Beginning last summer when buyers from
Japan and Egypt bypassed US wheat and
bought from Russia and countries
surrounding Russia, reports since then
have grown week after week that too much
wheat has been sold and eventually
buyers will have to come back to North
America for wheat. I am not saying it
can't happen, but for now it is simply
speculation it MIGHT happen.
As recently as a week ago the Ukraine
Agricultural Ministry announced it had
met sanitary requirements of China to
export corn. It met the requirements due
to a three billion dollar loan from
China. Shipments of corn to China are
expected before the end of the year.
Would China loan three billion dollars
if they thought corn wasn't available?
Of course they wouldn't.
It is also obvious wheat growers from
the southern Plains to the northern
Plains and wheat growing mountain states
and all the way to the major wheat
growing areas in Canada have stored
wheat. Over the past couple of weeks, I
have heard from wheat producers and
traders from the US as well
Saskatchewan, Alberta, Australia and
South Africa and all have wheat.
Essentially, they repeated the reports
claiming wheat has been oversold and
with the price drop since the last USDA
report, want to know when to expect a
rally.
Has wheat, along with old crop grains in
South America, been oversold? Or is it
more likely those buyers took advantage
of great prices and buyers willing to
take it. Reports often showed how
grains, where it was being sold were
priced significantly cheaper, but
compared to current prices now the sales
look very good.
As I have said many times, estimating
crop yields and crop production for 2012
is next to impossible. Throughout the
past summer with all the reports on the
drought it would have been easy to
believe the US would have little if any
crops. Reports grew month by month that
the Russian crops were suffering just as
bad. Reports in July and August implied
Russia would need to keep corn and wheat
they were growing. But they didn't. Why?
Very little mention has been given to
the acreage planted. The drought did
devastate crops in many areas of the US,
but it must be remembered the US started
out with close to 96 million acres of
corn. Reports in June estimated China
planted 3 to 4 percent more acres. Why
haven't reports talked about the
increased growth just about any place
grain could and is grown? If you want a
safe bet, it has to be in 2013 worldwide
grain acreage, which will increase as
fast as planters can push seeds into the
ground.
Grain needs are down because livestock
production has dropped in the US.
Sometimes I feel alone when I report US
cattle will drop the need for feed in
the US. Why is it so hard to connect the
dots when the last Cattle on Feed Report
estimated 18.8% less cattle were placed
in September? Almost half of the
breeding herd was killed in 2011 in the
Plains and Southwest.
For all the talk that Brazil and
Argentina are running out of grain, it
has to be remembered the grain being
sold is their 2012 old crop grain. It
is not unusual for Argentina or Brazil
to sell grain before new crop has been
planted. Storing grain in South America
is unusual.
According to Celeres, one of the
largest, if not the largest analytical
consulting firm in Brazil as of November
9th said soybean sales for the new crop
are at 49 percent. Last year at this
time 36 percent was sold. Brazilian
farmers have been taking advantage of
higher than usual contracting prices. If
Brazil plants the predicted amount of
acres, it will become the largest
soybean growing country passing the US.
In the past week, reports thrive upon
the possibility international buying
will bring grain prices back to and
above summer highs. Most are based on
the heavy sales from Europe and South
America and the need to increase
purchases from the US. Why is it so
hard to see with the strength in the US
dollar compared to Brazil, buyers bought
where the best price was offered.
Southeast US livestock and poultry
producers took advantage
of the currency exchange rates. Is it
that hard to believe exchange rates have
changed in the past year?
Some facts...
Already the US beef herd is at a 60 year
low and will continue to drop in 2013 as
the liquidation of the breeding herd in
2011 further drops the availability of
calves. On top of the fewer cattle,
projected corn production was raised 19
million bushels with sorghum production
up 4 million bushels. The US is also
importing more corn. The USDA is also
forecasting a record for U.S. corn
imports of 100 million bushels. It is a
gigantic leap when compared to imports
of 28 and 29 million bushels in 2010 and
2011. Corn ending stocks are expected to
be 28 million higher. If the USDA
counted dried distiller grains and corn
gluten into feed use, on 5.5 billion
bushels used for ethanol, DDGs in 2012
would add 1.7 billion bushels to feed.
Corn exports are down. China has
repeatedly said for 2012/2013 it will
export possibly 5 percent of its needs.
Corn production in China, according to
the USDA, is growing 200 million metric
tons or 7.874 billion bushels up over
4.2 percent in 2011 and 11.5 percent
more compared to 2010. The US Attaché in
China has said the corn imported will go
for China's strategic reserves.
For months I have been pushing grain
producers to sell. Along with the
fundamentals, technically, I see markets
falling. The cost to store grains is a
cost that will be added to the final
selling price. The alternatives offered
with several strategies using futures,
options and forward contracting to sell
and, if desired to renown, should
strongly be considered.
For both the speculator and the hedger,
the facts outweigh the rumors and all
the possible unknowns and conjectures of
what might happen. I received an email
this week asking if wheat would rally.
Throughout the email, I saw if this
happens then this should happen. "If"
and "should" are not fundamental
reasons.
