Doubts on Russian crop

[John_Walter]

Wheat futures got a boost this morning on doubts as to whether Russia can significantly expand plantings, according to a Dow Jones report. "Russia plans to plant grains for the 2011 harvest on 49.8 million hectares, up 5.7% on the year. Drought ravaged Russia's most recent crop, and it may be difficult for farmers to expand plantings that much, traders say."

So, it appears that the drama on the global wheat scene continues....

John

[Palouser]

I still have heard nothing on Pakistan's damaged irrigation system and where they are on wheat plantings. Some years irrigation is needed to sprout the wheat. Pics I've seen indicated severe damage to fields and the distribution ditches which were silted in.

[Artifice]

What is the antithesis of the next shoe dripping? Why is it some only ever see dropping shoes? A neediness for a bull market? I look at world production over time and see trend yields and ever higher output. Some years are above avg and prices drop, some yrs are below avg and prices rise.  

Weather- reversion to the mean. There is no success in long term weather prediction.

Globally the next shoe that might not drop is we get an average crop in the year ahead. The US is loaded in wheat, huge stocks. Others short fall is covered.   

USDA just upped Aussie wheat top 24 vs 23. If it dipped to 21, nd they only exported 13 MMT i/o 16 would it matter in a world that produces 640 to 680 MMT annually?  

[Artifice]

"damaged irrigation system" FWIW Pakistan doesn’t grow all its wheat in one operation with one irrigation system. They grow across a big area. Ever visited? Fascinating country.

What if the world just grew an average crop? Lake Woebegone, where all the children are above average and Woobeit pond where the wheat crop is below average every year!!

Artifice.

[Palouser]

Pritch, I see crops in terms of trends and risks. You like seasonals and averages. Fine with me. You didn't like when I started pointing out the possibilities of a Russian drought either. I can make more money homing in on possible risks that appear to be becoming reality than seasonals that ignore developing risks. Betting on seasonals the last 4 years or so has been a big loser in my estimation. But, then you were predicting the Russians would start exporting again this month - yet are now rumored to be on the verge of buying feed from S America.

If the world was 'awash' in quality wheat the Aussie situation might not be a big deal, because we both agree that the Aussies will have quantity. But with a slim stocks of hi pro milling wheat globally the possible threats to Aussie quality take on added signifigance. As I said it is something to watch for - not count on. But Australia has a history of being somewhat like the Ukraine in terms of crop setbacks. They are not a consistent supplier due to the general climate. I am also considering the calls for the affects of the SO, which appear to be inconsistent and possibly delayed.

I will watch. If the Aussies have trouble I will probably make more money. If not I doubt it will cost me since the market has the Aussies 'priced in'. So, I watch.

[Palouser]

Pakistan has the largest unitary irrigation system in the world, going from one end of the country to the other. It is true that not ALL crops are grown with that system, but the vast majority is. The flood engulfed and paralleled that system from one end to the other. There is still standing water that may take months to evaporate or drain away, clear at the other end. The amount of non irrigated wheat is small and as a fraction of production much smaller still.

The fact you don't seem to know this makes it unlikely that you have ever been there, so the patronizing doesn't quite fit.

[Artifice]

Please don’t make things up and be assuming. Crop production is a matrix of various factors. Anything can go wrong in area any year. And anything in any area can go right. Constantly looking for the “wrongs” is biased and, well, not objective. It takes a cluster of events in larger growing areas to really harm world supply. That can happen and has 2 Xs in the last 5 yrs. On average, yes average, crops grow and we have plentiful supply.

Pakistan is fine.

Don’t tell me what I think, “I don’t like your view Russia may have a problem”. It doesn’t matter what people think, we don’t matter, what matters is, what is. I don’t care what you think or say, this is about markets, supply & demand. Does it matter if Russia doesn’t expand by 6% acreage but only 2? On average NO! Back to back droughts can happen, but on average, not! Average yields there will fix them up.

.

They erred badly in August, caught scare fever themselves by canceling exports and topped the market. Now they are stuck with wheat to export.

Index funds are loaded with spec length they can’t use or consume. It is weighing. Russia’s cancel topped it in August, the bean bull carrying it in Oct Nov, now? IMO wheat really needs some serious threat or as  the horizon of new crops ,,,,,,  

Dominant theme of our day: futures and the CBT are providing tremendous benefit to producers. Mass interest in being long commodities, edibles, creates fat premia that producers can collect.   Either producers provide that supply and collect or a spec.   

Artifice

[Palouser]

I am familiar with any 'matrix' regarding wheat since that's what I grow. As for 'making things up' and 'assuming'? Don't do that. I question and I get the information to confirm the answer. I don't care what the facts are because I don't have a predetermined conviction. But, I've learned it's very beneficial to know what the production and condition trends are, and follow them until they express themselves one way or another. Some trends have intrinsic importance determined by prior and background events. If a producer doesn't watch them then they don't know their industry.

As for futures? I could care less. Futures won't change the physical fundamentals and will generally be the tardy follower of every development during a season. It may amplify the pattern to a degree, but it is always late to the party. Therefore, my sales strategy shifts are based on information I gather about physical - not futures. I'm selling grain, not speccing. They are entirely different games. Beyond that I'm a successful opportunist in physical. Seasonals have been getting crushed.

[Palouser]

Pritch, here ya go, hot off the press! It ain't over til it's over.

Rain May Cut 30% of Australia’s NSW Wheat Crop to Feed-Grade

By Wendy Pugh
    Nov. 30 (Bloomberg) -- Wet weather forecast for New South
Wales, Australia’s largest wheat -producing state, threatens to
downgrade as much as 30 percent of the state’s crop to feed-
grade quality, a cereals technical specialist said.
    “We are going to see a significant increase in the amount
of feed wheat coming into the system,” Peter Matthews, a
Temora-based specialist at Industry & Investment NSW, said
today. Feed volumes could reach 20 percent to 30 percent of the
state’s crop, estimated at 9.2 million metric tons, as rain
continues this week compared with 4 percent to 5 percent
normally, he said.
    The rain is widening price premiums for higher-quality
milling wheat and slowing harvesting of an Australian crop
forecast to be one of the largest on record. Rising amounts of
feed-grade supplies and harvesting delays may curb export
volumes, GrainCorp Ltd., the largest grain handler in the
nation’s east, said last week.

[Artifice]

CBT nite trade: +2.25    Headlines don’t cut it. Highly inaccurate, created by news teams trying to get something out to attract attention. Head-line users die out fast. Name a yr when the headline didn’t say “DRY in AUSSIE LAND, wheat gone!!” Locusts! La Nina, El Nino!

Seasonals a.1 who is trading seasonals? b. mkt advanced post harvest =  a  seasonal tendency.       A “seasonal” is an average, a tendency, so it is just true in that context.

The not-trying-to-be-a-hero marketer scales his sales and uses seasonals for edge. On average unplanted crops have premia built in and harvested crops have some discount built in. A producer can collect that or let the spec world collect it through time. It is big.

A marketer who only sees bullish, makes out now and then but through heavy supply years gets busted, paying huge carry costs in endlessly declining mkts. A couple of bull yrs doesn’t change reality.

Joe/Sally investors, tired of stocks, because they can’t sit still and just own corp. equity, are hot for commodities. That doesn’t create value, it creates un-value, artificially inflated prices.

Someone will collect that, whom.

Artificially high induces greater production.

Production responds to prices.  

Futures provide an extra crop to harvest. Or don’t.