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Farmers stuck with report-Roy Smith

07/01/2011 @ 1:47pm

The crop report that was released Thursday was a real shocker. Stocks and planted acres of the three major grains all were bearish when the results were known. In these reports, the final numbers are not as important as how those numbers compare to what the trade thought they would be. Response to the surprising report was that corn and Chicago wheat futures contracts were limit down at the close. The one saving grace is that July corn futures had no trading limit today, so we did not have to guess what the theoretical price would have been. When the dust settled the contract was 69 cents lower. 

Already, I have read comments that the numbers are wrong, that USDA is not taking into account all of the cropping problems that already have affected production potential. USDA even admitted it would be resampling four of the states hardest hit by bad planting weather. It is easy to rationalize that production will not be as great as the numbers on the report indicate. Regardless of how accurate yesterday’s numbers appear to those of us in the country, we are stuck with the report and its affect on prices until the next report. 

In 43 years of farming, I have survived many government reports. Farmers and grain traders usually anticipate that the report will report bullish news. Many times just the opposite happens. It is almost impossible to gauge inventories or production potential from the perspective of our individual farming operations. I only have to think back to 2008 when I traveled through Eastern Iowa the last week of June and saw the flooding devastation. I was so bullish it was scary. A few days later a government crop report was released telling that the damage was not as bad as I had judged. Grain prices dropped for months following that report. 

The long term seasonal charts do not offer a lot of consolation to those with hopes of higher prices. The Fourth of July weekend is a turning point in a lot of years. This year that may mean we have seen the last of a long uptrend in corn prices. There is always the possibility of some cropping problem turning up later in the summer that will bring a short covering rally. There is typically a 37 or 50 percent retracement after a sharp sell off such as we are now experiencing. In the soybean market, there is hope of a rally induced by fears of an early, killing frost. Also in the soybean market there is the hope that the 'dead cat bounce', following harvest, will be as good as last year.   

Yesterday morning, I scouted the soybeans I planted on the Missouri River bottom. Two small fields of 19 and 13 acres respectively are all that I farm on the flood plain. The 13 acre field has been a total loss for a week. The other field is somewhat higher in elevation. I thought it was high enough I would never experience high water on that piece. However, the river was up six inches over night Wednesday. Turn rows along the creek are under water now. On my way to scout fields. I saw a duck walking down the road headed for high ground. What does that mean for me? Maybe the duck knows something we farmers do not. At least he was headed the right direction!

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