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What’s Your Target?

What’s Your Target?

When was the last time you played darts? OK, when was the last time you played darts blindfolded? The second game is a little more challenging because you may have no idea where your target is. But it’s a lot like the game some farmers play of trying to sell their crops into a market rally without knowing where profit resides for their operation. It’s difficult to know when to pull the trigger during the growing season if you don’t know where you will be able to profit.

I’ve heard some bankers say 80% of the farmers they work with don’t have a solid cost of production or a marketing plan. So if you’re ready to go with that, you’re in the minority.

In a recent webinar offered by Penton Agriculture, Purdue University Professor of Agricultural Economics, Michael Boehlje asked attendees about their cost of production for the upcoming growing season. Here’s how they answered. This time more farmers knew. They may have been ball-parking it.

If you’re serious about marketing and profiting in a season that’s going to bring narrow opportunities for this, it’s important to know. And when we talk about breakeven, it’s not just seed plus herbicide plus hired labor and fuel. You should be including land costs, equipment costs (depreciation) and family living expense. The reason family living is included is that it’s essentially the salary you’re paying yourself from the business. Once you roll that all up, then you know your target.

We’ve developed a financial tool that helps farmers do this. It allows you to input costs and market strategies/positions, along with crop insurance. Then when those market opportunities come along in profit territory, you’re notified, so you can quickly act. Essentially, we help you find the target and the program tells you when to pull the trigger according to your plan.

If you’d like to see how the software works, sign up for a free trial at www.agwizard.com

 

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Profit Watch Commentary – January 3, 2014

We will finish the first week of 2014 with a double whammy – a plunge in prices and a plunge in temperatures. Records are expected to fall across the country as frigid temperatures move in from Canada. Northern Minnesota may see wind chills of -75 degrees on Sunday morning. Wind chills colder than 50 below can cause exposed flesh to freeze in only 5-10 minutes. This weekend is expected to be the longest sub-zero period in 18 years. Bundle up!
The snowstorm in Chicago and out East coupled with the holidays have affected trading volume this week. Hopefully next week everyone will be back to work.
Believe it or not, the big January Crop report is only one week away. Early next week, the trade will be releasing private trade guesses on production and carryout. Informa got ahead of the game, and released their best guess today. As per usual, their production numbers increased. Below is a recap.
Informa Current USDA est
Corn 14.160 bln 13.989 bln – 161.6 bpa 160.4 bpa
Soybeans 3.329 bln 3.258 bln – 44.0 bpa 43.0 bpa
The higher corn production estimate was due to a combination of an increase in yield and harvested acres. The bump in soybean production was the result of higher yields. Interesting to find that the highest trade estimate in the November crop report was 43.3 bpa. Informa’s yield estimate of 44 bpa matches the record US yield in 2009.
Despite Informa’s bearish projections, both corn and soybean prices ended the day on a positive note. Wheat actually led the rally and closed up nearly 9 cents after making new contract lows early in the day. Unfortunately, the weekly change in prices was not so positive. Corn and wheat lost 3-6 cents on the week, with soybeans taking the biggest hit. March soybeans fell 42.5 cents with November soybeans down nearly 25 cents.
March corn made a new contract low today, but finished the day up 3 cents. The higher close is a small victory. The corn market has been hit with everything from all sides lately. The US hog herd is shrinking due to disease. The weekly ethanol production was down from 926,000 barrels last week to 913,000 this week. (Bright spot: pace is still ahead of last year.) DDG prices are down $100/ton and cutting into ethanol margins. China may not unload DDGs if tested positive to MIR162. And to top it all off, export sales today were lousy. A marketing year low. Only 6.1 million bushels were sold this past week of old corn and .8 mln new. There was no Chinese business.
When it rains, it pours. But, perhaps the market is getting a little ahead of itself. A lot of negative news is in the market, and everyone pretty well expects a bigger USDA number next Friday. There is a chance that the DDG situation may be worked out with the Chinese as early as next week. The Funds are holding onto a RECORD short position. And, finally, the index funds are slated to buy over 90,000 contracts of corn starting next week.
If the Bears get their way, March corn will likely sink to $4.17, 4.10 and ultimately $4. If the Bulls can get a little relief, prices will target $4.25, 4.33, 4.40, and $4.495.
Soybean prices got ripped this week due to good rains in South America last weekend and the DDG situation. Harvest has started in a small area of Brazil and conditions are mostly favorable. 70% of Argentina also got good rains, leaving the majority of the country in pretty good shape. South America has a big crop coming and traders know it.
In the past, poor SA logistics have played a key role in the US securing unexpected export sales. We can’t imagine why that won’t happen again this year at some point.
To date we have more export sales on the books versus the current USDA projection. Today’s strong export sales of 34.7 mln bushels put the number over the top. We have 1.493 bln bushels of soybeans sold with a USDA projection of 1.475 bln. We don’t have all those bushels shipped, so there is the possibility of China cancelling sales in favor of cheaper beans from SA down the road.
The bean Bears were definitely cheering this week. Their next target for March soybeans is $12.625, 12.5625 and $12.3325. The Bulls will look to regroup with March targets of $12.75, 12.92, 13.00 and the December high of $13.3925.
Have a great weekend.

