Closing Comments 9-25-2012 a few days ahead of USDA Stocks Report

Markets closed the day rather choppy; finishing on both sides of unchanged in a non-eventful market day.  Filled with talk of better than expected yield reports and position squaring ahead of the month end, quarter end, and the big USDA report that will be out on Friday.

Corn was down 1 on the nearby while Dec 2013 corn was up a penny, beans closed 1-3 cents firmer, KC wheat was off 2 pennies, MPLS wheat was off 8 cents, CBOT wheat was of a nickel, equities where lower with the DOW off 101 points, US dollar bounced to 79.682 on the cash index, and crude was off about a dollar a barrel.

Not a real eventful day; technically we held the recent trading ranges we have had and today’s price range was one of the more quieter ones we have seen in some time.  Typically inside days or consolidation periods act like springs or coils wrapped up; the tighter they get the more the eventual breakout bounces.  In our case we really don’t know where the breakout will take us; will it be another leg down on ideas that the supply won’t be as tight as we once thought?  Or perhaps the demand hasn’t been curbed nearly enough and our next bounce is to the upside.

Things might actually be easy; or should I say easier to predict if it was just as simple as supply and demand.  But the reality is it is much more complicated than that.  You have the other factors like the outside markets and the funds.  Some funds are just risk on or risk off on a given day; others are trading the technical factors.  You have even more factors like the position of the traditional end users and suppliers.  I.E. some end user margins such as ethanol plants have stressed margins while producers are generically better off today than they have ever been in terms of net worth, bin space, ….etc… and they just don’t have to move product like they used to. 

One thing that has lead pressure on the markets has been the better than expected yields.   But better then what is my question.  Are the yields for a given state actually better then the yields forecasted by the USDA in their last report?  Or are the yields just better then the worst case scenario that the USDA didn’t ever really put in print anyways?    If they are better than expected will the extra supply be offset with increased demand leaving a zero net effect?

Here is a good example; this is a yield report that I got from my guys at Country Hedging.  It is great information but does it really tell me that our crop is bigger or smaller than expected?  How can one really put it into perspective?

- YIELD corn/beans Renville Co, s.c. MN : Just getting started in mn. 40 acres soybeans. Buffalo Lake, Renville County. 55 bpa early maturity and planted early down to 9 percent moisture. Corn same area running 190 bpa 18 percent moisture.

- YIELD corn SE Champaign county : 50 acres corn 22bpa

- YIELD corn Hancock Co IL-western IL : Northern part of this county continues to see good corn yields

63 ac field 198 dry

40 ac field 170 dry

130 ac field 190 dry

160 ac field 220 (heavy soil- had a timely rain)

119 ac (various fields) 205 dry

- YIELD  Stark County Illinois Bean yields :

150 ac. 45.20 bpa

144 ac. 63.57bpa

80 ac. 57.20 bpa

We have yet to cut our good beans, above expectation

- YIELD beans LaSalle County IL (n central) : First real bean yield report from LaSalle County, IL is 40.2 bpa. Typical yield would be in the high 50's - low 60's .Two years ago, double-crop beans on this field made 42.

- YIELD corn & bean yields from sw MN : 900 acres of corn 191 bu/acre

950 acres of soybeans 58 bu/acre (range has been 48-63 on fields)  a few poorer fields left to go producer thinks final farm yield will still be above 55.  

- YIELD corn/beans Ford / Iroquois counties e.c. IL : Our corn yields are about like everyone else's.  We finished corn harvest last week--good soils, maybe a touch of rain during the summer ranged from 150 to 180 with an average around 160-165.  The good soils with no rain--averaged about 100 to 110.  The poorer soils with really no rain ranged from 20 to 70bu/acre averaging about 50 to 60.  The moistures were from 18 % to 23 % with no aflatoxin present

The first soybean field harvested made 40 to 45, past years made 70 plus; am certain the rest will not be that good.

- YIELD beans NW Minnesota : Pennington County, NW MN, 2500 acres 40 bpa.  APH is 30.

- YIELD beans southern illinois (Jackson & Perry Counties) : Early bean yields, mst running 12%, and reported a lot of beans on the ground.

Jackson Co good bottom ground and only a few acres going 48

Perry Co, 80 acres of beans avg running 47, corn on this farm made 61, which was very good for the county.

