far behind. There was alot of debt taken on in that time period to keep things rolling. It take alot of capitol to start a farm back up after depopulation and there are alot of livestock/poultry that are extended that will not be able to get the finances needed to get things going again.