The title of this brief article is just a funny scene in the movie talladega nights. It is a comedy so this is meant as humor,yet true from my thought that there are certain aspects of the market that at present are difficult to figure out. I invite people to watch the movie, it is funny. regarding the markets. We have broken steadily all week. The US/China talks ended with nothing solid to report. The african flu in China has expanded to 4 locations. The number of animals culled at present is as high as 50,000. This is a drop in the bucket compared to the total number of hogs. However, it is expanding,that is the problem. It is my belief they will not be able to contain this. Looking at the fundamental numbers, the basis. At present US beans are deep discount to the board. The US meal market is weak. The ARG, and BRAZILIAN meal basis at discounts to the board. The global availability of cheaper protein sources is ample. Yet, people want to speak of a tight meal market. WHY? I have no answer. The last time beans were at $850, nov 30 2015, meal was 255-259 dollars per ton. At present meal carry will be a record. In addition the pro farmer tour is estimating yield at 53 bu to the acre. If true and realized the carry could grow to over 800 mil bu. Thats right folks 800 million bu. Plus global stocks at , pick a number 110-120 mmt. Numbers never seen before. Meal under this reality is way to high in my opinion. The markets are sales on any further rally.
The Corn up a bit after a down week. The markets are bothered by the excellent weather. The pro farmer tour is estimating a potential final yield as high as 177 bu to the acre. This is a bu lower than the usda and opens the door for a reduction in carry if the demand is solid.. This is my contention. The market will start to build a good demand base at these levels. This could draw down the stocks and ultimately keep the corn stocks in a friendly position. The market will rely on the Arg crop to come in large to relieve the global shortfall. This will take some time. It appears to me corn has a window to appreciate. Especially if any weather concerns arise.
” IT IS BETTER TO BE FEARED THAN LOVED IF YOU CANNOT BE BOTH ” NICCOLO MACHIAVELLI
BE WELL