"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Tuesday, September 2, 2014

Incredibly - Corn Conditions Improve; So do Beans

I have been trading grains for a long, long time and I am having to really search what is left of my memory to recall seeing the corn crop in such a dramatically fine condition this late in the season. I am sure there were years but truth be told, it is the bad years we remember more so than the outstanding years.

USDA gave us the numbers for the past week and they are outstanding. 93% of the nation's corn crop is in fair to excellent condition. The Good/Excellent condition category actually ticked up 1%. The breakdown is as follows:

CURRENT                                PREVIOUS WEEK         LAST YEAR

Excellent:   22%                         21%                           14%
Good      :  52%                          52%                          42%
Fair        :   19%                         20%                          28%

As I have said here previously, as we move closer to harvest, the general appearance of the corn plant tends to show some deterioration as the plant's energy is being directed into the ear. That can lead to some slight drop in the overall condition of the plant as far as its general appearance is concerned. Thus far that is not even showing up.

90% of the crop is in the Dough stage compared to 82% a year ago and the 5-year average of 89%.

The only concern might be the Dent stage is showing 35% compared to 39% a year ago and the 5-year average of 59%. That is certainly behind. My view on this is that the perfect growing weather ( warmth and continued moisture) is slowing down the maturation process of the ear. In dry years, maturity tends to move ahead for the ear but at the expense of filling. You get an ear that matures quicker but one whose kernels are smaller and weigh less. What this lagging dent tells me is that we are going to have some pretty hefty weights and large kernels. That should increase the overall size of the harvest when it finally does commence. Any of you agronomists out there who read the site might want to chime in on that if I have missed anything.

Hopefully, we will not get any hard, early killing frost as we wait for the crop to finish up.

On the soybean front, bulls were talking up excessive rains in some areas today as a reason to buy beans. SDS chatter was also making the rounds ( waterlogged fields can be conducive to SDS). However, the overall condition of the soybean crop actually improved last week. An astonishing 94% of the crop is rated Fair to Excellent.

Here are how things stand.

CURRENT WEEK                    PREVIOUS WEEK          LAST YEAR

Excellent:    18%                      18%                         11%
Good:          54%                      52%                         43%
Fair:            22%                      23%                         31%

Those rains last week, especially in the drier areas, made a marked improvement in the overall crop condition rating.

95% of the crop is in the pod setting stage versus 91% last year at this time and the 5-year average of 95%. The Southern states are showing leaf dropping ahead of last year at this time and the 5-year average, with the exception of Mississippi, which is well ahead of last year but lagging the 5 year average somewhat.

It is hard to see anything bullish in these reports. At this stage of the growing season, warmth is needed to finish things up. Farmers are now watching the weather and hoping that Mother Nature does not surprise with any early hard freeze as this year's crop growing season winds down. It seems to me that the frost angle is about all that the bulls have left at this stage.

Strong Dollar finally catches up to Gold

Geopolitical events had been supporting gold of late but those can only carry the metal so far when several fundamental factors were acting as a strong headwind against a further rise in its price.

We have mentioned falling inflationary fears as evidenced by the TIPS spread, falling commodity prices as evidenced by the GSCI and a stronger Dollar, not to mention a stock market than continues to make all time highs.

We have had reports of falling demand for gold but those were being ignored as traders chose to focus on events in Ukraine, Iraq/Syria, and to some extent, Gaza.

Apparently today was the day that those who were buying gold based on geopolitical events threw in the towel.

With the US Dollar trading above the 83 level on the USDX and with crude oil plunging nearly $3.00 at one point, if inflation fears were the reason some were buying gold, those fears evaporated today. The ISM number only fueled further talk of higher interest rates in the US. When one contrasts that sort of talk with chatter that the ECB may actually move to lower rates, it is not hard to understand why the Dollar is rallying. Rates in Japan are certainly not going to move higher any time soon.

The Aussie has been moving in a tight range between 94 and 92 against the US Dollar for nearly 5 months now. It will be interesting to see whether this key commodity-based currency will undergo some sort of breakout from that range.

From a technical analysis standpoint, the Dollar is in a strong trending move higher as evidenced by the ADX over 50. While the Euro is trading down slightly, the bulk of the gains in the Dollar today have been at the expense of the Yen, and the various commodity currencies.

Gold fell through chart support at last week's low and remains below that level as I type these comments. There is some light support near the $1260 level with stronger support near $1240. Indicators are negative at the moment with the ADX indicating the lack of a clear trend with more of a grinding type move lower.

Beans are trading higher as bulls talk up the recent rains as being excessive and hurting quality in some locations. That remains to be seen. Early harvest reports from the South are strong. The market may have to wait until closer to harvest before deciding to wring out what is left of any weather premium in both corn and beans. Heat/warmth now to finish the crop are what are needed as rains have ensured adequate moisture in most growing regions. I have not seen any forecasts of an early killing frost at this point.

We'll get the crop condition/progress reports this afternoon as they were not published yesterday due to the Labor Day holiday.