Weekly Market Comments: 7/21/10
There is a Reason: Rain Makes Grain Last week's newsletter received some wrathful comments from readers who are Nebraska corn producers. They cannot fathom bearish market opinions when they have corn standing in water stunted and yellow. Those on sandy hills and high ground are projecting historical yields. When there is drought in July we do not hear these counter opinions. This week's USDA Crop Progress Report showed improvement in corn in six states and decline in eleven. Heat has helped the wet, western states but stressed the dry, eastern states. With a 70%+ good/excellent rating, don't expect to see yields below 160BPA yet.
In late April, we abandoned predictions of lower prices in anticipation of dry weather then we twittered our way through 60 days of stagnant price action with no excess heat. Those predictions may have been right for the wrong reasons. Afterward, the June 30th USDA Stocks Report launched ten days of 60¢ gains.
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Our Bailiwick
As a fundamental (supply/demand) focused firm, we recognize that single focus mercantile factors are not realistic in this news environment. Our desire is to provide an overview. Now on the down-hill slide of July, we are taking volatility out of the market daily and starting to discount the unknown crop concerns. Surely, there can be an event that will hiccup producers back to $4.10 versus December corn futures, but this may be a "wish & hope". Prior to the Earl Butz era, factors connected to "outside" markets such as currency, crude oil and metals were important. Hedge funds did not exist, and we did not start our morning opening commentaries based on such "extraneous" morsels in the middle of the harvest.  Milling and Baking presented a refreshing example of what the price challenge should be for those of us in the cash trade. The latest edition included, "Farmers Plant the Smallest Area to Wheat Since 1971." This read bullish, but at the bottom of the same page the headline following the recent USDA stocks report reads, "Wheat Carryover a Twenty Year High at 973 million bushels," which reads bearish.
There is something redeeming about being on the wrong side of this buy or sell "economic" conclusion when compared to being broadsided by analysts' reports of fund buying and selling.
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Your Feedback for the CFTC
 The CFTC's upcoming Agricultural Advisory Committee will be meeting on August 5th to discuss the issue of wheat conversion (or lack of) as delivery month approaches. We welcome the opportunity to present the price risk concerns that affect your bottom line before this regulatory agency.
Please send comments to ehicks@cfosystemsllc.com.
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