Jackson Co again running 42, only got started.

- YIELD  Miami Co, IN corn and beans (n central) : Miami county indiana

Beans 48 bpa first field, in line with 5 yr avg.

Corn 3 fields 120, 50,38 all adjusted dry. Horrible yields

- YIELDS - various Iowa locations corn/beans : SE IA – Louisa Co – 600 acres done  Right at 200 bpa avg…. About 40 bpa better than 2011. Area had a 4 inch rain at the end of July that saved the crop.

SE IA – Johnson Co – 50 acres went 160, 10 bpa less than 2011

C IA – Polk Co – Producer reports 3 corn fields done. All corn after beans 1 at 135, 1 at 180, 1 at 185. This would be slightly less than 2011

EC IA – Jones Co – 100 bpa corn on poor dirt, 150 on another farm, 215 best so far. Down roughly 20 from 2011

EC IA – Jones Co – 80 acres of beans went 59, down 5 from 2011

SE IA – Henry Co – 100 acres of beans went 61, same as 2011

- YIELD corn/bns Lee & DeKalb Counties, n IL : Lee County- 151 acres corn- 179 bpa- TW up to 60 lbs-Some hail damage

DeKalb County- 156 acres beans- 52.75 bpa-Moisture averaged 12%

- Lee County- 151 acres corn- 179 bpa- TW up to 60 lbs-Some hail damage

  

DeKalb County- 156 acres beans- 52.75 bpa-Moisture averaged 12% : West Point NE, dryland corn complete at 95 bpa, irrigated roing in the 240's

early dryland beans 40's

Bottom line is what I am trying to say is that we are in stages where we are overloaded with information and trying to determine what information is already built into the price is not easy.  So recommendation has been and will continue to be that of using good risk management techniques that help diversify risk and allow one to lock in profitable returns as there never has been nor will there ever be a right answer or plan that fits everyone; all situations, goals, and needs are different thus at the end of the day one needs to follow their gut in a way that get’s them comfortable; no matter what the next big move might be.  If you need help with this, want to put in some open orders or offers, or write a grain marketing plan please give us a call.

Other info out today is the big report on Friday.  More and more estimates are out there and here is the latest I have seen.

Average wheat production – 2.271 billion bushels; versus the USDA currently at 2.268 billion bushels; so a small increase.  I have seen some expected a small decrease in winter wheat yields with an increase in spring wheat yields.

For Sept 1 stocks; corn is pegged at 1.145 billion bushels versus 1.127 last year.  Beans at 130 million bushels versus 215 last year.  I am rather surprised the market isn’t expecting the USDA to have a higher number considering the fact that in their September report they mentioned all of the new crop corn that would be harvested.  Plus what has happened numerous times in the past is that this report has shown that we used new crop corn instead of old crop corn.  I don’t know how they distinguish as I know that it is tough for us as an elevator who has to report the stocks to keep things straight between what is old and what is new.  So how does the USDA do it with hundreds of thousands that they have to get their info from?  Bottom line is I would be a little nervous off of this report.

One positive this report has it that a few days after it is when we have made our lows the past couple of years and bounced or traded sideways. 

Basis is firmer for wheat as elevators and producers focus on fall harvest.  We still need some export business if we really want to make another leg up on the flat price.  I think the wheat market having consolidated for nearly 3 months now has the stages set for a major move sometime later this year or early next; but once again there are way too many unknown to know which way that move will be.

The birdseed market is quiet; buyers are looking for millet on most days; but sunflowers are getting very tough to sell.  Bids are weaker and the buyers sense harvest.  The one thing that isn’t happening is they are not buying a lot at cheaper bids; so if one has staying power holding product isn’t the worst idea in the world; but know if you are going to have to sell in a couple weeks and know you are going to have to sell you might be better off selling today then tomorrow; at least until we get to that point that the buyers jump in.

Don’t forget we are still offering free DP on corn and milo.

Also if you are not getting our daily voice update on your phone around noon please give us a call and we will sign you up.

Thanks and have a great day and safe harvest!

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670

605-295-3100 (cell)

605-258-2166 (fax)

jeremey.frost@chsinc.com

www.midwestcooperatives.com

http://grainmarketingplans.blogspot.com/

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