Ray Grabanski: Bam! Boom! Bull Market!
Football fans are almost unanimous in their glowing praise of commentator John Madden for his ability to take complicated things and explain them in simple terms to football fans. As John Madden would describe grain markets today so simply and beautifully, "Bam! Boom! All of a sudden we had a bull market!"
It is that simple. Nothing has changed in the yield prospects of the crop - no changes in fundamentals from a week ago, when prices were $1.50 lower beans and $.50 lower corn. The growing season didn't make an about face in weather, or crop yield prospects of HRS wheat, corn, or soybeans.
Exports didn't all of a sudden change, Russia didn't start buying grain in bunches, and neither did China. Ethanol plants didn't explode in their development, and livestock producers didn't expand due to high profitability in their sector.
The only thing that may have changed was the realization by fund traders and hedge fund managers that the DOW wasn't going down anytime soon. In fact, by breaking above 9000 it looks like it just might stay there - and with it crude oil might not decline from $70. In fact, it might even go higher. And all of a sudden, you could almost hear the brains click in that if crude went from $32 in March to $70 and stayed their to today, that maybe corn and soybeans could go higher as well??? Especially after dropping sharply from June into July, at the same time that the DOW rallied, crude oil remained high, and the dollar made new recent lows.
This rally is not related to production or supply cutbacks which is typical during the summer months. Instead, this one is related to outside markets, and how well they have held up after the world seemed like it was ending last March. And in a few short days, "Bam! Boom! A bull market!"
It makes you wonder just how long this rally can be sustained, and just how explosive it could be if ethanol were to start expanding again, and if the DOW breaks 10,000, or if a drought actually does develop during August (or any other crop problem for that matter - maybe an early frost?).
Go grains! And may the inflation force be with you!
More and more details are coming out of the ACRE program as signup nears an end. Pro Ag is becoming more and more convinced that ND producers should make sure they sign up farms with corn planted or prevented planted in them. From all indications, ND could have some serious problems with production in 2009 as late planting and a season void of growing degrees will present a huge risk this fall. The cheapest $108 of frost insurance will come from the ACRE program. It is very possible that with an early frost the full eligible $108 could be paid from USDA coffers for the corn ACRE program. Make sure you closely examine this issue, as we can see some real potential here.
A San Francisco company is offering frost protection for northern producers that looks very promising for all crops, including dry beans, sunflowers, corn, and soybeans. You simply buy insurance for the first 32 degree, 30 degree, or 28 degree day (you pick the temp) for a weather station near you, and it pays based on the date of the first temp frost. You can buy from $75 to $100/acre, and you pick the days you want to protect and the company calculates a premium due. If you have a lot at risk for this frost date, it is worth checking out. If you have questions, feel free to call our office at 1-800-450-1404. If nothing else, it is very interesting to see how premiums are calculated, and you can see the risk the company feels is there for a chance of an early frost.