Futures trading may not be suitable for all investors. The trading of futures/options involves substantial risk of loss and you should fully understand those risks prior to trading. This material should be construed as the solicitation of an offer to sell or the solicitation of an offer to buy the derivative(s) noted in any jurisdiction where such an offer or solicitation would be legal. These materials have been created for a select group of individuals, and are intended to be presented with the proper context and guidance. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by AgriSource, Inc.
AgriSource, Inc. is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. It does not constitute an individualized recommendation, or take into account the particular trading objectives, financial situations, or needs of individual customers. Contact AgriSource, Inc. designated personnel for specific trading advice to meet your trading preferences or goals.

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Profit Watch Commentary – Dec. 13, 2013

TGIF.  The rally we had going to start the week got side-tracked.  March corn futures faded about 14 cents from yesterday’s high.  From Monday’s high to today’s low, March beans dropped 36 cents.  Old crop soybeans still managed small net gains on the week.  All corn and wheat contracts lost ground on the week.

Soybeans managed a respectable comeback into the closing bell today led by meal.  The spot basis levels for outbound meal have been rising rather significantly in recent weeks.  Slow farmer movement of beans into processors along with an anticipated uptick in demand were the bullish features in the soya complex this week.  Potential trouble ahead for DDG exports has the soybean trade thinking more meal may have to get into that pipeline.

Of course, the trouble we’re referring to is China having issues with a particular unapproved GMO trait showing up in boats at their ports. The issue with boatloads of corn is old news.  A rumor that 50 containers of U.S. origin DDGs with the GMO trait have been rejected is the new wrinkle.  Could be that China is simply playing games and they’ll take the “tainted corn” after all.  Nearly every other country in the world does NOT have a problem with this particular trait.  But, the implications of less corn & DDG exports has the trade nervous.  China has bought approximately 150 million bushels of U.S. corn so far this crop year.  Over 100 million bushels of this amount has not yet shipped!

On top of the trouble with China, we’ve got the “stupid” proposal from a group of U.S. Senators called the “Corn Ethanol Mandate Elimination Act”.  Bob Dinneen, President and CEO of the Renewable Fuels Association (RFA), was recently quoted saying, “This is monumentally stupid. This legislation ought to be entitled ‘The Oil Monopoly Protection Act of 2013.’ This bill would deprive Americans of cost-saving, renewable fuel choice. It would set this country back in its quest to gain energy independence and further damage the environment by increasing the need for fracking, tar sands, and off-shore drilling.”

According to a recent report by the World Energy Outlook (an authoritative source of energy market analysis and projections) fossil fuel global consumption subsidies totaled nearly $650 billion in 2012! Ethanol subsidies are miniscule in comparison. The relentless attacks on corn-based ethanol are tiring.  However, if you are a corn producer you should probably do your part to keep the industry moving along.

