Thoughts on 2010 Wheat Fungicide Research

Pat Boren
CPS Tangent


Joe Cacka, the agronomist for Crop Production Services recently released data from his research in 2010.  While reviewing his data I was very interested in a wheat trial in the Tangent area.   The purpose of the trial was to evaluate the impact of different fungicides applied at the early flag leaf stage.  2010 was a severe year for disease problems in wheat and that point was made dramatically clear when I saw the results of Joe’s trial.  The take home message is that the untreated plot yielded an average of 37% less than treated plots.  The grower’s field was treated twice with a fungicide and the difference was  even greater!   Do the math at current wheat prices!

Grain Market Report 25Feb2011

Tanner Sheahan
CPS Tangent

Snow!  This area comes to grinding halt when our precipitation comes in solid form but it's a nice change from the norm.  Drive safe!

Wheat has done some bouncing this week.  From Dan's reports it sounds like the bounces are fairly violent but we're still looking at wheat approaching $8.  Yesterday, 2011 prices ranged from $7.50-$7.75 and new crop 2012 hit $7.29, the lowest we've seen in a while.  Today we're looking at $7.60 for post harvest and $7.70-$7.8- from now through June.  Next years price has recovered to $7.64. 

23Feb2011

After yesterday’s washout, last nights futures worked timidly lower. Corn futures closed the night session down another 16, while wheat coughed up another 10-14. European wheat futures lost 7%, then recovered to close out down 1.1%. Expanded limits today: Corn is .45, wheat is .90.
 Predictably Egypt tendered last night. They tendered for US HRW, DNS, SWW, SRW. Funds/ Specs continue to look toward safety until the Mid East settles down and becomes a bit more defined. Oil, gold are the recent winners. Fundamentally the only change is UPCOMING in China.
           Weatherman says ‘significant and prolonged wet period is headed for Central China. Other than that, the 7-10 day calls for below normal precip for the main wheat production areas of Texas, Okie and Kansas. The 10-14 day only calls for that area to get both drier (area expands) and warmer than normal. Mexico has now replanted 336m acres after recent freezes. They expect corn imports (from the US) to hit 7.5 myn mt this year. The EU commission is slowly being forced to accept the fact that their own scientists have been unable to find a threat from GMO. It is still a political lightening rod. Politics/ consumer acceptance will likely drive the topic…but market forces won’t go away.
24Feb2011

Yesterday, we had something that appeared to be a recovery, or was it a ‘dead cat bounce’? Futures under continued pressure again this morning.  Crude is up $2.75. Libya’s oil exports are down 25% and grain cargo ships are being diverted from ports. With all the problems in the Mid East, this certainly qualifies as one of those ‘black swan’ events. Sharply higher oil prices are NOT conducive to a recovering economy. I would expect to see a pretty drastic change in the COT report next Monday. The ‘long only’ index funds have sold over 300 myn bu of corn in the last month and ½. USDA estimated acres again, and they were identical to the 2/14 numbers used earlier…indicating 92 myn acres of corn. When the math is done, it works out to 13.5 byn bu @160 bpa yield. With current usage (ethanol usage numbers will likely INCREASE before year is over) we would only have 700 myn bu of corn c/o for 2012.
           Ethanol gets its own paragraph this am. EIA showed no ‘build up’ of inventory, but there were over 350 myn gallons exported. Margins widened by an estimated .25/ gal with runup in crude and drop in corn values. It seems EPA may lose some funding in the current budget battles, which would effectively block implementation of E15 on 2001 and newer vehicles. The ethanol industry has started to mobilize to develop support in the new Congress for maintaining current subsidies/ credits. Who knows how that turns out, but one would have to imagine that cuts will be made there as well as other areas.
           Egypt booked 4.2 myn SRW overnight and 4.4 French wheat. They cancelled the HRW portion of the tender. China tendered for 4 myn bu of Aussie milling wheat. COFCO (state trading arm of CNGOIC…Chinese National Grain and Oilseed Info Center) confirms that they have bot 1 myn mt or 36.7 myn bu of Aussie feed wheat. Chinese corn stox: use is estimated at 37% which is tight for them (they would normally run about 93% or carry over almost a whole years supply. This tends to support theory that China will be/ could be in for large amounts of corn. And the Chinese gov’t also announced that they will set up their own bio-tech seed industry. Mexico continues to replant (est over ½ done). Their national corn group says they may need to import additional corn (white and yellow). White corn is important to keep tortilla prices low.
***Didja Know: IF you are 1 in a million in China, there are 1300 exactly like you! China is the world’s #1 English speaking nation. In the last 5 minutes or so, 67 babies were born in the US, 274 in China and 395 in India.
 25Feb2011

