We have been waiting for two months for USDA to give us clarity about our Supply and Demand numbers. We finally have sufficient information to be able to give plausible explanations as to how they arrived at these figures.
This report shows big yields, but fortunately it shows big usage too! The World Ag Outlook Board said exports and domestic use were up for soybeans and corn, but wheat fell short of expectations. Livestock numbers are down, but prices have been very good and building of herds should be taking place.
USDA cut 690,000 harvested acres from production, but increased yield from 41.2 to 43.0 BPA. The result is that production is 33 mbu above the average trade guess. Big increases for exports and domestic use have ending stocks at 170 mbu (range 150-240), about 7 mbu below trade guess. This has basis at very attractive levels, and with spreads inverted, basis should be set on all 2013 crop beans. Tight ending stocks in the U.S. and increased planted acres in South America are factors to watch during the next few months. It usually takes bumper crops back-to-back, for both the northern and southern hemisphere, before a rally comes to an end. Any problems in South America over the next month or two should rally prices to recent highs and allow for sales of new crop. November 2014 objectives on the chart…$12.35, 12.55, 13.00 and life of contract high $13.35.
Things are kind of quiet in the wheat complex. The carry out is 565 mbu, up 4 mbu from September and 36 mbu above trade guess. The price for wheat the past two years has spent time in the $8-9 range, but it looks like it has a long climb if it is going to make it there this year. If you have plans for wheat this year, you may need to lower your sights a little, as there is pretty good resistance over $7.20 July. Wheat basis is fairly strong for old and new crop wheat.
Corn / Milo
The way that this crop was planted this year, is a testament to the American farmer and his tenacity. There was a time when it did not look possible to get everything planted in time to make normal yields. Farmers seem to be able to always make it happen. Take a questionable start to the year, add an almost perfect finish, and you have another bumper crop. USDA put the yield at 160.4 BPA, the second highest on record, but they reduced the harvested acres by 1.9 million acres. Total Production almost topped 14 billion bushels, enough to lift the carryout to 1.887 billion. While these figures are bearish, these possibilities have been discussed for weeks; so when the news finally broke...it is old news. A rally is born!
Where do we go from here? A retracement of the June high to the recent low would place the first objective around $4.60 and the second at $5.28. Exports this year are double this same time last year, reflected by strong old crop basis, so with good demand, we may be on our way.
Last Friday, USDA released the November Supply/Demand reports. The long grain report was somewhat of a mixed bag. On the supply side, USDA lowered imports 0.5 mln cwts and raised production by 2.5 mln cwts as a result of higher field yields. However, on the use side, USDA raised exports by 2.0 mln cwts. The overall effect to Ending Stocks was a wash. The average long grain farm price was raised $.50/cwt to $14.50 - 15.50/cwt.
In regard to Medium/Short grain Supply/Demand, the only change there was an increase of 1.2 mln cwts in production, which dropped to the bottom line and raised Ending Stocks by a corresponding 1.2 mln cwts.
Global Supply/Demand shows Ending Stocks fell 0.8% from the October report.
Export sales have picked up somewhat over the last few weeks. A surprise sale of 40,000 mt of U.S. milled rice to Iraq was announced about three weeks ago. Sales are still not good by any account, but somewhat improved. Our Mexican market has been penetrated in a small way by Viet milled rice recently. There is genuine concern within the rice industry that the Vietnamese could take meaningful market share. We have heard this before and it has failed to materialize. Unfortunately, ultra cheap Viet prices make the concern especially troubling.
Harvest for the most part is over. There are a few uncut fields left. In general, we have experienced good field yields, good milling yields and low damage. This is the best quality crop we have had in recent years.
If you would like to get your rice graded or priced, please pull your samples and drop them off at one of our elevators. As always, you are under no obligation and there is no grading fee.
—FGT is moving farm-stored corn and beans to the river now. Basis levels are very good. Bean basis has recently been the equivalent of $1.00 over the July futures!
—Binned grain is eligible for rebates too. January 2014 rebates will average 26 cents per bushel. Only your locally-owned cooperative is paying patronage rebates on grain, on top of a competitive market price up front. There is no better deal out there.
October Bean Contracts
—Because of the lengthy harvest, the delivery period for October bean contracts has been extended to November 30. Be sure to complete delivery or settle up on any balance by that date.
—FGT is booking new-crop wheat. Basis is currently -14 July at the river. We are also receiving old-crop wheat at Greenville with basis at +15 December futures.
—We may all need to press the reset button on marketing for 2014 crops. Corn has already moved from an inverted market to a carry market, with each successive futures month priced higher. With the US carryout doubling from 2013 to 2014, it seems unlikely that we will see premiums for 2014 harvest-time corn. And while bean futures are now strongly inverted, a large South American crop and current plans for a big increase in US plantings may pressure the inverse out of the market.
The Lighter Side
A man dies and meets St. Peter at the Pearly Gates. Peter says to the man, “Here’s how it works. You need to have one hundred points to get into heaven. You tell me all the good things you’ve done. They are all worth a certain number of points. If your total is one hundred or more, you can come in.”
“Well,” says the man. “ I was happily married to the same woman for 52 years. I never looked at another woman. I was attentive and loved her dearly.”
“That’s great,” says St. Peter. “That’ll be two points.”
“Hmmm,” says the man. “This is going to be harder than I thought. Well, I attended church regularly, volunteered my time and tithed faithfully.”
“Wonderful.” says St. Peter. “That’s worth another point.”
“One point!” says the man. “Okay, okay. I was involved with a prison ministry for twenty-five years. I went into the prison, at least monthly, and shared Jesus with them.”
“Wow!” says St. Peter. “That’s another two points!”
“Only two points!” says the man. “At this rate, it’ll be only by the grace of God that’ll I’ll ever get into this place.”
“Bingo!” says St. Peter. “That’s one hundred points! Come on in.”
Sights and Sounds
Nature’s beauty astounds the senses
As games lose out to camp, and calls
Purpled layers of sky & sun & clouds
Brush strokes far beyond man’s reach
But the people thirsted there for water, and the people grumbled against Moses and said, “Why did you bring us up out of Egypt, to kill us and our children and our livestock with thirst?” So Moses cried to the Lord, “What shall I do with this people? They are almost ready to stone me.” And the Lord said to Moses, “Pass on before the people, taking with you some of the elders of Israel, and take in your hand the staff with which you struck the Nile, and go. Behold, I will stand before you there on the rock at Horeb, and you shall strike the rock, and water shall come out of it, and the people will drink.” And Moses did so, in the sight of the elders of Israel.