Raw March Market Thoughts

[marketeye]

From two reliable sources, I thought I would share some of their thoughts on March Markets.

CME Group trader choosing anonymity:

RAW MARKET THOUGHTS

Tuesday is a mild report...only demand numbers will be adjusted... we think the USDA can raise corn and bean exports..perhaps lower crush to off set... the export pace has been better than implied USDA demand to date..though shipments have lagged creating somewhat of a dilemma for how to best reflect the pace of demand... wheat looking for near unchanged numbers but could cut exports... the devaluing foreign currency in FSU and South America... US dollar on the high..has been elevating domestic basis for those producers prompting them to move grain... US offers are currently being under cut in wheat and corn and beans... for wheat the market now moving so low that we wander if wheat will work into a larger share of feeding later this summer... perhaps a drag on corn feeding...and there is a fear in general that USDA implied corn feeding is too high to begin with...quarterly stocks will give some insight at the end of the month....if there is an upside fear you see it in Dec corn where poor implied on farm revenue makes planting expensive corn a tougher prospect for both the US farmer as well as 2nd crop corn in Brazil and the FSU.... Brazil is behind planting 2nd crop corn in mato grosso..64 versus 75 a year ago... paran 49 versus 57 a year ago... two big corn states that plant in febmch and harvest in Sept... A Ukrain official today suggesting corn production there could be down 19% down some 6mmt.. and what if US farmer is 89 or lower... it will make next years balance sheet look relatively snug... realize the USDA's outlook at 166.8 would be the 2nd highest ever... i saw some university stuff  Darrell Good on corn yields and thought trend near 164 would be more appropriate... plug those numbers into outlook balance and i see Dec corn prices 4.30-4.70.....warmer weather next week and post Tuesday's WASDE it will be all about the planting intention and stocks report at the end of the month...
 
Last line...Brazil Ukraine Argentina.. all are large crop areas the world consumer has come to relay on... non have viable farm subsidy program.. and all are seeing large devaluations in currencies... encouraging the movement of old crop grain for the moment..grain that was costed in pre devaluation currency... but next season cost are rising dramatically in local currency   hrynia, Real and Peso.. makes me pessimistic on next year production...and supportive for deffered corn... for beans the worry is more acres for less expensive crop and more conservative producers..bean market does not need 2 million more bean acres as some have suggested... USDA's outlook acreage in total looked a little low...perhaps we can see some addition to bean acres at end of the month...

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Anne Frick, Sr. VP/Futures Research, Jefferies Bache, LLC:

"Next Tuesday’s report will contain no new survey based estimates for the soy complex, nor will it cover the new crop.  The market is likely to key on the South American crop estimates but at this stage, unless there is a major decline that keeps these crops from reaching record high levels, the size of the crop is arguably less important to the market than the pace at which the crop moves into usage channels. The March 31 reports, both survey based, are much more important. The USDA’s forecast for higher production costs and lower soybean plantings has caused some market participants to question their assumption, based on reports of seed sales, that there will be a significant increase in increase in U.S. soybean plantings. The March 1 stocks in all positions figure may have less importance this year given the outlook for a very comfortable U.S. carryover than it did last year when prospective U.S. supplies were extremely tight. However, since the residual usage in the Dec. 1 reports was a record high level (attributed to huge supplies in the export pipeline) the March 1 residual may command some attention. In recent years when the Dec. 1 residual was extremely high, there has been an historically unusually pattern of “finding” soybeans in the March report. If that is not the case this year then traders may assume that the 2014 soybean crop was overstated, especially given the memories of last week when the FSA figures were thought to indicate an overstatement of plantings."

What do you think? Your turn to weigh-in. Go for it.

Mike

[Palouser]

I think the preliminary verdict is in on Ukraine and corn. There will be a large drop in corn acres in Ukraine because loans are at 30% interest and the loan sharks will be a lot higher. That means seed and fertilizer can't be afforded. Cheaper crops will be planted, maybe barley or oil mustards.

[sw363535]

Is it possible we see acres reduction in the US across the board?  Talking reality not usda.  

High expenses and lower prices tend to do that.....

$5 wheat will turn a lot of wheat to grazing.  Cattle prices are taking heifers out of the meat line and acres are going to feed the herd increase.  I could see some marginal corn and bean acres going to forage crops.  I am seeing a little triticale and feed on marginal water that would have been corn 2 dollars ago.

[Palouser]

The one opening I see for feed and forage is fall planted grasses harvested green and followed by a short season crop like DC soy. It would depend on conditions and location but I was talking to a friend who swears bybaling beardless barley then plantying an early fall crop - like canla or rapeseed. On the plins I wold think DC soy would work. Our seasobn is extremely short in comparison. It's a common practice (or was?) for forage wheat to be planted then harvested as silage before cotton.

[sw363535]

before drought it happened in the southern plains.  We plant a lot of wheat for cover in drought cause it is a cheap imput crop.  If spring is wet we graze or hay some of it then plant back to shorter season grain sorgum of forage to get it back in rotation.  Like you said a longer growing season....

[Palouser]

My best paying crop was a patch of hay, first year, for export. Only one cutting. True, we had an off year for grain but we were still in the 70's for winter wheat.

[Shaggy98]

Is planting a dual purpose crop really reducing the total crop planted in the eyes of the USDA?  Seems we still report forage sorghum and grain sorghum the same thus giving the government a false indication of total planted acres when they release their acreage reports.  I used sorghum as an example, but I'm sure there are other crops planted and reported as grain crops that have no intentions to be used as such, corn silage and forage beans just to name a couple more.

[sw363535]

Yes shaggy ---------------------- You are dancing on a strong point.---maybe a couple of em.

Usda is just producing overall data.  To accumulate overall gdp activity for the broader economic picture in the government planning process.  And since 1996 at least those numbers are disconnected from reality.  They don't even accumulate fsa data, it is just projection, ( or what ever similar term is politically correct on the board this year).  There were occasions before '96 when the folks in that office felt like their work lives were waisted, but since 96 that wonderful historic database has been rendered worthless.

The answer to your question is NO... it is not different because it has an ultimate economic benefit to you.  It can be argued that forage or dual purpose crops have an economic advantage over others because they often skip a taxable transaction or two.

The sad point that continues to glare at us is that most of the US population is getting so disconnected from agriculture that the usda data seems relevant.   

I have seen a book produced by a man who is a contributor to the marketing board that explains where each commodity comes from and what it is.  He produced it because his small son asked him "what do you do?"  It is geared for grade school age, but I suggested to him that it fit better at the JUco or college level.  Frankly, I doubt the average adult knows what each commodity represents and where it comes from.