Markets have been very exciting this morning! I think I got whiplash looking from screen to screen. At one point Corn was up the limit and Chicago was up 46! We keep talking about volatility, but until you have a day like this/ week like this, it is just hard to explain. Again this market is NOT being driven by fundamentals. The fundamentals have not changed, but with what is going in the Mid East, that certainly qualifies as a ‘Black Swan’ event. All this volatility has resulted in KC reporting ‘record’ volume. I would imagine that the other exchanges will post record volumes as well. More evidence that the futures markets are not being fundamentally driven.
           Snow pack in the Northern tier states is rated the heaviest in 8 years (there will be big flooding). Typically the flooding starts Mid March. The weather man says the northern tier states will remain ‘colder than normal’, while the south will be ‘warmer than normal’. I have got to believe we will see some winter kill resulting from last night/ tonights temps. Ground is totally clear, and although the plants have had time to ‘toughen’ up…we will be near zero. Export sales report showed very strong wheat sales of 37 myn bu and also very strong corn sales of 59 myn bu. Actual shipments are still lagging however.
           IGC reported yesterday that they are anticipating increase wheat production to the tune of +24 myn mt (equal to another Aussie crop). And are projecting the 2nd biggest ever wheat production. Its all coffee shop talk today as there simply is a ton of weather and it is way WAY early, even so, I suppose you have to start someplace. Indonesia booked 5.7 myn Aussie wheat last night, Bangladesh is tendering for Indian wheat, and the Saudi’s are tendering for 10 myn bu of wheat…April/ May TOS. Turkey dropped their wheat import tax to ZERO through June. China confirmed overnight that their corn reserves are less than 15 myn mt (that’s probably HIGH). Their normal carryover in corn would be about 35-40 myn mt. Mexico is projecting corn prod of 23.5 myn mt after reseeding vs. 25 myn mt prior to the frosts.

***Didja Know: “Never take life too seriously, no one ever gets out alive anyway” Anon. As of 1996 the USDA categorized frozen French Fries as ‘fresh vegetables’…it is possible to eat 3500 crayons/ day and still not hit the toxicity level of normal glass of water…
HAVE A GREAT WEEKEND!!!
 

Grain Market Report 22Feb2011

Tanner Sheahan
CPS Tangent

Wheat has fallen off some more.  Prices are pretty flat for the rest of the year ranging from $7.75 and peaking at $7.90 for May.  Post harvest is still $7.75-7.80 and new crop for next year is hanging in there at $7.53.  It's amazing how disappointed we get when prices drop and I know that's a direct hit on the bottom line but we're still bumping up against $8.  That's pretty good money.

The weather is going to be...less than desirable for a while here.  That's good for the growers on the stripe rust front.  But be ready when the weather breaks; stripe rust is out there and getting worse with every good day.

Dan sent out his acronym/abbreviation cheat sheet again the other day and I thought it would be a good idea to post it up for those of you who may have missed it the first time around.  It can get confusing if you don't what all those letters mean.

