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Recovery after $1 loss?
Soybean prices dropped $1 last week in a washout-type trade, as everyone seemed
bullish soybeans due to late planting/late crop development. The market taught
bulls a lesson last week, and now that the medicine was dealt out last week, the
market is stabilizing and even rallying some this week. It's possible we could
even gain back 50c of the loss before we resume the downtrend!
There is some discussion for the 2009 crop year that yields might be reduced by
USDA in Friday's report, contrary to what most analysts (including Pro Ag) are
suspecting will happen. In fact, tomorrow a press release will be provided from
a satellite imagery company that believes the crop is smaller than the August
report numbers - and it may be considered bullish (especially in soybeans) if
people believe the numbers. The thought process behind it is that with late
planting and a cool summer, there just wasn't enough time/light to produce a
bumper crop of soybeans or corn. Therefore, yields won't be like 2004 or 1994,
both cool years that produced record shattering crops.
It would be nice to get a good bounce during the uncertainty over crop sizes, as
still the debate is healthy regarding what the final crop size will be. And
just when the crop size is questioned the most and the market bounces back the
most from that inquiry - that's when we'll have a chance to hedge it again!
Frost is still a topic of conversation if you look at crop maturity, and this is
more of an issue for corn than soybeans. Soybeans are behind in maturity, but
not by much. In a few weeks or at normal frost time, most soybeans will be safe
from freeze risk and we don't have to worry about soybean losses anymore. But
corn could be a different story, as it might take until mid October to make
grain for some areas.
Pro Ag is especially worried about corn, as we could easily lose 2-4 bu/acre
from a normal frost date for the Corn Belt, and an early frost would present
even more problems. For now, the forecast does not yet include frost in it for
any major growing areas, but things can quickly change at this time of year.
While we are not very bearish for now, eventually we do foresee a slide in grain
prices (maybe even later this week) into harvest time, with some price pressure
still expected in the coming few months. Lets hope the market can rally this
week to give us yet another chance to get short again!
ACRE Signup Percentages Small
Signup for the ACRE program seems smaller than expected, with many shunning the
new program even though it seemed to make sense for most corn/soybean producers.
Preliminary indications of 10-20% signup in MN, ND, SD, and MT seem small by the
numbers we would have expected. A couple reasons why it might be so small:
1) Wheat and barley producers were reluctant to signup given their expected
big crop yield in 2009. So far, the growers who didn't sign up may be OK
as an LDP has been generated for barley and durum growers in recent weeks,
and HRS wheat isn't far away. With large yields (2 crops in one year???)
and no potential loss in ACRE, having LDP eligibility might be well worth
the wait until next year.
2) MN and IA producers might be expecting big corn yields. If they remain
frost free a few more weeks, they might be right!
3) Corn and soybean yield potential has been expanding as we finish out the
growing season. When frost hits, it'll likely drop but for now we are
sitting on 165 bu corn crops and 45 bu soybean crops. We can take some
frost, and still have a big national crop yield.
4) Paperwork requirement. Some people just said no due to the paperwork
required to get into ACRE (proving yields, etc).
Pro Ag still thinks ND corn and soybean producers might be better off in ACRE,
as its likely a lot of crop will be lost to frost, even on a normal frost date.
But it is somewhat surprising that more growers didn't sign up.
The information contained, while not guaranteed as to accuracy or
completeness, has been obtained from sources we believe to be
reliable. The opinions and recommendations contained are based on
our judgment and do not guarantee that profits will be achieved
or that losses will not be incurred. Recommendations should not
be construed as an offer to buy or sell commodities. There is
substantial risk of loss in trading futures and options on
If you have questions about this column, call Progressive Ag at 1-800-450-1404,
or email ray at email@example.com.
Soybean prices dropped $1 last week in a washout-type trade, as everyone seemed bullish soybeans due to late planting/late crop development. The market taught bulls a lesson last week, and now that the medicine was dealt out last week, the market is stabilizing and even rallying some this week. It's possible we could even gain back 50c of the loss before we resume the downtrend!