Gulke: Three Knowns

[TOM4CWB]

I respect Jerry Gulke as much as any market commentary writer in the business.

He has a very good article this morning...

Here are the 3 knowns...

"1) The things that we know that we know. 2) The things that we know we don't know. 3) The things that we don't know that we don't know -- that is the future unknown knowns, that can rise up to bite us. We pretty much know the crop(s) are deteriorating fast, with time running out for corn."

How bad will the weather be in the next 2 months?

Gerrys comments that the unknowns are likely to drive the markets in directions few could anticipate... will agriculture get side swiped into an unexpected difficulty? That is likely to be the outcome.

How dry will western Canada become? We simply do not know... we have a decent enough crop comming... just like the US had 10 days ago. NOW the US is about 20 percent below what was the expected crop: 2 weeks made a world of difference.

2 weeks in western Canada... of nail biting... no doubt. The heat maps look ugly for Alberta.... the European weather model says we may get some rain this week... the US model says NO RAIN.

Our Canola is as tall as I have seen it on July 9... chest high in places. Our wheat is short and headed out short.

Hang on... we know the world will keep on spinning.... a wild weather market. What will happen to the US EPA mandate on Ethanol? It is an US election year... ANYTHING is possible!!!

[bucket]

...and a proof is a proof etc.....

Deep thoughts!

The crops are not in good shape in the US and we don't have the luxury of that soil here in western canada. A week of 32c will move crops backwards quickly here as they never rooted because of the rain.

[TOM4CWB]

FYI:



A Weekly Update From Your Friends at the Red River Farm Network


Monday, July 9, 2012


Weekly News Highlights

Hot, Hot, Hot — Temperatures have cooled across the northwestern Midwest. However, last week's blistering heat, coupled with the lack of rain, did more damage to the corn crop. Weekend weather is fueling more double-digit gains in grain futures overnight. The trade expects another sharp drop in crop condition ratings when USDA releases its weekly crop progress report this afternoon. December corn gained 58 ¼ cents last week, while November soybeans went up 78 cents per bushel. Stay with the Red River Farm Network for news that impacts the bottom-line.

S/D Numbers Released This Week — Grain traders expect USDA to adjust its corn yield estimate in Wednesday’s Supply/Demand report. The current projection of 166 bushels per acre is expected to be cut about 12 bushels per acre, but the market has been trading a yield lower than that for the past several days. Analysts also expect USDA to reduce its soybean yield. A Dow Jones survey also reveals expectations of the old-crop corn carryover of 840 million bushels, down 11 million from last month, and an old-crop soybean carryover of 170 million bushels, five million less than June. For the new crop, analysts peg corn ending stocks at 1.2 billion bushels, down 650 million bushels from a month ago. Analysts expect USDA to raise its wheat production estimate about 20 million bushels in Wednesday’s report.

Informa Cuts Yield — Informa Economics has reduced its corn and soybean yield estimates from its previous forecast. Informa cut its corn yield 1.4 bushels per acre, to 153.5 bushels per acre. That’s almost ten bushels less than Informa’s early season yield forecast, and 12.5 bushels below USDA’s 166 bushel per acre yield estimate. Corn production is put at 13.6 billion bushels, up 1.3 billion from last year. Informa lowered its soybean yield forecast to 42 bushels per acre, from 42.7 previously, putting crop size at 3.16 billion bushels. Informa also reduced its wheat production estimate 23 million bushels from last month, despite increasing its winter wheat forecast 21 million bushels. Informa pegs the spring wheat crop at 500 million bushels, up from last year's 455 million.

Cropcast Cuts Yield Estimate — Cropcast pegs this year’s US corn yield at 150.6 bushels per acre, down 2.7 bushels from its previous forecast. Cropcast’s senior agricultural meteorologist Don Keeney says their yield estimate has come down more than eight percent. “We have the yields currently at 150.6 bushel per acre; that’s down considerably over the past few weeks," said Keeney, "We started out right around 164, but, we’re down to 150.6 right now; it’s pretty bad in the central Midwest.” Cropcast projects this year’s corn crop at 13.2 billion bushels, more than 300 million below its prior estimate. The soybean yield is put at 40 bushels per acre, down from 40.6 previously, putting US soybean production just below three billion bushels. Keeney says soybeans have more time for beneficial rain, but not as much as usual.

