Cruise The Crop Markets 2010 Day 1
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Transcript of Cruise The Crop Markets 2010 Day 1
© Roach Ag Marketing, Ltd.
Grain Price Outlook and Market Strategies
Cruise The Crop Markets
by John Roach
January 17 - 24, 2009
Day 1
© Roach Ag Marketing, Ltd.
Roach Ag Marketing, Ltd.
7601 N. Federal HwySuite 265-B
Boca Raton, FL 33487
800-622-7628
[email protected] http://www.roachag.com
© Roach Ag Marketing, Ltd.
Grain prices set their peak of a new price plateau in 2008. The new price plateau will
remain but prices will search out the bottom of their range
again this fall, if crops are good.
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Why will the new price plateau remain?
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Population Growth Rates
Source: USDA Agricultural Projections to 2017.
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Global Meat beef + pork + chickens & turkeysProduction, per capita consumption, and population
Source: USDA Agricultural Projections to 2017.
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Dollar Index
Dollar’s value has been driving trade for the last 2 years
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Index funds increasingly important beginning 4 years
ago
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Five-year moving average of world production values.
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GSCI™ Components and Dollar Weights (%) (12-18-2009)
Energy 69.53 Industrial Metals 8.21 Precious Metals 3.30
Agriculture 14.71;
Wheat 3.16; Red Wheat 0.63; Corn 3.40 Soybeans 2.39; Cotton 1.15; Sugar 2.82
Coffee 0.78; Cocoa 0.38 ;
Livestock 4.26 Live Cattle 2.44; Feeder Cattle 0.46; Lean Hogs 1.36
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What role did fundamentals play in 2009 grain prices?
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#1 - World Soybean Crop down 27.4 million tons = 34% of entire U.S. Crop
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March Intentions#2 - March Intentions
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MarchFinal
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© Roach Ag Marketing, Ltd.
#3- On May 17 only 62% of the U.S. corn crop was planted
with Illinois at 20%.
Beans were 25% planted with Illinois at 1%
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Dollar IndexDollar back in decline from Feb 09 to June 09
Bears’ 1st Target
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• Tight U.S. soybean ending stocks this year and tight corn stocks next year were forecast
• China building soybean reserves
• Fear of rampant inflation
• Speculative money again flowed into grain markets as traders chased beginning bull market moves
In Addition
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• South American crops quit shrinking
• U.S. Dollar quit getting cheaper
• There was no inflation….yet
• China quit buying
• U.S. farmers planted more acres than expected and the weather became nearly perfect for big crops
Grain Prices Dropped from July to Sept 2009 because:
© Roach Ag Marketing, Ltd.
• U.S. crop experienced cold wet fall and slow harvest
• U.S. Dollar resumed its decline and inflation fear grew
• China became an aggressive buyer of beans
• Speculative fever re-ignited in the face of shrinking production, increasing bean demand estimates
Then Prices Rallied from Sept to December
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What are the Fundamentals Now?
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Aug forecast +31.5 MMT Nov & Dec +39.4 MMT Jan +42.58 MMT
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© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
Bean Acreage
2008 – USDA 75.7 Mil. Acres
2009 – USDA 77.5 Mil. Acres
2010 - Informa 77.0 Mil. Acres
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U.S. and world inventory very tight now
China demand numbers increasing
2010 ending stocks no longer tight, but we must raise big crops in 2010
Prices should peak prior to normal March June selling season if no U.S. crop problem develops
Bean Situation and Price Outlook
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© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
FSU-12 Exports2007-8 – 27.47 MMT2008-9 – 54.71 MMT
2009-10 – 49.50 MMTU.S. Corn Exports
2007-8 – 69.89 MMT2008-9 – 51.17 MMT
2009-10 – 55.79 MMTU.S. Wheat Exports 2007-8 – 34.36 MMT2008-9 – 27.64 MMT
2009-10 – 22.45 MMT
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© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
Non – U.S. 58.9 Bu/Acre
World 80.3 Bu/Acre
U.S. 162.9 Bu/Acre
USDA 2009 World Corn Yields 12/10/09
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© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
World coarse grain and U.S. ending stocks ample - but just barely. Wheat hurting demand
U.S. ending stocks likely to increase due to smaller exports and feed offset by + ethanol
Livestock producers losing less money
We still need a big corn crop every year and should have seasonal strength in 2010
Corn Situation and Price Outlook
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
© Roach Ag Marketing, Ltd.
World wheat ending stocks are 3rd largest on record and US biggest since 1988
Prices increasingly dominated by former Soviet Union production
Index fund ownership distorting price higher and basis wider
2010 winter acreage 37.1 mil acres down 14.3% from 2009
Wheat Situation and Price Outlook