Afternoon Recap News by Arlan Suderman ( Tuesday 07/17/2012 ).

Discussion in 'Commodity Futures' started by kanellop, Jul 18, 2012.

  1. kanellop

    kanellop

    Hello Again to All.

    Exist some very serious and considering News in the last Afternoon ( 07/17/2012 ) Recap News by Arlan Suderman here:

    http://farmprogress.com/wallaces-farmer/story.aspx/afternoon-recap-arlan-suderman-22-30795 .

    Here some Comments for Corn:

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    Corn prices pushed sharply higher overnight, before riding a roller coaster to a soft finish as traders book profits on this summer's big price gains. This has been the pattern of late, with prices consolidating mid-week after big gains on Sunday night and Monday.

    USDA reports that 71% of the nation's corn crop is silking and 12% is in the dough stage, up from the five-year average pace of 36% and 4% respectively. This week's crop rates a condition index score of 281 (500=perfect crop & 100=total failure), down from 304 the previous week and down from 367 the previous year. The 10-year average index for this week is 368.

    The 1988 crop rated a condition index score of 252. The current rate of decline combined with the weather forecast for this week suggests that this year's crop rating will fall below the 1988 score by next week. The Farm Futures yield model puts the crop at 128.8 bushels per acre within a range of 126.6 to 131, based on this week's ratings.

    Producers harvested 85.5% of planted acres in 1988, with a similar proportion harvested in 1983. USDA still has this year's harvested acres at 92.2%, or the fourth highest percent on record. Dropping that percentage to '88 levels would mean harvesting 82.4 million acres, down from the current estimate of 88.9 million. Using a yield of 130 bushels per acre, producers would harvest a crop of 10.7 billion bushels, down 4 billion from USDA's June estimate.

    USDA has already assumed rationing of 1 billion bushels of demand in last week's crop report. High prices are currently rationing demand, slowing livestock, exports and ethanol consumption. However, we have not yet slowed demand enough to account for a drop in production of 4 billion bushels. That doesn't mean that we would have to ration demand by 4 billion bushels, but we'd have to ration demand at 2.5 to 3.0 billion bushels. That should argue for higher prices in the days/weeks ahead.

    September corn reached a high of $7.96-1/2 on Monday evening, down 3-1/4 cents from the all-time high for a lead contract set in 2008. That becomes the next objective for traders. We're beginning to see September gain value versus the December contract as old-crop stocks tighten and prospects for the early-harvested 2012 crop shrink.

    I also need to correct something that I previously said. I had indicated in comments that crop revenue insurance harvest option carried a $2 limit to gains. I failed to acknowledge a change in the program that actually doubles the spring guarantee. Work with your crop insurance agent to determine your protection level.

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    Here are some Comments for Soybeans:

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    Soybean prices followed a similar pattern to corn, with a bit more weakness at times due to the massive positions in the oilseed already held by speculative fund managers. The lead August contract is well-established above $16, but the new-crop November contract remains unable to match the feat.

    USDA reports that 66% of the crop is blooming, with 16% setting pods, above the five-year average pace for the week of 42% and 9% respectively. The crop rates a condition index score of 298 this week, up from 309 the previous week, up from 364 the previous year and above the 10-year average for the week of 359. The 1988 crop registered a score of 286 at this point in the growing season. This year's crop is on pace to drop below 1988 levels by next week if the weather pattern holds through the week.

    Traders used showers in the forecast as an excuse to take profits today, but losses were minimal. The models were showing the possibility of 0.20 to 0.60" rains, which would do little to change the current status of the crop. Yet, it made for a nice excuse to pocket some profits, although few traders wanted to hold short (sold) positions as crop ratings decline.

    Farm Futures yield model pegs the crop at 37.8 bushels per acre, down another 1.3 bushels on the week and below USDA's latest estimate of 40.5 bushels per acre. USDA's balance sheet already reflects expectations that the market will 250 million bushels of demand. We'll probably have to double that, but unfortunately, crush and export data indicates that $16 prices still haven't even started the rationing yet.

    It's safe to say that this year's losses have exceeded the trade's expectations, while the strength in demand has done so as well. Continuing this weather pattern for a few more weeks could be devastating for the crop, with much higher prices likely needed to ration demand.

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    Kind Regards,

    Goerge Kanellopoulos.