Look Out — Roach Ag Marketing market analyst Greg Milkovich says record grain prices could be seen this year, but watch out. “We’ve been looking at it and talking about it for what seems like a couple of months here, you know, watching the soil moistures," said Milkovich, "It certainly just accelerated all of a sudden, and once it’s on the front of the paper, it’s kind of yesterday’s news, but these funds still aren’t really involved in this market yet, and if they decide to step in, look out.”

Buyers Seeking Info on Crop Conditions — Money Farm President Mike Krueger spoke at the US Wheat Associates Latin American Buyers Conference in Colombia. Krueger says the hallway talk at this conference focused on the current market situation. “The world was very bearish coming into April/May with the world wheat crop being big and the US wheat crop looked great," said Krueger, "Everybody was bearish and it felt like not many of the millers or importers, the buyers from South America, had very much coverage and then all of a sudden in the last three or four weeks, things have turned around dramatically and you’ve put in steep gains; people wanted to know how much farther it could go, when it will end, you know, always the same sorts of questions farmers are asking."

www.rrfn.com.

[TOM4CWB]

More RRFN:

Drought Stress — According to North Dakota State University Extension agronomist Joel Ransom, early planted corn is probably at maximum water use now. Ransom says the region is running out of soil moisture. “We could be using up to a quarter to a third of an inch a day; we need rain on a regular basis to kind of keep things going," said Ransom, "We’re kind of running in a deficit at the moment, so the roots are tapping into water that’s down below, at least, if there’s water below." At this point, there aren't many visual drought stress symptoms seen. As the crop moves into the reproductive phase, Ransom says yield loss is much higher. “If we have enough stress to roll the leaves during the day, we could have ten to 20 percent yield loss and as we get into tasseling, it’s going to go up a little more; during that silk emergence through the early part of the grain filling, we can have up to 40 to 50 percent yield loss with just four days of leaf rolling in the crop." With about half the growing season still ahead, Ransom says the potential for yield losses due to drought appear to be quite high unless timely rains are seen.

A Critical Time — Pro Farmer editor Chip Flory says the hot, dry weather is coming at a critical time for the corn crop. The level of damage seen in the crop won't be available for awhile. "The (USDA July) Crop Production report doesn’t cover corn and soybeans yet," explains Flory, "We don’t get a survey-based estimate from USDA until August, so we’ve got a long ways to go before we start to get any survey-based data on what this corn crop looks like; there’s going to be a lot of uncertainty out there and the uncertainty is going to breed some volatility into these markets." Flory predicts aggressive moves to the upside and to the downside over the next few weeks.

More Corn Acres in Manitoba — Statistics Canada says corn acres in Manitoba will reach a record 300,000 this year. The estimate is based on a phone survey conducted before June 7th and easily tops the 1981 record of 225,000 acres. Manitoba’s corn industry says the Stats Can number caught the corn industry by surprise with the industry expecting around 250,000 acres. Stats Can also pegged Manitoba’s soybean acres at 875,000 up 300,000 from last year.

WOW!

[charliep]

You can add logistics to your set of unknowns. I think west coast will be fully utilized with most of the capacity already booked. Stuff will back up in the country this fall (assuming some type of crop). East coast will be less desireable with the demise of the CWB freight adjustment factor. Churchill - well there is the $9/tonne help and who knows.

Movement south to the US will be of interest with rally and potential production shortfall. In a normal year, I suspect western Canadian grain would continue to move east and west with only a slight increase in exports to the US.

This is not a normal year and I am starting to get the sense of more movement across the line to fill their potential production void. Farmers and the grain trade will get price signals and delivery access directly without the regulatory burden of CWB buybacks, etc. It is going to be interesting how grain flows and logistics turn out this coming winter.

But perhaps just the ravings of a mad man.

Transaction security (getting paid) will be important - particularly on US sales.

[bucket]

Interesting, they have been talking about leaf rolling for over two weeks over at NAT. A modest 20 percent reduction would put the corn crop at a 132 bpa using a 166bpa national average. Some are talking under 100 bpa.

The corn crop is in a lot of trouble in the states.

[charliep]

Note elsewhere but there has been some feed wheat business done for south east asia late summer/early. Blend of just about any type of wheat available including and loaded onto unit trains to direct hit a boat in Vancouver. Stay tuned. No muss. No fuss. Fills the void of $7 plus corn futures in the export market.