August 15, 2011
By: Craig Haugaard, Grain Origination Manager
My son, Captain Craig Haugaard, and the men of Apache Troop came home from their deployment on Saturday so I drove down to Ft. Hood, Texas to welcome him home. After seeing the drought through Kansas, Oklahoma and Texas I have my bull horns strapped on this morning. I also had a lot of time to listen to the radio and in doing so learned about a group that I never knew existed. NAAFA, which stands for National Association to Advance Fat Acceptance. Crap, I can’t even type that without laughing. Anyway, apparently a life time of poor diet and lack of exercise qualifies me to be a member of a “non-profit civil rights organization dedicated to ending size discrimination in all of its forms.” Also, I learned I am not fat, I am practicing size diversity. They have a national convention coming up and the speakers didn’t excite me but the buffet looks like it will be freakin awesome. Anyway, I just thought that those of you out there that have, like me, put on more pounds than you would like over the years would like to know that we have a group fighting for our rights and someday soon we may be recognized as a protected group. What a country. Now I am just going to sit here and sing “We shall overcome…”
CORN: 4 higher
On my drive down I stopped in a café in Itasca, TX and ended up visiting with a couple of local farmers. They have had almost no rain in that area since last fall. The winter wheat crop in that area came in at about 60 bu/acre and was good quality while the recently harvested corn crop ran at 20 bu/acre. The milo crop was also a disaster and they thought cotton would be about 15% of normal. As I look at the trading environment in which we are now operating it would seem to me that we are in a situation where some price rationing is going to need to occur in the coming months. At the same time I believe you are going to see the market try and buy in more acres for next year. This should keep prices at a fairly elevated level, so while we probably won’t see a run up like we had last winter we also won’t see a market correction like we saw in 2008.
Technically, all of my indicators have turned bullish. In the December futures keep an eye on the $7.22 ¾ level as that may prove to be a strong resistance point.
SOYBEANS: 10 higher
At the end of the day with the USDA giving us a smaller crop and tightening carry-out it is going to make what happens in South America even more important. We are sitting here with the 2nd tightest soybean supply/demand ratio in the history of the Western Hemisphere. A large South American crop can ease that for a bit but as we look at the pace at which soybean demand around the world continues to ratchet up it looks as if the demand for more acres will continue. If we assume that most of those acres will come from South America then we will need them to keep increasing their bean acres by 5% a year for the foreseeable future. If I am doing my math correctly that means they will have to bring in another 6 million acres of production year after year after year. The other alternative is to kill demand and that would appear to take prices much higher than the current levels. This should be a fun multi-year ride. For now I look for this market to work its way back and test the upper end of the current trading range ($14.11 in the November futures.)
WHEAT: 9 higher
The folks in Texas that I visited with told me that if they don’t get some rain there will be a lot of folks that are not going to put winter wheat seed in the soil. That, of course is a developing fear in the trade as this drought continues to hang on. This could be a major story in the wheat market before it is all said and done. The other story will be the large amount of wheat feeding this year which will help to pull down the stocks. With wheat being seen more and more as a feed grain look for the direction of this market to be determined in part by the price direction of corn. At the present time my technical indicators are all bullish.
The information contained above was taken from sources which Wheat Growers believe to be reliable, but is not guaranteed by Wheat Growers as to accuracy or completeness and is made available for information purposes only. There is a risk of loss when trading commodity futures and options.