Tag Archives: usda grain reports

Following Up on Corn, Weekly Exports and the Dollar’s Devaluation

 

Corn continues to march to new highs, now trading around $4.80 per bushel. Much of what we’re seeing is demand driven. I was looking at corn sales for the marketing year ending September 1st and it validated much of what we’ve been discussing.

 

From the USDA website. China has imported 236,000 metric tons this marketing year. Over the last three years, their U.S. corn imports total 0. Yes, that is a 0.  While this is only 1.5% of our total exports, it must come as a surprise demand factor due their absence of imports in the past. Also of note, Taiwan imported 651,000 metric tons. This is up from 488,000 last year and 0 in the previous two years. Yet another upside surprise. Combine this with Japan’s 66% increase over last year and you have three Asian countries’ demand increasing from 166,000 tons in 2008 to 5,216,000 tons in 2010. This accounts for 1/3 of all exports and obviously represents a HUGE piece of the pricing mechanism. Weekly net exports are as high as they’ve been in the last 10 years.

Fundamental Analytics Weekly Net Sales chart is the 2nd, “Interesting Formation .”Full access to currenc and historical grain reports is available at USDAGrainReports.com

I apologize for the poor formatting. While I may be technically competent, I’m not always technically capable. CORN – UNMILLED                                     MARKETING YEAR 09/01 – 08/31   OUTSTANDING EXPORT SALES AND EXPORTS BY COUNTRY, REGION AND MARKETING YEAR1000 METRIC TONS       AS OF SEPTEMBER 2, 2010——————————————————————————–                      :      CURRENT MARKETING YEAR         :NEXT MARKETING YEAR                       ———————————————————                      :OUTSTANDING SALES:ACCUMULATED EXPORTS: OUTSTANDING SALES                        ———————————————————   DESTINATION        :THIS WEEK: YR AGO:THIS WEEK: YR AGO  :SECOND YR: THIRD YR——————————————————————————–                      :EUROPEAN UNION – 27   :     1.0      0.3       0.0      0.0        0.0       0.0   SPAIN              :     1.0      0.1       0.0      0.0        0.0       0.0   U KING             :       *      0.2       0.0      0.0        0.0       0.0                      :JAPAN                 :  4329.5   2595.1     166.6     88.9        0.0       0.0                      :TAIWAN                :   651.4    487.9       0.0      4.3        0.0       0.0                      :CHINA                 :   236.0      0.0         *      0.0        0.0       0.0                      :OTHER ASIA AND OCEANIA:  1214.5   1696.4      57.3    117.9        0.0       0.0   HG KONG            :     1.3      1.5       0.0      0.0        0.0       0.0   INDNSIA            :     0.0      1.4       0.0      0.0        0.0       0.0   ISRAEL             :   226.0      0.0       0.0      0.0        0.0       0.0   KOR REP            :   832.1   1633.3      57.3     57.8        0.0       0.0   MALAYSA            :     3.3      3.0       0.0      0.2        0.0       0.0   OPAC IS            :     0.0      1.6       0.0      0.0        0.0       0.0   PHIL               :     0.5      0.0       0.0      0.0        0.0    &
nbsp;  0.0   SYRIA              :   151.0     50.0       0.0     60.0        0.0       0.0   VIETNAM            :     0.3      5.6       0.0      0.0        0.0       0.0                      :AFRICA                :  1144.5    557.7       0.0    174.6        0.0       0.0   ALGERIA            :     0.0      0.0       0.0     26.5        0.0       0.0   EGYPT              :  1090.0    487.8       0.0    130.1        0.0       0.0   MOROCCO            :    29.5     49.9       0.0     18.0        0.0       0.0   TUNISIA            :    25.0     20.0       0.0      0.0        0.0       0.0                      :WESTERN HEMISPHERE    :  3739.0   4112.2      61.9    151.2        4.6       0.0   BARBADO            :     3.2      6.1       0.0      0.0        0.0       0.0   C RICA             :   129.4     71.3       0.0      0.0        0.0       0.0   CANADA             :    90.2    251.3       6.7     22.1        0.0       0.0   COLOMB             :   295.5    582.3       0.0      0.0        0.0       0.0   CUBA               :    75.0    200.0       0.0      0.0        0.0       0.0   DOM REP            :   243.1    196.8       0.0      0.0        0.0       0.0   ECUADOR            :     0.0     45.0       0.0      0.0        0.0       0.0   F W IND            :    19.5     17.1       0.0      0.0        0.0       0.0   GUATMAL            :   248.8    394.9       0.0      0.0        0.0       0.0   HONDURA            :    82.1     96.7       3.5      0.0        0.0       0.0   JAMAICA            :    64.8     57.6       1.5      0.0        0.0       0.0   LW WW I            :     0.5      1.8       0.0      0.0        0.0       0.0   MEXICO             :  2283.0   1822.9      30.2     80.1        4.6       0.0   NICARAG            :    11.6      8.7       0.0      0.0        0.0       0.0   PANAMA             :   103.7     99.0       0.0      0.0        0.0       0.0   PERU               :    36.5    217.5       0.0     23.5        0.0       0.0   TRINID             :    24.0     15.0       0.0      0.0        0.0       0.0   VENEZ              :    28.2     28.2      20.0     25.5        0.0       0.0——————————————————————————–TOTAL KNOWN           : 11315.9   9449.6     285.8    5
37.0        4.6       0.0TOTAL UNKNOWN         :  3786.6   2681.9       0.0      0.0       50.8       0.0——————————————————————————–TOTAL KNOWN & UNKNOWN : 15102.5  12131.4     285.8    537.0       55.4       0.0EXPORTS FOR OWN ACCT  :      –        –       21.9     34.3         –         – OPTIONAL ORIGIN       :   141.8    127.1        –        –         0.0       0.0——————————————————————————–