For starters, if one of the following sponsors and co-sponsors of the new proposal are from your state….you should reach out to your Senator and try to educate them!

Dianne Feinsten (CA-D)

Tom Coburn (OK-R)

Kay Hagan (NC-D)

Richard Burr (NC-R)

Susan Collins (MA-R)

Pat Toomey (PA-R)

Jeff Flake (AZ-R)

Bob Corker (TN-R)

Jim Risch (ID-R)

Joe Manchin (WV-D)

You could also reach out to EPA or the White House or at least sign a petition. Here’s one place to start > http://www.fuelsamerica.org/

To read more about the ethanol industry’s response to the Feinsten-Coburn proposal, click on the link below.

http://domesticfuel.com/2013/12/12/anti-corn-ethanol-legislation-sparks-outrage/

That’s all for now. Let’s hope corn futures can get a correction rally going the start of next week.  For now, have a good weekend!

Futures trading may not be suitable for all investors. The trading offutures/options involves substantial risk of loss and you should fully understand those risks prior to trading. This material should be construed as the solicitation of an offer to sell or the solicitation of an offer to buy the derivative(s) noted in any jurisdiction where such an offer or solicitation would be legal. These materials have been created for a select group of individuals, and are intended to be presented with the proper context and guidance.  Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by AgriSource, Inc.

AgriSource, Inc. is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. It does not constitute an individualized recommendation, or take into account the particular trading objectives, financial situations, or needs of individual customers. Contact AgriSource, Inc. designated personnel for specific trading advice to meet your trading preferences or goals.

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Profit Watch Commentary – Nov. 22, 2013

The soybean market caught on fire today. January soybeans closed up 28 cents at $13.195, matching the previous high this month. New crop was up nearly 8 cents at $11.67. Unfortunately, corn and wheat failed to show up to the party. December corn settled slightly lower at $4.22. New crop corn was unchanged at $4.5775. December wheat closed slightly higher at $6.495. July wheat (vs Chicago) closed up 3 cents at $6.59.

Something really strange happened in the grain market this week – grain prices didn’t get beat up! Perhaps we have put in the seasonal low? Soybeans put in the best performance of the week with January futures gaining 39 cents. Wheat got in on the action, but with much smaller gains of a nickel. December corn futures were sharply unchanged.

Wall Street didn’t have a problem with gains this week, or for the past seven straight weeks if you care to count. Both the DJIA and S&P closed at record highs. The DJIA settled 55 points higher at 16,065. The S&P was up 9 at 1,805. 20,000 – here we come? Who would have ever thought that the Dow would be sitting at record highs with high unemployment, an out of control deficit and record entitlements? I guess when the government messes with the market (as in QE forever), all of the old rules and “logic” fall to the wayside.

Fresh news was noticeably absent this week. Next week will probably be worse with the holiday shortened week. We expect trading volume to be light, which could be a good thing (or not). We have our eye on additional soybean sales. But, we don’t have a specific target price for you tonight. At the very least, today’s rally is a great opportunity to catch-up on old crop soybeans.

Basis is starting to narrow as farmers remain tight holders of both corn and soybeans. The fact is that exporting companies HAVE to get their hands on beans to ship to China with their aggressive sales program. To date, we have already booked 90% of the USDA annual soybean export projections with 42 weeks left in the marketing year. The average for this time of year is 62 percent. Kicking butt, is putting it mildly.

The USDA announced an additional soybean sale this morning to China for 4.2 million bushels. The other day the market was nervous that China was nearly finished buying soybeans and may even cancel some cargos. Chatter today was the complete opposite! Now, the talk is that China will pay up for US beans to ensure timely delivery. Evidently there were 60 day loading delays in South America last year. China doesn’t want a repeat. Bottom line: China is going to do what is best for China and they aren’t going to advertise their plans. This is why the market is going to be on pins and needles the closer we get to the harvest in South America.

