Thoughts on the Markets

[charliep]

Things are too quiet in here so have to stir the pot. What are peoples thoughts about markets/actions?

A couple of my notes.

1) A friend of mine (Dave Reiman) always pushed me to look at long term charts. Example CBT Corn Monthly Futures Chart(http://futures.tradingcharts.com/chart/CN/M). The idea is to separate thinking into cheap (less $2.00/bu), normal ($2.00 to $2.50/bu) and expensive (over $2.50/bu). Unless some unusual sitution kicks in (longer term weather problems), the market always heads back to normal prices. Here are the monthly charts for barley and canola.

http://futures.tradingcharts.com/chart/BA/M

http://futures.tradingcharts.com/chart/CA/M

2) Wet weather is good. Having said that, all crops are behind normal maturity. A few days hot days this summer/cooperation on weather this fall and slower than normal development won't be an issue. The weather risk is higher than normal, however. A poor quality grain crop would have a major impact on the feed market.

What are others thinking? Are you happy with the amount of new crop you have forward priced? If you aren't, are you looking at doing pricing in the current market?

[crusher]

We did price some new crop, around 20% instead of 50% - oh well. Sold out old crop non board this week after waiting and waiting on the malt.

Have received 6 inches of rain in the last week (Edmonton). Crops were looking okay before the rain, but we will probably be losing some low spots now. We started some fungicide applications in the canola, but the ground won't support the sprayer now, and I hate dealing with aerial applicators, so I'm not sure what we will do now. I expect disease will knock off 10 % of yield around here.

Everyone was saying two months ago that prices were in a long term uptrend and with low stocks and record demand there would be strong support. Most charts formed a head and shoulders but once again I missed the signal. At the time I was comparing grain charts to crude oil, which had very similar chart action and had just completed a very strong rebound to new highs. I bet on a similar move in grains, but was wrong.

With harvest lows possibly in US winter wheat, I think wheat will be the first to recover. Export demand has been okay, China keeps buying which was predicted. Quality premiums may show up if it keeps raining in the spring wheat belt.

I hope that everyone will soon be on the bandwagon that prices can only go lower, which will be the signal to buy. I wasn't panicking two months ago and I'm not going to now. I've sold enough to cover my fall expenses and will be binning the rest for sales in the new year. Basis levels are going to be huge on everything this fall!

I'm thankful for the abundant moisture, if I can't use it up this year, there's always next year. I'm also thankful I didn't seed any barley, I was quoted $2.10/bu new crop - UGH!!

[rain]

Crusher has there been any new crop wheat bids up there?

[crusher]

New crop feed wheat is around $3.50, depending if you can make a sale. There is wide variability in price, grain company vs. feed user.

I made a tidy profit on SPE wheat last year, I haven't looked but some of the crops must be in the money by now.

Got pretty heavy rains lately, around 8 inches in 10 days. Most crops seem to be handling it okay except some of the heavier land is very poor. There was lots of Rovral put on the canola in this area. With all the moisture and high humidity around here, the crop diseases should be quite high.

[rain]

Markets in North America are really taking a beating now.

Like a lot of people we have some presold but where more cautious do to dry spring conditions before seeding.

All that left now is to see how low futures will go before we see a bounce.

The crappy cattle situation has me worried we will not see basis levels narrow in to help indicate a futures bottom is in.

Looking for a bright side to all of this these futures levels will help out the livestock guys. Long term that will help us.