 

These export figures also fall right inline with the Dollar’s declining value. The Yen hit a 15 year high against the Dollar last week and the Chinese Yuan continues to appreciate, in spite of their officially pegged boundaries to the greenback. We also saw the Dollar depreciating against several African currencies, including the Egyptian Pound.

 

Further examination of the table reveals little in the way of exports to the Euro zone, with Spain and United Kingdom being the only two countries to make the list. Obviously they have an added advantage in being able to grow their own crops but, with the severe weather problems they’ve had this summer and the impact on their crops, one would think we might see an uptick in exports to this area.

 

I read an interesting article this weekend detailing the competitive devaluation race between Euro zone, United Kingdom and the United States. The current political plans are similar among all three. All three must devalue their currency in order to make their exports more competitive and force increased domestic consumption upon their people. This is the only way they can grow their way out of their recessions while keeping domestic inflation in check. However, at the same time they are printing money to devalue, they are forcing the individual savings rate to increase (the U.S. has gone from 0 savings to 6% in the last year), this also reduces domestic demand, stifles small business and lowers taxable receipts. Keeping this in mind, it becomes a race to see who can implement the process the most efficiently and beat the other faltering countries to the end game of sustainable growth and manageable debt.

This blog is published by Andy Waldock. Andy Waldock is a trader, analyst, broker and asset manager. Therefore, Andy Waldock may have positions for himself, his family, or, his clients in any market discussed. The blog is meant for educational purposes and to develop a dialogue among those with an interest in the commodity markets. The commodity markets employ a high degree of leverage and may not be suitable for all investors. There is substantial risk in investing in futures.

 

Trading in Volatile Markets

Trading in Volatile Markets

Last week’s events bring to mind some important truths about
commodity trading. Many traders categorize themselves as fundamental traders or,
technical traders or, systematic traders. However, the best traders find it
hard, at best, to implement their particular trading plan when market
volatility explodes and the rules are changed in the middle of the game. Let’s
frame the market’s activity before we dissect its impact on trading styles.

First of all, the financial markets are in mass liquidation.
The stock market saw 150 year old stalwarts reduced to bankruptcy. The bond
market was experiencing priced in risk premiums higher than those witnessed
during 9/11. The commodity markets were under mass liquidation as Commodity
Index Traders, the managers of the long only commodity funds, were being forced
to liquidate on the way down to reduce leverage. Daily ranges were increasing
and cash balances were fluctuating wildly, regardless of trading style. The news
events that were surfacing daily were materially impacting not only the
markets, but the exchanges and trading strategies, directly.

For this discussion, it’s important to know a bit about each
trader’s style. Fundamental trader are long term, macro -economic investors who
place a high emphasis on, “being right in the long run.” They typically follow the Commitment of Traders reports or the USDA grain reports. Many fundamental
traders may claim to have, “been early,” when entering a market and are therefore
placed immediately into a losing trade. This is not a knock on their trading style
or, any of the others that I’m about to mention. Fundamental traders rarely
trade with stop losses because they don’t want to stopped out of a “noisy
market.” Generally speaking, they focus on a particular market or, sector and
tend to know it very, very well. Their idea of a “fair price,” or “fair value,”
leads them in and out of the market based on their models.