The corn market doesn’t rely on exports as much as the soybean market. It is important, but we have other uses for corn like feed and ethanol. Exports were pretty pathetic last year. We expected a better program this year, and so far we are not disappointed. To date, we have 69% of the USDA corn export projections on the books. The average for this time of the year is 49 percent. Our competition is the Black Sea and South America. They typically undercut us on price. We haven’t noticed the competition in the last few years due to the increase in ethanol production. However, with increasing acreage, bigger carryouts and the anti-ethanol sentiment, we need to beef up our export share.

Futures trading may not be suitable for all investors. The trading of futures/options involves substantial risk of loss and you should fully understand those risks prior to trading. This material should be construed as the solicitation of an offer to sell or the solicitation of an offer to buy the derivative(s) noted in any jurisdiction where such an offer or solicitation would be legal. These materials have been created for a select group of individuals, and are intended to be presented with the proper context and guidance. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by AgriSource, Inc.

AgriSource, Inc. is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. It does not constitute an individualized recommendation, or take into account the particular trading objectives, financial situations, or needs of individual customers. Contact AgriSource, Inc. designated personnel for specific trading advice to meet your trading preferences or goals.

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Profit Watch Commentary – Nov. 15, 2013

Ouch!  Soybeans got smacked today.  A disappointing weekly sales figure from USDA for soybeans and soybean oil greeted the trade first thing this morning.  Then, Informa reminded the world that U.S. producers are likely to plant a record number of soybean acres next year.  Finally, the EPA rolled out some negative news late in the session.  A proposed cut in the RFS mandate for bio-diesel hit the soybean market hard in the closing minutes.  The January bean contract was down more than 35 cents at the low of the day.  March corn was down 6 1/2 cents at the low as the news was bearish for ethanol as well.

Rumors have been swirling for at least a week that the EPA was going to make a major announcement about the Renewable Fuels Standard.  They did in fact roll out a proposal about 15 minutes before the session ended that (if approved) will slash 2014 biofuel requirements by 16%.  Big Oil got what they wanted in the proposal. It’s the same proposal that was leaked last month that also spooked the marketplace.  They say it’s all about the “blend wall”.  In effect, the refiners are saying that the RFS requirement will require the use of more ethanol than can be blended into gasoline at the 10% level.  And, that if it’s left in place it will force refiners to export more fuel or produce less gasoline, leading to shortages and higher prices at the pump.  Seems to us that a logical fix would be to blend 15% ethanol into the gasoline supply.   But, that’s another fight and another argument for another day.

It’s hard to say at this point if there’s more downside in corn and soybean prices due to this development.  The EPA stated that these are proposals only.  A 60-day comment period will be opened up soon for the pros and cons to be forwarded for review.  The EPA says it will likely be next spring before the new minimum requirements are instituted.  It should also be pointed out that the levels we’re referring to here are MINIMUMS only.  Ethanol production has exceeded these RFS mandated levels in 6 of the past 7 years.  That being said, we are concerned that some in the trade (the funds, weak longs and perhaps farmers) will view this development as a “tipping point”.  Last week’s low of $4.15 1/2 could be a target to start next week.  The bears will be gunning for it and the bulls may want to test it for signs of stability.

Weekly export sales were announced this morning.  The corn number at 47 million bushels was well above expectations and puts sales to date at DOUBLE the amount we had on the books a year ago this time. The sales figure for soybean meal was about as expected.  Everything else was under expectations.

Trade Range of Estimates       This week           Last Week

Corn         31 – 39  mln bu          47.4 mln bu         67.7 mln bu

Beans        33 – 44  mln bu          31.2 mln bu         37.4 mln bu

Wheat        13 – 20  mln bu          10.6 mln bu         15.3 mln bu

Meal        200 – 350(000) tonnes    283,200 tonnes      287,800 tonnes

Oil          25 – 50 (000) tonnes      7,200 tonnes       65,900 tonnes

See below for the Informa planted acreage numbers released this morning. Their corn and soybean acres were trimmed just slightly from last month.  They now see 3.9 million less corn, 1.2 million more wheat and a whopping 7.4 million more beans.  Informa did not update their yield and production numbers.  However, we’ve posted their numbers from last month and the latest estimates from USDA for this year’s crops.

