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Market Movers: November Crop Production Report

– David Hightower:
Welcome to Market Movers. I’m Dave Hightower
joined by Dan Basse. We’ve had an
early October freeze. Is this going to nick
production into the report? – Dan Basse:
I think so, David. As we look towards
the Dakotas in particular, we’re doing a
resurvey up there in terms of
what the snow potential, that snow storm in October
really caused for damage. So harvested acreage
will be looked at, and we think it
nicked production a little bit. Ag Resource is looking for
a U.S. corn yield of 166. We’re looking for a
slight decline in soybeans, at 46.5 bushels an acre. – David Hightower:
Minnesota and North Dakota, three and four in
total soybean production; not insignificant. – Dan Basse:
Not insignificant at all. And so it’s worrisome
to get those crops out. Fields are saturated. They’re waiting
for things to freeze up to get combines
and support things. – David Hightower:
Another important factor outside the grains,
big demand destruction off of the trade
economic slowing. Do we put it back in? It seemed like we were
making progress on that front. – Dan Basse:
We are making progress between the
United States and China. We’re phasing deals, and it looks like we’re
going to get a phase one deal completed maybe
during the month of November. That will be
somewhat after the report, but the market will
start to look forward, and think about that
$20 billion of potential demand that could be forthcoming. Soybeans would be the crop
that would go into most, but maybe there’s even
a little bit of grain demand in there in terms of corn and
wheat somewhere down the road. – David Hightower:
Just on a flat basis, $0.38 down;
in the corn market, $1.20 down because
of the demand destruction. So a bounce in the market
is not unlikely. – Dan Basse: I think
we’re going to see a bounce, but as I
stand back from it, what really bothers me
is U.S. corn sales to date are worse then they
they were back in 2012. That year we only exported
730 million bushels of corn, so somewhere along the line, we really need to
kick this export market into some kind of overdrive to get numbers
where they need to be to reach USDA’s forecast. – David Hightower: Exactly. Before we dive into
our trade discussions, I’d like to point out that
these trades are examples, not recommendations
or advice. How do you see it? – Dan Basse:
My trade example, I’m looking at a corn spread. I want to buy a
July 20 corn future, sell a December
20 corn future at a four-cent July discount. The market today
is at a three cent, so I’m giving myself
a little bit of room to get in that trade. I’m looking
to take profits at an eight cent
July premium, and I want to risk four cents
on the entire spread. – David Hightower:
Good strategy. Long futures at the market
covered with the short. As an example, I’m looking to catch up
on lost feed demand. I want to buy the
March soybean meal at $310 with
an objective of $336, and I’m willing to risk
to close as low as $305. – Dan Basse:
I like that trade, David. The Chinese meal trade
in the last few weeks just exploded. There’s a lot of end users that just don’t have
enough coverage on meal. – David Hightower:
Maybe we’ll get out from under the macro cloud, get a little bit
of lower supply and a rally in grains. – David Hightower:
On Market Movers, we like to educate
new folks just tuning in, and this time we want to
talk about harvest problems; quality, quantity
and maybe delays. – Dan Basse:
They’re everywhere, David. If you look
at the harvest pace, we’re maybe going to
be 60% done on beans, 35% done on corn
as of this week. As I look forward, the weather forecast
has snow and cold in it. It’s going to continue
to eat away at this crop, but it’s really eating
away at the crop in quality. We think that test weights
for corn will be down, soybean splits will be up. And what this really means is that there will be
siome discounts for farmers, maybe some
appreciation in basis, but it’s never
good for the market in terms of being bullish when
you have off-quality crops. I’m a little concerned about
that further down the road. – David Hightower:
USDA has been slow to realize some of the other problems. Thanks, Dan,
for your insight. We’ll keep a
close eye on the market. Thanks for joining us
on Market Movers. I’m Dave Hightower. Trade well
and trade smart.

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