Technical traders rely on oscillators, indicators, trend
lines and so forth. Elliot wave analysts, Fibonacci traders and pattern
recognition also fall into this category. As long as the trend lines hold, the oscillator
bounces back or the wave count is right, it works. Pattern traders can trade
within the framework of their studies and historical models of what has worked
for them in the past and use them as best they can to forecast future price
movement.

Lastly, systematic traders focus their time on the
development of algorithms and buy/sell programs that, once implemented, provide
quantitative entry and exit commands. The implementation of the system comes
down to the trader’s ability and willingness to execute the program’s commands
exactly as the program specifies.

How has last week’s action affected trader’s ability to
trade? The fundamental traders have had to sit through some exceptionally wild
equity swings. Looking at last week’s moves, was the fundamental trader right
to say that gold was too cheap in the $700’s or is the fundamental trader right
to assume that gold is too expensive in the $900’s. There is no question that
crude was overpriced at $140+ per barrel but, I don’t know anyone who sold at
$120 on the way up and still had it for the ride back down.  If the fundamental trader can’t stay with the
position, does it really matter if he’s proven right, over time? This is where
the old saying, “The markets can remain irrational longer than a trader can
remain solvent,” comes from. Look at last week’s ranges and multiply them times
their point values. The mini S&P 500 was 11 points higher for the week
(+$550). However, the range was 155 points or, $7750 per contract. That’s a lot
of risk for someone buying the market’s $550 return.

Technical traders had many of their classic signals trigger
trading opportunities. Overbought and oversold readings were both pegged in
various markets. Index traders had VIX readings over 40 and TRIN indicators
over 900. Commitment of Traders Index followers received both buy and sell
signals and lastly, several trend lines were violated, only to have the markets
reverse course the following day.

System traders didn’t fare any better, I’m afraid. There
were some day trading opportunities but, anything given one day was taken back
over the next day or two. Therefore, losing trades abounded. Also making
matters worse, the exceptional volatility led to execution issues. Markets that
normally had a tight bid and offer with many contracts available on either side
suddenly found themselves at a loss for executing multiple contract orders at a
single price. Other orders, like stop or, market orders were executed far worse
than any slippage allowance that was modeled into the system’s creation.

The very short point of this very long article is that, sometimes,
it’s most important to focus on each trade as a single trade. Execute that
trade as if in a vacuum. When markets are swinging like they have been,
fundamentals can be thrown out the window, technicals taken with a grain of
salt and systems employed as best as execution will allow. Discretionary
traders have been provided with a tremendous opportunity. The ability to
synthesize macro- economic dynamics in a fluid environment filtered through the
lens of technical analysis and executed with the precision of a binary program
are the discretionary trader’s harvest season. This ability to take any trade
as simply, “a trade,” and maximize the profit and loss characteristics of each,
through careful monitoring, is the discretionary trader’s opportunity to ride
gold for $150 dollars in two days or squeeze 300 basis points out of the yield
curve. These are the, “Hero” moments that I will never be a part of as we continue
to try and carve something out of the middle.

Andy Waldock

http://www.commodityandderivativeadv.com

 

 

Lost in the Confusion

Lost in the Confusion

 

Amid the roar of the financial chaos and their ability to affect,
seemingly every market, one sector has been quietly building a base and should
be renewing buying interest. Remember back in late May and June during the
wettest spring ever when the concerns of crop planting were making the local
news? The ensuing run up in grain prices soon had everyone beating the drum of ethanol’s
demand on corn prices and the cost of bread, chips and cereal.

Since the grain markets peaked in July, many of them have
sold off considerably. Soybeans have fallen from an all time high of $16.47
down to $11.00 per bushel. Corn and wheat are also off 30 – 35%. The main
reasons for this sell off has been the exceptional growing conditions helping to
make up for the wet spring as well as the typical seasonal pattern the grain
markets have of selling off once the crop has been planted. Further pressure
was added this summer by the rise in the U.S Dollar and the global demand
reduction associated with increasing purchase costs as a result of the exchange
rate.

Soybeans and wheat continued to decline this past week amid
the global uncertainty of the financial markets and a general flight from
derivative based investment. However, corn made its low of $5.00 per bushel
more than a month ago. Also, the corn market failed to make new lows amid the
financial panic. Technically, corn need only close above $5.67 to setup a
genuinely bullish breakout of a double bottom.