Total Production     Planted Acres       Yield

INFM Oct 2014 Corn   13.692 bln bu       91.7 mln acres      163.0 bpa

INFM Nov 2014 Corn                       91.5 mln acres

USDA Nov 2013 Corn   13.989 bln bu       95.4 mln acres      160.4 bpa

INFM Oct 2014 Beans   3.684 bln bu       83.9 mln acres       44.5 bpa

INFM Nov 2014 Beans                      83.8 mln acres

USDA Nov 2013 Beans   3.258 bln bu       76.5 mln acres       43.0 bpa

Here’s a quick snapshot of corn basis bids as of this afternoon.  The first four bids are processor bids across the Corn Belt.  Of course, the New Orleans bid is at the Gulf of Mexico.  The landscape has sure changed.  It’s hard to believe that the best bid in the Corn Belt the month of November is at a land-locked location in NC Iowa. A brand new 150,000/day Cargill ethanol facility that’s opened right across the road from a 100,000/day VeraSun ethanol facility has created a “black hole” of demand.

Blair, NE    Ft Dodge, IA    Decatur, IL    Lafayette, IN    New Orleans, LA

+ 5            +35            +10             -10               +85

That’s all for now.  Have a great weekend!

CBOT  Closes                  Today    Wkly Chg      Yearly Highs

Dec 13 Corn   $ 4.22         -  4 1/2   -   4 3/4    $ 6.05

May 14 Corn   $ 4.30 1/2     -  6       -   8          $ 6.14

Jul 14 Corn   $ 4.45 3/4     -  6 1/2   -   8          $ 6.21

Dec 14 Corn   $ 4.59 3/4     -  6 3/4   -   8 3/4    $ 5.87 3/4

Dec 15 Corn   $ 4.76 1/4     -  7       -   5 1/2      $ 5.68 3/4

Jan 14 Beans  $12.80 1/2     - 33       -  15 1/2     $14.06

Mar 14 Beans  $12.65 3/4     - 31 3/4   -  11         $13.77 3/4

Jul 14 Beans  $12.45         - 30 3/4   -   8 1/4     $13.50 3/4

Nov 14 Beans  $11.53 1/2     - 23 1/2   -   7 1/2     $13.15

Nov 15 Beans  $11.45         - 23 1/2   -  10 1/4     $12.71 1/2

Dec 13 Wheat  $ 6.44 1/2     -    1/4   -   5 1/4     $ 8.34 1/2

Mar 14 Wheat  $ 6.54 1/2     -    3/4   -   7         $ 8.45

Jul 14 Wheat  $ 6.55 3/4     -  3 1/2   -  12 3/4     $ 8.22 1/4

KCBT Closes

Dec 13 Wheat  $ 6.98 1/4     -  4 3/4   -  10 1/4     $ 8.90

Mar 14 Wheat  $ 7.00 1/4     -  4 1/2   -  11         $ 8.90 1/2

Jul 14 Wheat  $ 6.90 3/4     -  6       -  15 3/4     $ 8.39

MPLS Close

Dec 13 Wheat  $ 6.96 3/4     -  3 1/4   -  11 1/4     $ 9.03 1/4

Mar 14 Wheat  $ 7.06 1/2     -  3 1/2   -  13         $ 9.06 1/2

Jul 14 Wheat  $ 7.21 1/4     -  1 3/4   -  11 1/2     $ 8.90

Futures trading may not be suitable for all investors. The trading of

futures/options involves substantial risk of loss and you should fully

understand those risks prior to trading. This material should be construed as

the solicitation of an offer to sell or the solicitation of an offer to buy

the derivative(s) noted in any jurisdiction where such an offer or

solicitation would be legal. These materials have been created for a select

group of individuals, and are intended to be presented with the proper context

and guidance.  Information contained herein was obtained from sources believed

to be reliable, but is not guaranteed as to its accuracy. These materials

represent the opinions and viewpoints of the author, and do not necessarily

reflect the viewpoints and trading strategies employed by AgriSource, Inc.

