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Market Movers: October Crop Production Report

[Market Movers] – David Hightower: Welcome
to Market Movers. I’m Dave Hightower joined by
Dan Basse. We come into the crop report
here, hopefully we are going to see some final adjustment to
acres, we have been waiting on this thinking there is going to
be some lower acres but may have some lower yield
in beans, but then again we have had really good weather
since this report is probably calculated. – Dan Basse: What we have
David is it we think about this report, FSA date is
finally included in this data to give us some really good
estimates on harvest today for acreage for corn and beans. Along with that, we finally get
objective yield counts something else the market has
been waiting for so going to have a good feel of
what kernel weights are and so in corn and what soybean
pod weights are, so overall this is report that will be
a defining moment with the corn and bean crops this year and
will give us some real clarity going forward. – David Hightower: And, we
have had the lofty ending stocks projections for beans
at times those have been coming down. – Dan Basse: Well, I think
what’s really happening for this report is that
we think forward, we had these stocks reports last
week that cut corn 322 million bushels, we had a 116 million
bushels decline and soybeans because of diminished crops
a year before, lower end stocks that really sets the table for
this report on Thursday. We see a yield number like
166 rendering corn that will be bullish, something under
47 on beans, I think that really gets the markets
going because as you say end stocks will be coming
down the levels that are deemed as tight historically. – David Hightower: Now, in the
corn market probably a little more volatility, the trade
expects lower yields with better weather again since
then, but if the less acres are planted, we are going to need
start and see evidence may be that the USDA sees
a little bit tighter supply. – Dan Basse: Well, they do
if you look at the average trade estimate for this report,
we are talking about corn end stocks being between 1.7
and 1.8 billion bushels. That’s substantially tighter
than we have been thinking for pretty much the
latter part of the summer so that’s tight on corn, in
soybeans we may be down to 500-550 million, but you got to
get below 450 if you really want to start putting on some
bullish ideas. – David Hightower: So, before
we dive into our trade discussions, I would like to
point out t hat these trades are examples and not
recommendations or advise. So, Dan, how do you see it? – Dan Basse: Well, Dave, the
one trade we would like is we like looking at
buying a December $4 corn call now that’s only a bout 15 cents
away from the market, it sets the day, we think it gives us
some time, we are going to buy 5 cents, we are going to
risk 3 cents with an objective of 10 cents. We are hopeful in believing
that this market will give us some bullishness on corn, I am
thinking of a corn yield of a bout a 166 bushels and
acres. – David Hightower: I like that,
it’s a tighter market. But Dan as an example,
I am looking to buy January soybean $9.30-$10.00 bull call
spread and then I want to sell a January soybean $8.70 put for
a net cost on the spread of 12, I am selling the put
because we do have the prospect of very high
supply still even if we are going to get less supply, I want
to use an objective of 33 cents and I want to risk a
total of 7.5 on the trade. – Dan Basse: Well, I like that,
I think David in a general sense that bean pod weight
could be down, it was too high back in September I think
that’s where the decline will come in yield, may be we get a
yield number of 46.5 for 47, that will really make that
trade good. – David Hightower: And, we might
get some difference from the average trade estimate in bot
these markets. So, Dan on Market Movers, we
like to educate new folks just tuning in and then
this time I want to talk about the concept of trend
yield. – Dan Basse: Well, trend yield
is something that goes back over an extended period of time,
so we take yield and we look at that average gain each year
and if taste of corn is above 1.8 bushels per acre, whether
it’s technology or the farmer or weather has added on
to corn yield year after year and that has given us a trend,
so we look forward to the 20-20 crop year for example,
the US corn trend yield to be about 178.6 bushels per
acre meaning that this year’s corn yield at 166 is
about 12 bushels below that. – David Hightower: We were
looking for poor weather probably each end of that trend
yield gain. – Dan Basse: Well, I think that
right, I think weather this year has really been and climate
weather it’s the cool wet conditions at the start of the
growing season and now cool and wet to get it out of the
field may be propane futures are the place to be looking at
length because it’s going to take a lot of propane to get
this corn crop dried down. – David Hightower: Very good. Thanks Dan for your insight, we
will keep a close eye on the market, thanks for joining us
on Market Movers, I’m Dave Hightower, trade well
and trade smart. [Line Break]

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