Kleist Comments


Comments: Choppy session. As mentioned, I am having my doubts about cash cattle being higher this week (see Morning comments). That seems likely after the early rally failed to sustain at discount. Midday beef was mixed again and movement light this time.

Comments: The market gave back early gains plus made new lows for the move. We didn’t trust the ‘consolidation’ this morning and was justified. Why? Discount has not been a reason NOT to sell for quite awhile now, just as the spring rally was no reason not to buy. No one had a grasp of ‘value’ trading the darkly lit corners of PEDv virus going up, ditto on the downside.

Corn: Soybeans: There’s a basic problem with trying to get bullish, even ‘probing the long side’ as it were, because of this: weather has been excellent for the majority of the crop and most problem areas are ‘local’; while the corn might not reach 175.0bu./acre, 170+ will still produce a huge crop and that is my similar logic for the beans. And take crop estimates with a ‘grain’ of salt: as FCStone looks for a 14.550bln. crop, Informa looks for a 13.988bln.bu. crop…….just a 564mln.bu. difference. Point is, with the size of the crop what’s a few million bushels among friends? Soybeans FCStone 3.865bln. vs. Informa’s 3.700bln….165mln.bu. difference?

As for export demand, it MUST be good to consume mot of this crop and recent large sales need to be consistently good and sliding lower prices seem needed to do so unless South America blows up (or we have a late season freeze). Speaking of which, my fears over Argentine farmers holding back beans (confirmed) due to high taxes means 1)they are likely backed up and 2) to get money for new crop plantings they’ll need to move beans eventually. If that happens into our harvest it could be a major problem. Plus the world economies are not really in good shape. Including ours.

Not trying to be overly bearish, but when even I ‘hope’ for a rally for un-hedged clients I need to take stock of what we are possibly facing ‘down the road’.

Wheat: The recovery had a bit more legs than I gave it credit for. However, I still suspect it is technical in nature including all the talk of a summer bottom after winter harvest; also talk of poor quality wheat out of parts of Europe is prevalent but I think it’s more “fill in the blanks” fundamentally as mentioned. The Achilles Heel for wheat has been demand shuts off when it has a significant rally. Technically we are over my pivot of $5.43 and I believe that extended the rally. Upside? Likely limited but we’ll look for an area to short it again.

By the way, Informa all-wheat 1.986bln.bu. (winter 1.365bln.) vs. USDA’s 2.13bln.

Kleist Comments

This is John Kleist, of Kleist Ag Consulting.
Questions? Email me: johnwkleist@sbcglobal.net

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