AgriSource, Inc. is not responsible for any redistribution of this material by

third parties, or any trading decisions taken by persons not intended to view

this material. It does not constitute an individualized recommendation, or

take into account the particular trading objectives, financial situations, or

needs of individual customers. Contact AgriSource, Inc. designated personnel

for specific trading advice to meet your trading preferences or goals.

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Profit Watch Commentary – Nov. 8, 2013

Whew! The report is out of the way. And, more importantly, it was a great ending to a loooong week. December corn closed 6 cents higher at $4.2675, and posted a key reversal in the process. January soybeans settled nearly 30 cents higher at $12.96. December wheat was 3 cents lower and finished the day near $6.50. For the week, December corn gained a mere penny, January soybean netted 44 cents and Chicago wheat fell 18 cents.

We were happy with today’s rally, but we are thinking the boys on Wall Street are feeling even better. The DOW finished up 168 points to close at a record 15,762 points. It is the 5th straight weekly gain for both the DOW and S&P 500.  The Labor Dept reported that we added about twice as many jobs in October as Wall Street expected. Some analysts felt the jobs numbers were shaky (or will be revised later), but they were obviously overruled. In addition, the labor participation rate dropped to 62.8%, the lowest since March 1978. Logic would suggest that fewer workers is a bad thing. We would be wrong. Another 720,000 people dropped out of the workforce this month and Wall Street goes wild. Hello? Is anyone paying attention?  We wouldn’t make such a big deal about the rally on Wall Street, but it impacts agriculture. The “positive” jobs number (if that is what you want to call it) is the reason the dollar rallied. A strong dollar makes our commodities more expensive to the world. Big supplies require big demand to keep balances in check. That could be a problem, if the dollar keeps marching higher.

Well, Uncle Sam was all about “big” today. According to the USDA, we have both BIG crops and BIG demand. In a nutshell, yields were near the trade’s expectations, but the acreage decreased more than anticipated. The USDA also increased demand more than the trade expected, thereby resulting in a smaller carryout.
Mind you, the carryout is still very large for corn at 1.887 bln bushels versus last year’s carryout of 824 million. The excitement today was that the carryout wasn’t over 2 billion. The soybean carryout is a different story. After last year’s drought, we were left with 141 million bushels of soybeans at the end of August. Today, the USDA is projecting a carryout of 170 million. Demand is that good. Prices will have to ration demand, at least until South America’s crop is made. Trader’s that were once demand-doubters have found religion.

This crop year is one for the record books. 16 states either tied or broke their previous corn yield record. Seven states posted new record soybean yields. We have a record supply of corn to be stored this Fall. We established a record plant population in corn and a new record pod weight in soybeans. Notice that all of the records are on the supply side of the equation. Although current demand is not breaking any records, it has snapped back faster than most thought possible after last year’s high prices.  There was a lot of information in today’s report, and we will try not to bore you with too many details.

CORN

The USDA increased the corn yield from 155.3 bpa in September to 160.4. The planted and harvested acres were lowered near 2 million. Given that adjustment, the production came in just slightly under 14 billion at 13.989 billion. On the demand side, feed usage increased 100 mln, exports up 175 mln and ethanol steady. Exports are nearly double last year, and it was the largest Sep-Nov move in 22 years. The USDA increased yields in Illinois +15, Iowa +7, Indiana +9 and Nebraska +5. Yields were up on average 3.2 bpa in the WCB and 8.7 bpa in the ECB. Record yields for all ECB states except Wisconsin. IL and WI were right at record, IN 3 bushels above old record. Planted corn acres were down 880,000 in the WCB, with harvested acres down 870,000. More specifically, every state was lower except South Dakota. Heavy hitters such as Iowa was down 400,000 acres and Minnesota dropped 100,000. The USDA lowered planted acres in the ECB 600,000 and harvested acres 530,000. Acreage was also lowered in the Midsouth and East/Southeast states. Record yields reported in every state but Texas and South Carolina.

