This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Monday, September 22, 2014.
As I mention in the video, this week will be important to the grain markets on both supply stories and demand stories alike. The supply side will be focused on yield reports, harvest progress and outlooks for next week’s grain stocks report. The demand side will be livestock watching, as we get livestock slaughter, cold storage and a quarterly hogs and pigs. The USDA has been very proactive increasing demand use in the recent WASDE reports. For there to be increased feed usage, we need to see more animals. Cattle on feed showed fewer animals on feed now than at any other time since my father was a kid. The derivative of decrease from year over year was smaller, but we still have fewer animals none the less. While ethanol industry usage is up, we can’t rely on that alone. We need feeding to be the “thing to do” for farmers.
I was out in Nebraska over the weekend and I heard a farmer utter something I haven’t heard a smaller farmer say in a while, “I am thinking of buying some feeder pigs, the pencil out to the equivalent of selling 5.00 corn at these hog prices”. Bingo, my friend. Welcome to the world of capitalism. You say you can’t make money with corn at 3.30? Well, find something that uses corn as an input and make money that way. This kind of thought, while simple in nature, takes a while to catch on. Slowly, I believe we are getting there. Another season or two of razor thin margins combined with massive profits from growing livestock should encourage folks to “use” rather than sell.
The weather across the majority of the corn and bean belts has been fantastic for harvesting corn. We’re seeing fields dry out and the trend of amazing weather looks like it will hold through the first week in October. Keep in mind that as we get more into October we will be seeing more harvest problems, the 8 to 14 day does show higher chances of precipitation. And if I recall, what comes after warm wet temps in our weather pattern? That’s right, polar vortex.
The crops will show more yield problems as well and more will get stored. This supports an argument that says a low is not too far away. That said, I think we see the 2010 lows sooner rather than later, so I would stay short until either harvest slows or the USDA math forces are correction. With Grain Stocks reported next week and WASDE a few weeks later, bulls will have that chance.
WEATHER: 6-10 day outlooks via NOAA
We have a light week considering macro reports, but the USDA will be busy. With the dollar index at break out levels, a week off from macro news may keep it contained below 85, for now. The hogs and pigs report will come out after Friday’s close, so in reality folks won’t be able to trade it until next Monday.
Crop progress was just released and things are essentially the same as the last few. We’re past the point where conditions will show much change, unless it involves moisture. Corn maturity is about 12% behind schedule, with Iowa about 23% behind schedule. Like I said above, the later crops will show more wear. This supports the theory of an early harvest low. Nationwide, corn harvest is 7% complete vs a 15% 5 year average. Illinois is 5% complete, but I think it’s past that. I speak to many Illini who are complete with record yields. One guy I talked with from the Tennessee area said that his crop there is 40% bigger than 2012 and 2013 COMBINED.
Soybean conditions fell 1% but remain wonderful in most areas. Beans are behind as well, with 45% dropping leaves vs. 53% on average. This shouldn’t affect price as the warm upcoming should accelerate maturity. Soybean harvest is 60% complete in Louisiana,41% complete in Mississippi, and 23% in Arkansas. All are ahead of schedule. Other than those states, virtually no one has started. The big crops down south have pressured FOB basis and should continue to do so.
The USDA released its September cold storage report today. It showed that beef supplies in the freezer were 343.6 million pounds on August 31, down 6.2% from the previous month and down 20% from the same month last year. Beef supplies remain razor thin, shown by the high prices. Pork in the freezer was up 2.4% from the previous month, but down 0.5% from the previous year. It’s funny to think this, but supplies of frozen pork are not that tight. Bellies which were uber tight last year are on the rebound. We will have to wait until Friday to see how big the herd has become. I’ll be focused on breeding herd size.
THE CHARTS-FRONT MONTH WEEKLY
CORN – 52 week ma
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