Potash supply-demand balance could tighten
Protect your inventories TEALE, from pg. 18
The problem arising now is that the pork cutout has begun to slip, making the packer margin tighter and thus the possibility of the packer backing
if there is a broad-based expectation among analysts that tapering will begin in September. Mario Draghi of the European Central Bank did hold a press conference following the policy meeting, striking an accommodative tone by citing a weak recovery and pledging to keep interest rates at recordlows or lower for an extended period. Wheat markets bucked the price trends in the row crops, gaining 4.75 cents in Minneapolis, 15.25 cents in Kansas City, and 10.25 cents in Chicago. Egypt made its fourth purchase of wheat in the month of July, buying 240 tmt from Romania and Russia. Japan announced it will resume buying U.S. white wheat after confirmation that the GMO wheat found this spring in Oregon was an isolated incident. Total U.S. weekly export sales were 597 tmt. Recent frost in Brazil will trim production and increase the potential for U.S. hard red winter wheat exports. This material has been prepared by a sales or trading employee or agent of CHS Hedging Inc. and should be considered a solicitation. ❖
HUNEKE, from pg. 18 your cost of production and practicing margin management. When agronomy retailers start offering options for prepaid fertilizer, it’s important to put those costs into your cost structure to determine if it’s the right time to purchase the input. If your numbers tell you that you can purchase the input and maintain a profit, purchase the input. It’s important, however, to remain disciplined. When making the purchase, you need to protect it by selling some commodity. You can use various means to protect that purchase: a hedge-toarrive contract, fixed contract or utilizing a put and call strategy. Rest assured with a quality risk management program Having a quality risk management program, such as crop insurance, is the foundation for executing a plan while still sleeping at night. Crop insurance gives you the ability to forward sell and take advantage of opportunities that arise. Get it in writing Another valuable resource is having your marketing plan in writing. It is proven that when a marketing plan is
written down producers tend to adhere to it. Key components of the plan include price goal and timeframe for that goal. That way, if you haven’t had an opportunity for your target price, you still have a date to execute a sale. As changes occur within the year, you can adjust your plan accordingly. Looking back, some of the best marketing decisions I’ve made were when I utilized the margin management strategy to purchase inputs. There have been a few times when fertilizer prices have come down, but if I look at the time I purchased the input, I was also able to sell the crop at a higher price than the current board price. If you practice margin management and lock in profits along the way, it adds up to a profitable year. There is a saying that I love to quote: “No one has ever gone broke locking in a profit.” AgStar Financial Services is a cooperative owned by client stockholders. As part of the Farm Credit System, AgStar has served 69 counties in Minnesota and northwest Wisconsin with a wide range of financial products and services for more than 95 years. ❖
away from aggressively bidding for live inventories. The next several weeks could be very interesting and will likely set the tone of the hog market heading into the winter months. With the pork cutout now below the $100/cwt., pork still represents the best value in the entire meat complex which could still provide some support to the market in the near term. Producers are urged to keep the market information at hand and protect inventories if needed. ❖
‘No one has ever gone broke locking in a profit’
“Where Farm and Family Meet”
back and forth and closing just slightly better for the period. From a seasonal standpoint, we are in a timeframe when the summer high is established. On the other side of the coin, the demand for pork has been good which has kept the market buoyant.
here and in Europe continue to pledge that monetary stimulus will be provided as needed. Second quarter GDP growth was 1.7 percent, beating expectations for growth of about 1 percent, but annual revisions to historical data meant that the first quarter was trimmed from 1.8 percent to 1.1 percent. When the numbers for the first half are viewed as a whole, essentially growth was about where the market expected prior to the release of the Q2 number. The ISM Manufacturing Index for July was very strong at 55.4 compared to 50.9 the previous month, consistent with accelerating GDP growth in the current quarter. The Federal Open Market Committee meeting mid-week resulted in no policy change as expected, and there was no press conference following the meeting. The statement released did dial back ever so slightly the Fed’s assessment of economic growth, and contained language that spelled out the Fed acknowledgment of the risks of disinflation. That fueled the perception that commitment to QE as needed remained in place, even
MARKETING
<< www.TheLandOnline.com >>
beans have a longer window to take advantage of rainfall, making July weather less critical than July and August weather considered together. However, we have trimmed our soybean yield estimate from the preseason expectation by 0.5 bu./acre to 44.1 based on the preliminary rainfall and temperature data. Export sales were solid at 79 tmt for old-crop and 1.0 mmt for new-crop. Daily sales announcements showed a total of 410 tmt for 2013-14 sold to unknown. OUTLOOK: The November soybean contract is trading near price levels last seen in June 2012 before the drought hit. The market defined lows on a closing basis at $11.53 during that period. The market will remain focused on the weather pattern during August, which looks cool and somewhat dry at this point. Funds shed nearly 35,000 contracts of their net length during the last reporting period, but remain net long about 31,000. The first key resistance point on rallies is $12.23-12.27. Demand is solid, but the natural focus on the supply side at this time of year will drive the markets. The August USDA supply/demand report is on Aug. 12. Emslie’s Extras: This week saw the release of the first estimate of second quarter Gross Domestic Product in the United States, Federal Reserve and European Central Bank policy meetings, and the July Employment report, highlighting a heavy confluence of economic reports and events during the week that saw U.S. equity markets reach new record highs. The S&P 500 was up about 0.9 percent for the week ahead of the close on Friday, establishing the new record high print of 1707.85 on Thursday. The economic news from the United States was more mixed in nature than the push to a record high on the stock market might suggest, but the central banks both
THE LAND, AUGUST 9, 2013
EMSLIE, from pg. 18 implies their profit model will be to move higher volumes at lower prices, especially directly to China which may be able buy potash at $300/ton compared to $400 on world markets currently. The publicly traded members of the Canadian potash cartel fell sharply on the prospect of lower prices. This should mean lower potash prices at the farm gate next season. In the long-run the lower price expectation already has put huge question marks over some projects on the drawing board, including ones in Canada and England. Without production expansion, the supplydemand balance could tighten. OUTLOOK: December corn attempted a very modest mid-week rally before falling to a new 2013 low by the end of the week. For the week, the December contract was down 12.25 cents, and the September contract was down 16 cents. On the latest Commodity Futures Trading Commission report, non-index funds were short 182,000 contracts, the biggest net-short since at least 2006. Until the market shows some sign of bottoming, there is no trigger for funds to abandon their short positions. With the new multi-year low in the December 2013 contract made during the week, the next previous low on the chart was made all the way back in November 2010 at $4.60. On the upside, the December contract made monthly highs in March to June just above the $5.70 mark, defining resistance. SOYBEANS — New-crop soybeans were the focus of selling this week, declining on 4 of the 5 sessions and ultimately losing 47 cents on the week. The old-crop August contract held in a little better, but was still down 18.75 cents on the week. Crop condition slipped by 1 point in the good/excellent category to 63 percent, but remains above the five-year average. Soy-
19