SOYBEANS
The USDA increased yield 1.8 bpa to 43 bpa. Acreage was lowered 700,000. Evidently the special survey the USDA took in late summer caught most of the acreage revisions. Total production was slightly under the average trade guess at 3.258 billion. The USDA was somewhat aggressive on demand to the surprise of many. Uncle Sam increased crush 30 mbu and exports 80 million. Carryout increased 20 million from September to 170 million, in line with the trade estimate.
The USDA left soybean production unchanged for Brazil and Argentina. However, if realized, those two countries would combine for 141.5 MMT in production versus 130.7 this past year. More competition. The USDA increased yields by 2 bushels in Iowa and Indiana, +3 in Illinois and +5 in both Nebraska and South Dakota. Ohio tied its record yield. Most of the record yields were in the Midsouth and E/Southeast states. Acreage fell 300,000 in the WCB. Of note, Iowa dropped 200,000 acres with North Dakota adding 250,000. The ECB acres were lowered 200,000. Historically, if the USDA increases yield from the September to November reports, they also increase yield from the November to January reports. That isn’t what you wanted to hear, but it is reality. It is also a reason to hold onto the Put position for a bit longer. Technically, prices finished on a strong note. The funds are holding a near record short position in corn, and a large long position in soybeans. We could get some more mileage out of this report next week. It appears $4.40 December is a target, and $13 -13.50 January soybeans. We will most likely suggest sales at these levels. We will also start pushing 2014 a bit more aggressively.

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Profit Watch Commentary – Nov. 1, 2013

Prices finished the week off on a poor note. Soybeans and wheat took the worst beating this week.November soybeans lost 34 cents and December wheat fell 23 cents.  December corn fell 12.75 cents lower, but it has been in a funk for some time.  Today, December futures carved out a fresh low of $4.2575. The fundsare holding onto a record short in corn, so perhaps we are nearing the bottom.  If you want some good news, get off LaSalle street and head over to Wall Street.  The DOW was up 70 points today and closed at 15,616. Unbelievable.

The S&P is also going up like gangbusters. The dollar has also taken off, but that isn’t good news for ag.  A stronger dollar makes our goods more expensive to buy. We are not surprised to see prices drift lower this harvest. Producers, in general, are pleasantly surprised with yields this year.  Evidently the cooler temps played a much greater (and beneficial) role in production versus the lack of moisture.  We should have a decent handle on bean yields as harvest is nearly complete.  Traders are guessing bean harvest will be 85-90% complete by Monday.  Corn harvest is probably 70-75% complete. The weather forecast is a mixed bag, so harvest pace will likely be slow going forward. The USDA will release production estimates next Friday. The market is more anxious than usual about next week’s report.  In the meantime, we will be entertained by private guesses.

Today, two well-recognized firms released their estimates.  Their estimates exceeded USDA’s September estimates in both corn and soybeans. Larger estimates were one of the reasons prices fell today. Ironically, Informa and FC Stone published identical corn yields of 161.2 bpa.  Informa has factored in record corn yields for IN/OH/MI.  FC Stone expects the same records with IL added to the list. On average, Informa and Stone increased the Iowa yield 3 bpa, Minnesota +1.5 bpa and Nebraska +6 bpa. In the last 33 years, the USDA has increased yield estimates from September to November 61% of the time.  The largest increase came in the record breaking years of 1994 and 2004. (See below for a summary of estimates.) Thus, the odds are HIGH that yield will increase.  How much the USDA will offset yield with an acreage revision will be key.  Informa bumped their soybean estimate significantly to 43.3 bpa.  FC Stone also put out a healthy 42.8 bpa estimate.  Wow. Late plantings didn’t mean a thing? Informa thinks Ohio will set a new record this year.  FC Stone thinks IL, OH and MI will set new records.  The odds of the USDA increasing bean yields from Sep to Nov is 55% in the past 33 years.  Once again, what will the USDA change in acreage versus yield?