They are not statements of fact.
Japan and Egypt bypassed US wheat and
bought from Russia and countries
surrounding Russia, reports since then
have grown week after week that too much
wheat has been sold and eventually
buyers will have to come back to North
America for wheat. I am not saying it
can't happen, but for now it is simply
speculation it MIGHT happen.
As recently as a week ago the Ukraine
Agricultural Ministry announced it had
met sanitary requirements of China to
export corn. It met the requirements due
to a three billion dollar loan from
China. Shipments of corn to China are
expected before the end of the year.
Would China loan three billion dollars
if they thought corn wasn't available?
Of course they wouldn't.
It is also obvious wheat growers from
the southern Plains to the northern
Plains and wheat growing mountain states
and all the way to the major wheat
growing areas in Canada have stored
wheat. Over the past couple of weeks, I
have heard from wheat producers and
traders from the US as well
Saskatchewan, Alberta, Australia and
South Africa and all have wheat.
Essentially, they repeated the reports
claiming wheat has been oversold and
with the price drop since the last USDA
report, want to know when to expect a
rally.
Has wheat, along with old crop grains in
South America, been oversold? Or is it
more likely those buyers took advantage
of great prices and buyers willing to
take it. Reports often showed how
grains, where it was being sold were
priced significantly cheaper, but
compared to current prices now the sales
look very good.
As I have said many times, estimating
crop yields and crop production for 2012
is next to impossible. Throughout the
past summer with all the reports on the
drought it would have been easy to
believe the US would have little if any
crops. Reports grew month by month that
the Russian crops were suffering just as
bad. Reports in July and August implied
Russia would need to keep corn and wheat
they were growing. But they didn't. Why?
Very little mention has been given to
the acreage planted. The drought did
devastate crops in many areas of the US,
but it must be remembered the US started
out with close to 96 million acres of
corn. Reports in June estimated China
planted 3 to 4 percent more acres. Why
haven't reports talked about the
increased growth just about any place
grain could and is grown? If you want a
safe bet, it has to be in 2013 worldwide
grain acreage, which will increase as
fast as planters can push seeds into the
ground.
Grain needs are down because livestock
production has dropped in the US.
Sometimes I feel alone when I report US
cattle will drop the need for feed in
the US. Why is it so hard to connect the
dots when the last Cattle on Feed Report
estimated 18.8% less cattle were placed
in September? Almost half of the
breeding herd was killed in 2011 in the
Plains and Southwest.
For all the talk that Brazil and
Argentina are running out of grain, it
has to be remembered the grain being
sold is their 2012 old crop grain. It
is not unusual for Argentina or Brazil
to sell grain before new crop has been
planted. Storing grain in South America
is unusual.
According to Celeres, one of the
largest, if not the largest analytical
consulting firm in Brazil as of November
9th said soybean sales for the new crop
are at 49 percent. Last year at this
time 36 percent was sold. Brazilian
farmers have been taking advantage of
higher than usual contracting prices. If
Brazil plants the predicted amount of
acres, it will become the largest
soybean growing country passing the US.
In the past week, reports thrive upon
the possibility international buying
will bring grain prices back to and
above summer highs. Most are based on
the heavy sales from Europe and South
America and the need to increase
purchases from the US. Why is it so
hard to see with the strength in the US
dollar compared to Brazil, buyers bought
where the best price was offered.
Southeast US livestock and poultry
producers took advantage
of the currency exchange rates. Is it
that hard to believe exchange rates have
changed in the past year?
Some facts...
Already the US beef herd is at a 60 year
low and will continue to drop in 2013 as
the liquidation of the breeding herd in
2011 further drops the availability of
calves. On top of the fewer cattle,
projected corn production was raised 19
million bushels with sorghum production
up 4 million bushels. The US is also
importing more corn. The USDA is also
forecasting a record for U.S. corn
imports of 100 million bushels. It is a
gigantic leap when compared to imports
of 28 and 29 million bushels in 2010 and
2011. Corn ending stocks are expected to
be 28 million higher. If the USDA
counted dried distiller grains and corn
gluten into feed use, on 5.5 billion
bushels used for ethanol, DDGs in 2012
would add 1.7 billion bushels to feed.
Corn exports are down. China has
repeatedly said for 2012/2013 it will
export possibly 5 percent of its needs.
Corn production in China, according to
the USDA, is growing 200 million metric
tons or 7.874 billion bushels up over
4.2 percent in 2011 and 11.5 percent
more compared to 2010. The US Attaché in
China has said the corn imported will go
for China's strategic reserves.
For months I have been pushing grain
producers to sell. Along with the
fundamentals, technically, I see markets
falling. The cost to store grains is a
cost that will be added to the final
selling price. The alternatives offered
with several strategies using futures,
options and forward contracting to sell
and, if desired to renown, should
strongly be considered.
For both the speculator and the hedger,
the facts outweigh the rumors and all
the possible unknowns and conjectures of
what might happen. I received an email
this week asking if wheat would rally.
Throughout the email, I saw if this
happens then this should happen. "If"
and "should" are not fundamental
reasons.
They are not statements of fact.
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