Fundamentally, while the corn crop has grown well, the late
planting has had an effect on the maturation process of the crop. The saying
being floated by the corn pundits is, “Looks good from the road but not in the
field.” This year’s crop will be especially vulnerable to an early frost or
cool late summer as the late planting is affecting the finishing of the crop.
Lastly, and most importantly, the global corn crop began this year at one of
the tightest stocks to usage ratio on record. Basically, this means that there
was less of the previous year’s corn crop still available in the pipeline at
the beginning of this year’s planting season.

It appears in the USDA grain reports that given the acreage planted, the projected
yield and demand for this year’s crop will do little to ease this issue. While
we move to global “on demand inventory,” it’s important to know that commodity futures
supplies are static. Government’s can print money. Stock exchanges can forbid
short selling and banks can be bailed out. However, neither the U.S. Federal
Reserve nor the European or English Central Banks can create more corn. Those
who have been losing sleep over the next financial market, “Breaking News
Bulletin,” may wish to consider something more grounded.

 

Andy
Waldock

P –
866-990-0777

F –
419-624-0937

www.commodityandderivativeadv.com

Mother Nature’s Resilience

The current corn crop appears to have materially overcome the delays of a wet spring. April’s plantings were 30% behind normal. The picture became grimmer when May’s plantings were as much as 50% behind normal. This led to serious concerns as yield has been directly correlated to planting date, with yield falling consistently with date planted after May 1st. However, through the modern technology of GPS, tractors were able plant through the night as the weather allowed. This led to being fully planted by USDA Grain Report June’s acreage report. Now, corn has been in the ground and had a chance to grow with some periods of sunshine and good ground water tables. Mother Nature has done her thing as corn across the country has been racing to catch up. Currently, even with all of the delays in planting, corn rated in “good to excellent” condition is ahead of the five year average!

Given the drastic change in perspective from a dire spring to excellent condition as we head into the pollination period, it’s not surprising that the market has sold off as dramatically as it has. However, it’s important to keep a global perspective on the corn market. Even if corn is on the pace of 155 bu/acre yields, at 87.5 million acres planted this will still leave us with a stocks to usage ratio at or, near all time lows. This is also consistent with the International Grain Council’s expectation of global ending stocks being 24+ mmt lower than last year. Furthermore, with the Dollar expected to decline through the end of the year, we will continue to see strong export demand, especially in China as Hog feed usage continues to climb. We will be able to track China’s purchases through the Commitment of Traders Reports.Ultimately, as we have fallen to test the April –  June congestion between $5.70 and $6.20, traders and hedgers should prepare to use this as a longer term buying opportunity.

Right vs. Profitable

As many of you know, I’ve suggested being long the cotton market for a while, now. The recent setup can be seen here http://www.youtube.com/watch?v=qXUynIIiTNk . I suggested this trade on the 26th, knowing that the crop acreage report which can be found here with other USDA Grain Reports came out this morning. I expected a decline in cotton acreage of 10 – 15%. The number came out at 15% fewer acres planted. Clearly, I should have seen a swift rally through the 8230 – 8250 resistance. However, the market’s reaction to this number was to sell off 250+ points…..IMMEDIATELY! The market fell so swiftly that my protective sell stops were elected but, unable to be filled on the way down. Currently, I find myself sitting with a losing trade below my protective stop point in a market I was dead right on. I’m now tied to the screen trying to find a place to take my loss. The point is, “Being right, isn’t always profitable.”

Corn Crop Deterioration

The fundamentals f the corn market continue to point towards higher and higher prices. I understand that many people had a hard time forcing themselves to buy new crop corn $6 a bushel. Unfortunately, $7 is here and $7.50 is not far off. The corn market is experiencing a “perfet storm.” The short list of contributing factors are:1) Tight ending stocks leave us very dependent on this year’s crop.2) Increasing global (Asian) demand for red meat funnels more corn to feed.3) Declining Dollar increases global demand for our exports.4) The late start to this year’s crop will have a material effect on yields.5) Growing position of index trader positions in the Commitment of Traders Report.

The following article on Bloomberg goes into more detail without having to source each piece of the puzzle individually. If anyone wants more detail than it provides, please contact me directly.

Corn Deluged by Iowa, Illinois Rain Cuts Yields, Boosts Prices

By Jeff Wilson

Enlarge Image/Details

June 10 (Bloomberg) — Rainstorms sweeping the biggest corn states in the U.S. are damaging a crop that’s already failing to keep pace with global demand for food, fuel and cattle feed.