 
Corn                Informa    FC Stone    USDA
November yld est     161.2      161.2      ???
November prodn est  14.223     14.367      ???
Prior yld est        158.8      158.7     155.3
Prior prodn est     14.010     14.150    13.843
Soybeans
November yld est      43.3       42.8      ???
November prodn est   3.298      3.270      ???
Prior yld est         41.7       41.4      41.2
Prior prodn est      3.176      3.163     3.149
Crop Insurance Prices (Unofficial)
Corn     $ 4.39     $ 5.65 Spring
Soybeans $12.87     $12.87 Spring

Have a Great Weekend.

CBOT  Closes                  Today    Wkly Chg      Yearly Highs

Dec 13 Corn          $ 4.27 1/4     -  1          -  12 3/4    $ 6.05
May 14 Corn        $ 4.37 1/2     -  1 3/4   -  14 1/2     $ 6.14
Jul 14 Corn          $ 4.52 1/4     -  2          -  16            $ 6.21Dec 14
Corn                     $ 4.66 3/4     -  2 3/4   -  16           $ 5.87 3/4
Dec 15 Corn        $ 4.82 3/4     -  1 1/2   -  13 1/2     $ 5.68 3/4
Nov 13 Beans     $12.66          – 14 1/4    -  34           $14.09 1/2
Jan 14 Beans     $12.51 1/2     – 14 3/4   -  42           $14.06
Mar 14 Beans    $12.37          – 13 1/4     -  35           $13.77 3/4
Jul 14 Beans      $12.24 1/2     – 10 1/4   -  25 1/4   $13.50 3/4
Nov 14 Beans    $11.45 3/4     – 12 1/2   -  19 1/4    $13.15
Nov 15 Beans    $11.41 3/4     – 10 1/4   -  20           $12.71 1/2
Dec 13 Wheat    $ 6.67 3/4     +    1/4   -  23           $ 8.34 1/2
Mar 14 Wheat    $ 6.79 3/4     +    1/4   -  22           $ 8.45
Jul 14 Wheat     $ 6.84 3/4     +  1 1/4   -  16 3/4    $ 8.22 1/4

KCBT Closes

Dec 13 Wheat   $ 7.33 1/2     -  7         -  25 1/2    $ 8.90
Mar 14 Wheat   $ 7.36            -  6 1/4   -  23           $ 8.90 1/2
Jul 14 Wheat    $ 7.22 3/4     -    1/4   -  14 1/4    $ 8.39

MPLS Close

Dec 13 Wheat   $ 7.25 1/2     -  4 3/4   -  19 1/2   $ 9.03 1/4
Mar 14 Wheat  $ 7.37            -  4            -  18         $ 9.06 1/2
Jul 14 Wheat    $ 7.48 1/2    -  1 3/4   -  16            $ 8.90

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Financial Planning

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Invest in Farmland using your IRA

If you are looking for a strategy to diversify your retirement funds consider farmland – a proven investment that compares favorably with equities with the benefits of cash flow, as well as, capital appreciation.  Generally, earnings in an IRA account are exempt from taxes – except in the case of debt-financed rental property and also operations that are classified as a trade or business activity.  Careful planning is needed but including real estate, especially farmland, in your retirement portfolio is gaining in popularity.

Posted in Farmland Investments | Leave a comment

Short-Dated New Crop Options

A new, cost-effective alternative to traditional options, short-dated new crop options expire much earlier, resulting in premiums that are lower because of the reduced time value.  The three contract months are May, July, and September with corn options using the underlying December contract and soybean options using the underlying November contract.  Perhaps one of the biggest benefits to using these new options is the ability to trade high impact events, such as USDA reports or a dramatic change in the weather outlook.

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