Grain Marketing Abbreviations and Useful Information:

The grain business is like most anything else, there is a certain amount of “lingo” or jargon that is used and is primarily unique to the grain business. Below are some of the more common things you might run into, and hopefully the following information will be of help. Please give me a call or e-mail with any questions (541-481-6614 or graingrowers@centurytel.net)

The grain industry uses a unique lettering system to designate: the exchange where the grain is traded, the option month we are talking about and then the type of grain, for example CUW.
The exchanges we work with are: Chicago; for Soft Red Wheat (SRW), Corn, and Beans. Chicago gets the letter C.  Kansas City for Hard Red Winter (HRW).  Kansas City gets the letter K.  Minneapolis (Mpls) for Dark Northern Spring Wheat (DNS).  Mpls gets the letter M.
Most any of the grains we will deal with in this part of the country are traded in the option months of March, May, July, September, and December, and are designated by one letter.  March = H, May = K, July = N, September = U, and December = Z. The last letter is to designate the type of grain: Wheat is W, Corn is C, Beans are B.
Sooooo, CUW is Chicago September Wheat. CZC would be Chicago December Corn. Etc. CBOT is the Chicago Board of Trade, KCBT, Kansas City Board of Trade. MGE would be Mpls Grain Exchange.
M= 1,000  myn= 1,000,000    mt = metric ton (2,204 pounds)  a short ton has 2,000 pounds so: in a short ton (st) there are 33.33 bu of wheat, 35.7142 bu of corn, 41.66 bu of Barley. All export sales are made in mt so there are 36.7 bu/ mt of wheat, 39.4 bu/ mt of corn, and 45.9 bu/ mt of barley. So a 200m mt sale of wheat is about 7.3 myn (million) bu. Or 7.87 myn bu of corn.
COT: Commitment Of Traders report. This report shows who owns what in the grain industry. It is broken down into 3 main categories: The specs (speculators) or funds. The commercials or elevator operators, and the non reportables (positions held by small firms, individuals etc.) For each category and grain they list the long and short position. Positions are either by futures contracts or combination of futures/ options. The combo report comes out every 2 weeks, the futures portion is updated weekly. Extremely useful tool to help establish the market direction. There is now a “supplemental” report available that breaksout the position of “index funds”.

Abbreviations for locations: Argie: Argentina,    Aussie or OZ: Australia,    SA South Australia,    NSW New South Wales,    WA Western Australia.    SAM is South America.    EU: European Union.    FSU: Former Soviet Union.    Kaz or Kazi: Kazakhstan.    UK: United Kingdom.    USDA; United States Department of Ag.    ABARE: Australian Bureau of AG Resource Economics (similar to the USDA),    GASC: General Authority of Supply and Commodity (purchasing agency for Egypt),    JFA: Japanese Food Agency (Purchasing agency for Japan).    FAS: Foreign Ag Services (reports on world grain stocks).    FAO: Food and Ag Organization.    AWB: Australian Wheat Board.    MAFF: Japan’s Ministry of Ag Fisheries and Forestry,    CNGOIC: China Nat’l Grain Oilseeds and Info Center,    ABB: Australian Barley Board.   ABH: Australian Bulk Handlers.    CWB: Canadian Wheat Board.    CFSA: Often just called the FSA (Consolidated Farm Service Agency). Used to be called the ASCS.     

BU: bushel.    Min: Minimum.    Px: Price.    Cak: Contract.    S&D: Supply and Demand. This is a report put out by the USDA monthly. It has the estimated production numbers, estimated usage numbers (by industry…like seed, feed etc.) and estimated carryouts or how much they think we will have left at the end of the year.    Prem: Premium (can be used for Protein premium, spreads or basis depends on how its used).    Mo is used for month.    LH is Last Half,    FH is First Half (as in portion of a mo)    GMO: Genetically Modified Organism. Mostly refers to grain varieties that have been modified in the lab vs. the field (quicker, more precise, more efficient etc.) to exhibit certain characteristics like disease resistance, milling quality etc.

Sometimes we will abbreviate Major grain dealers: UH is United Harvest (after United Grain and Harvest States merged). Cgl (Cargill). LDC (Louis Dreyfuss Corporation). Kalex (Kalama Export). EGT Export Grain Terminal.
22Feb2011

More profit taking is on tap this morning, as traders seek ‘safe haven’. There has been lots of talk of spec limitations and enforcing those limitations. When you look at the size and scope of their positions the potential to the markets are obvious. Wheats are called down 15-20 and corn is called down 7-10.
           China’s worst drought affected areas are set to receive ‘significant and prolonged’ precip. This weather event should significantly ease the drought concerns.