US Soybean Crop Report Wishful Thinking
Jul 22nd, 2008 | By Kevin Kerr | Category: Featured, Financial NewsCorn and soybeans fell nearly 3 percent yesterday, according to Reuters, “as risk premiums built into the market in case of crop failure peeled away as favorable weather in the grain belt boosted production prospects.”
Soybeans have been extremely volatile to say the least, says commodities expert Kevin Kerr in Whiskey and Gunpowder.
The problem, says Kevin, is that all the rosy crop reports won’t come to fruition once harvest time rolls around. He says they’re just a lot of wishful thinking…
Jeff Caldwell, in a great article for Agriculture Online, hits the nail on the head:
“The USDA’s June acreage report didn’t tell the whole truth. Data were taken before flooding washed the productivity away from thousands of acres in Iowa, Illinois, Indiana, Minnesota, Missouri and Wisconsin.
“While another USDA report later this month will aim to get a better idea of what those acres will raise, University of Illinois economists are looking to trim some of the uncertainty from the ‘08 crop year forecast by applying weather models and historical data.
“‘Corn and soybean yield prospects are always uncertain, and that uncertainty is magnified this year due to much of the crop being planted later than usual, extensive flood damage and extensive replanting in some areas,’ according to a report by University of Illinois economists Scott Irwin, Darrel Good and Mike Tannura.”
Bottom line is nobody knows what lies in store for crops from now until harvest, and there are a lot of hot, dry days ahead. My feeling is that this pullback in beans is an incredible opportunity, but one that could still see further pullbacks, so options are the best way to go.
One thing I always stress with everything I do is to work a good defense as well as an offense. Let’s face it, no football team ever won the Super Bowl just because they had a great offense; they had to have good protection for their star quarterback, too. Using risk management in every portfolio is vital, not only a trading portfolio but an investment portfolio too.
It’s very important to understand the difference between an Investor and a Trader. I happen to have both an investment portfolio and my trading portfolios, two very different animals. I treat them differently, allocate risk differently and have different goals for each.
Source: It’s a Wild World
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Kevin Kerr a former subscriber to the Daily Reckoning and Whiskey & Gunpowder e-letters.
The soybean fell yesterday because Argentina re-established their grain exportation. This, right after the big war of export taxes between the Argentine government and the farm sector.
An insider says waiting in the silos and ports, there is close to 30 million tons of soy, sunflower, corn and wheat waiting for a balance in the exportation market.
Yesterday (Monday) was the first day of operations in the Rosario Market of the Santa Fe province in Argentina. This is the heart of the grain market for Argentina and in this cereal market alone, the price jumped to AR$970 (US$315) per ton.
Don’t worry; Argentina will bounce back, again, and again, and again and again.
Master Fu