Farms in Iowa were drenched with 5.78 inches of rain last month, or 37 percent more than normal, according to :S:d1″>Harry Hillaker, the climatologist for the biggest corn-growing state. The 22.23 inches that fell on Illinois from January through May was 45 percent above normal and the third-wettest on record, according to data compiled by the state.

Corn rose to a record $6.73 a bushel yesterday in Chicago, extending this year’s gain to 44 percent. Yields in the U.S. may fall 10 percent short of government forecasts, the biggest drop in 13 years, and send prices up another 34 percent as storms delay planting, stunt growth and leech fertilizer from the soil, said :S:d1″>Terry Jones, who farms more than 6,000 acres near Williamsburg, Iowa.

“It’s already a disaster,” said :S:d1″>Palle Pedersen, an agronomist at Iowa State University in Ames.

About 60 percent of the crop in the U.S., the world’s largest grower and exporter, was in good or excellent condition as of June 8, down from 63 percent the previous week, the Department of Agriculture said yesterday in a report. A year earlier, 77 percent got the highest rating. Iowa, Illinois, Nebraska, Minnesota and Indiana, the five top-producing states, reported declines.

`Midwest Flooding’

Check USDA Grain Reports

Rainfall across the Midwest was as much as four times normal over the past 60 days, according to National Weather Service data. In some places, storms dumped 15 inches more than average, the data show. The increase is equal to the typical rainfall some fields receive in a year, said :S:d1″>Roger Elmore, who is also an agronomist at Iowa State.

“The Midwest flooding is widespread and that has already hurt the crop,” delaying development and drowning some immature plants, said Jones, who is vice president of Russell Consulting Group in Panora, Iowa. “We could see national yields fall at least 10 percent, even with normal growing conditions the remainder of the year.”

Spring planting was delayed by rain and unusually cool weather that left fields too muddy for tractors and limited growth. U.S. corn planting was 51 percent completed by May 11, less than 71 percent the previous year, USDA data show.

The yield potential for corn drops unless plants emerge from the ground before the end of May in the Midwest, according to a University of Illinois study. The USDA estimated 78 percent had emerged as of June 1, compared with 92 percent a year earlier. To produce the best yields, corn needs to pollinate before the arrival of summer weather.

$8 a Bushel

“The crop is in serious trouble,” said :S:d1″>Jim Stephens, president of Farmers National Commodities Inc. in Omaha, Nebraska, who helps manage more than 3,600 farms across the Midwest. He said corn will top $8 a bushel this year.

The weather is endangering a U.S. crop already expected by the USDA to decline from last year’s record harvest after farmers planted 8.1 percent fewer acres. Global inventories may fall to the lowest levels in 24 years by Aug. 31, the USDA said.

U.S. farmers shifted to soybeans and wheat because the costs of corn is high relative to other crops. The USDA will update its yield and inventory estimates today in Washington and its estimate of U.S. planted acreage on June 30.

Demand for corn to feed livestock jumped 24 percent in the past decade as economic growth boosted incomes and meat consumption in developing countries. The prices of corn, soybeans, rice and wheat surged to recor
ds this year as food demand outpaced production. In the U.S., the cost of corn was increased by government subsidies and mandates for ethanol.

Rising Prices

In the top eight producing states, which grew 75 percent of last year’s crop, there is more acreage at risk than in 1993, when yields plunged 23 percent, said :S:d1″>Chip Flory, editor of the Professional Farmers of American advisory in Cedar Falls, Iowa.

Corn futures for July delivery rose 6.5 cents, or 1 percent, to $6.5725 a bushel yesterday on the Chicago Board of Trade, after touching a record high for a third straight session.

The saturation of soil moisture is in the 98th percentile of the highest levels in the past 40 years from South Dakota to Ohio, according to government data, increasing the risk of reduced yields from the loss of nitrogen fertilizer, Iowa State University’s Elmore said. The saturated soils are depleting fertilizer at a rate of as much as 4 percent a day, he said.

Farmers were expected to produce about 153.9 bushels an acre on average, up from 151.1 bushels last year, the USDA said May 9. Instead, yields probably will drop below 139 bushels and may fall even more, said Jones, the Iowa farmer.

To contact the reporter on this story: :S:d1″>Jeff Wilsonjwilson29@bloomberg.net