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Farmers Grain Market Letter  07/21/14 2:12:56 PM Printer Friendly VersionPrinter Friendly Version

Market Letter
07/21/2014

 
  
 
Outside Markets / Other Info     
         
            The Dow’s rally seems to defy all logic.  In March of 2009, the Dow put in a low of 6511; since that time, we have rolled over 10,000 points.  The previous high of 14,230 in October of 2007 was taken out in March of 2013, on its way to our present level of 17,000.  The catalyst seems to be better economic conditions around the globe, mainly lead by better than expected growth in China.
            The U.S. Dollar seems to be in a neutral stance, trading mid-range between the April low of 2008 (71.05) and the March high of 2009 (89.71).  The rally in commodities over the past few years has been favored by a weak dollar, making exports cheaper.  The high prices for our grain were met by lower demand, as feed mills and processors searched for the best source for a cheaper product.  The hope is that the lower prices for grain and a stable U.S. Dollar will help us build back the demand.
            The chart on Feeder Cattle looks about like the chart on the Dow—up, up, up.  The harvest lows of December 2008 were responsible for bringing the prices for grain down to a level more favorable to livestock, but by then the herds had been severely cut due to the high prices.  This sparked the rally that is currently in place.  Herds cannot be rebuilt overnight, but will require several years of steady demand and strong prices to keep ranchers motivated to keep building the herd.  For now, it seems some consolidation is in order, with still some room to keep going up. We need a lot of hungry critters to eat up all the beautiful crops seen in the Delta.
 
Government Reports
 
            The short story on these most recent reports is that there is just too much of everything, if we harvest a crop as big as the market is predicting.  There are just a couple of things that need to fall into place to make this presumption a reality.  South America has not planted yet, and we have not harvested yet!  There are a lot of things that can change in a very short time.
            The USDA Supply / Demand report added 71 million bushels to new crop corn; with yield unchanged (165.3 BPA). Old crop rose 100 million bushels, 13 million more than the average trade guess.  Soybeans Ending Stocks were boosted by posting a 69 million bushel negative residual (this adds to last year’s stocks to increase this year’s beginning stocks). This is the “mystery” category that is used to explain bushel discrepancies that can’t seem to be quantified (at least it appears that way).  The 13/14 carryout is 15 million higher after all adjustments (125 to 140 mbu), removing some of the tightness of old crop. The current stocks were both increased for wheat by USDA.  In fact, the most bullish news for wheat is that the turmoil in Ukraine is where about 1/6th of the world’s exports of wheat originate.
           
How Low?
 
                That is the question of the day!  In June of 2008, corn futures reached a high of $7.79 and soybeans reached $16.54 the following month.  The crop was big and was getting bigger.  By December, corn was bottoming at $3.05 and soybeans, $7.76.  Enough about history! Are we going that low? Lower? This is where that saying comes from, “Low prices solve low prices!”  When demand returns, the prices will turn back up.  When we see some of our old customers returning, buying multiple cargos at a time (China has recently done that in new crop soybeans), we will know that we have turned the corner. The sad part of the story is that it took almost 2 years to get corn back over $5.00 bushel.  We hope that demand continues to build as the size of this crop continues to grow.   
 
