"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Tuesday, October 14, 2014

Harvest Running Behind the Average Pace

This is not news for any grain trader who has been paying attention for the last few weeks however. Wet weather has prevented farmers from getting into the fields as quickly as they would like as has the lagging maturity of the crops in general but today's report just confirms that a very big crop is still out there.

Corn ratings held steady at 74% rated Good/Excellent with Beans rating 72% Good/Excellent so the crops remain in outstanding condition in general. These conditions numbers however are soon, if not already, going to lose the interest of traders as it will be harvest completion % that will be the focus and that means weather. Also, attention will shift to weather down in S. America as it is planting season in the S. Hemisphere.

There are some reports that the Argentinian government is getting ticked off at grain farmers down there, many whom are not selling their harvest from last year because of the depreciating peso. They would rather hold the "hard asset" than sell it and that has the government riled because it wants to see the sales so that it can tax them and generate some revenue.

On the maturity front, corn is now at 87% mature compared to the 5 year average of 89%. Illinois and Indiana are actually ahead of the 5 year average now on maturity while Iowa, Minnesota, Wisconsin and the Dakotas are behind.

Corn harvest is lagging but that was expected with the trade coming in a bit on the low side of actual harvest numbers when it came to pre-report estimates. Currently 24% of the crop is harvested compared to the 5 year average of 43%. That is why the recent storm was a good excuse for those gunning for stops to run the stops.

Someone ran a huge buy stop order after $3.50 and that got the ball rolling big time in the corn. I saw the violent price spike higher and figured someone's stop got picked. That is how the sharks operate.

Apparently an awful lot of call option writers got obliterated and were forced to buy futures to try to stem their bleeding.

On the soybeans - the national crop average has caught up with the 5-year average of 91% when it comes to dropping leaves.

Harvest is at 40% nationally compared to the 5-year average of 53%. That is a bit better than the pre-report averages. The best I saw was a 32% complete so those bidding up the beans for harvest lagging reasons may have lost a bit of ammunition based on this. We'll see however as there is now a huge "money game" taking place because of forced liquidation of short positions over margin calls that has been induced.

We have quite a few "bottom callers" in the grains right now on account of the technical price action of the last two days. It will be interesting to see how the competing technicals fare against the bearish fundamentals. Technicals win in the short term and thus MUST be respected but fundamentals always assert themselves but one does not know exactly when!

I can only say that I cannot remember seeing corns or beans bottoming with this low percentage of the harvest complete. If the forecasts hold, harvest progress should begin gathering some real momentum later this week. Northwest areas probably are already seeing a lot of combines running. I expect that to continue to the East as the soils dry out from West to East this week. low lying areas will have some issues due to the large amounts of rain where the impact from the recent weather system was felt.

That should lead to some strong farmer pricing of grain that is being harvested as some farmers have been fervently hoping for some sort of rally in prices that they could use to price grain. Well, thanks to the antics of some big specs, they now have that opportunity. whether they take advantage of it remains to be seen however. Many farmers tend to get bulled up quite quickly whenever some of these violent shortcovering rallies take place. The problem with short squeezes is that they can end just as quickly as they started.

Quick comment on the livestock - cattle got hit hard once again with feeders locking limit down. Those who were squeezing corn prices higher managed to obliterate the "math" for those paying these recent sky-high prices for replacement calves.

Hogs are hanging in there better right now due to the very deep discount of the now front-month December contract to the current lean hog index. The October contract expired today at 109.525 with the index at 109.70. The December closed today at 94.925 although it was smacked very hard later in the afternoon session as the pork collapsed in price today.

Falling crude oil prices are flashing quite a warning signal that the global and domestic economy continues to slow. Stocks rebounded a bit today but after being beaten down so hard the last few sessions, I guess that should not come as a surprise. Still the bounce looks tepid. In an environment such as this, with the GSCI making once more a brand new 49 month low, it does make one wonder why some entities are intent on chasing grain prices so steeply higher.

Lastly, unleaded gasoline has just plumbed more new lows today. One begins to suspect that ethanol distillers are going to have some trouble!

Incidentally, interest rates on the long end of the curve continue to plummet indicating the building deflationary pressures. Yield closed at 2.206%, the lowest in 16 months!

The Dollar remains stuck right smack dab in the middle of support near 85 and resistance near 87, basis USDX.

USDA Crop Condition/Progess reports

Those of you who trade grains will already be well aware of how busy I am right now but I will get some comments up on the grain reports this afternoon when I get some time. Needless to say, there has been a bloodbath among the shorts as some big specs went after the short interest.

Both corn and beans are showing a larger percentage of the crops have been harvested than the pre-report estimates which may lead to some selling this evening/afternoon on the open.

If you ask me why these things are rallying like they are, I have no explanation. All I can say at this point is that some very big specs went after the short interest and used the recent low pressure weather system that went through the Corn belt yesterday and Tuesday as an excuse.

I have not seen any reports of any major crop damage thus the entire rally looks to me to have been a series of upside buy stops that cascaded and set off the computers buying.

This is why I constantly make mention of the nature of today's markets when dealing with those in the gold bug community who blame every single move lower in gold as part of some orchestrated plot on the part of the "evil bullion banks - backed by the feds" to take it down. Those who advocate such foolishness have never seen what some of these big specs can to do a market.

more later...