Rice
 
            This month’s Supply/Demand report will reflect the new acreage update that USDA put out with the June 30th Acreage report.  In general, the acreage report shows that the 2014 area planted is estimated at 3.047 mln acres, up 558,000 acres vs. 2013 crop.  The state of Arkansas shows the largest increase with 495,000 more acres than last year, or +46%.  Mississippi had the 2nd highest % gain in acres, up 45,000 acres, or +33%.  Looking at the long grain Supply/Demand report for July, starting with the supply side, Production was increased 8 mln cwts, Imports were reduced 0.5 mln cwts, for a net 7.5 mln cwts additional supply.  On the use side of the balance sheet, Domestic/Residual use was increased 2.0 mln cwts; Exports were increased 3.0 mln cwts, for a total increase in usage of 5.0 mln cwts. The net change to Ending Stocks is an increase of 2.5 mln cwts to 28.8 mln cwts.  USDA dropped the average long grain price projection by $0.80/cwt to a range of $12.00 to $13.00/cwt.
            Export sales for the 2013 crop year are down 16%.  The most troubling place we are losing market share is Mexico, our largest export market, where we are down 26% for the year.  Thailand, Uruguay, Vietnam & Pakistan have all been in this market in the last couple of years competing with the U.S., with much cheaper prices.  One bright spot is we have sold Iraq a couple of cargos of rice.  However, with the renewed fighting there with ISIS, it is unclear what that means for future business.
            Futures and cash prices have declined significantly in the past month, some of which can be attributed to the overall weakness in the grains complex.  However, fundamentally we have a very large crop to move this year.  Currently, we are very competitively priced with the South American exporters.  Hopefully, this will help us get off to a strong and early start exporting rice this marketing year.  We need to regain market share in Mexico and Central America.  This crop needs to be moving through the marketing channels early and steady to clear this large supply and prevent market prices from falling to levels too low to sustain a profit.
 
The Lighter Side
           
            A man went to visit a friend and was amazed to find him playing chess with his dog. He watched the game in astonishment for a while.  “I can hardly believe my eyes!” he exclaimed.  “That’s the smartest dog I’ve ever seen.”
            “Nah, he’s not so smart,” replied the friend.  “I’ve beaten him three games out of five.
 
Sights and Sounds
 
            Lush, green plants
            Moist, brown soil
            Dry, white poly
            Cold, hard markets
 
FGT News
 
            FGT Connect—To provide you with even better service and convenience, FGT is replacing our online Member Login with our new and improved online service now called ‘FGT Connect’.  With this new service, you will have total account access through a computer or mobile device.  Look for our letter in the mail that will tell you how to sign up and use the new system.
            Improvements—FGT’s new outbound truck scales are ready at Mound, Waverly, and Waterproof.  Mound and Waverly also have a new traffic flow pattern to help you get in and out faster.  Lake Village’s new inbound scale and probe are complete.  Four new bins totaling 2.4 million bushels are going up at Mound, Indianola, and Greenville.  The two main pits at Greenville were extended to open both truck hoppers simultaneously, speeding up truck unloading.
Wheat Cutoff—FGT will suspend receiving wheat during corn/bean/rice harvest, and restart in late October.  We want to buy your bin-stored wheat.  Keep the bugs under control.
Truck Weights Notice—MDOT will be monitoring roads throughout Mississippi to ensure compliance with road and bridge weight limits during the 2014 harvest season.  Please advise any haulers that enforcement officials will be reasonable, but active in their responsibilities regarding overweight trucks.  FGT encourages cooperation to maintain good roads and bridges in all three states where we operate.
            Flatbed Trucks—Just a reminder, FGT no longer lifts trucks at any of its elevators.
 
FGT’s Elevator Managers & Assistant Managers are:
            Greenville—Ron Daniels & Gary Ballard
            Lake Village—Troy Abraugh
            Mound—Mitch Hopkins & Stuart Moberley (all LA)
            Waverly—Bruce Copes
            Waterproof—Lynn Bowden
            Belzoni & Hollandale—Ronnie Ferrell & Joey Manna
            Indianola—Paul Mancini
            Greenwood—Bud Tate & Robert Smith
These 12 guys have over 260 year’s experience in the grain elevator business.  We are proud that they work for FGT.
 
 Quote
 
1 Corinthians 2:1-5
 
And I, when I came to you, brothers, did not come proclaiming to you the testimony of God with lofty speech or wisdom. For I decided to know nothing among you except Jesus Christ and him crucified.  And I was with you in weakness and in fear and much trembling, and my speech and my message were not in plausible words of wisdom, but in demonstration of the Spirit and of power, so that your faith might not rest in the wisdom of men but in the power of God.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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