El Ni?o and the Money Flow - Tuesday, 13 May 2014

Last Friday the USDA released its May WASDE report.  The 2014-2015 estimated corn crop is a record large number of 13.935 billion bushels up from last year’s estimate of 13.925 billion bushels.  The soybean numbers also show big expectations with 3.635 billion bushels estimated.  Of course these yields are reliant on normal May planting dates and conditions as well as a good summer growing season. 

The feed usage number is expected to begin to decline due to the slow rebuilding of the cattle herd numbers, mostly as a result of record values for feeder cattle and a short supply of calves.  The lower cost of feed and improving drought conditions though are boosting producer’s confidence in the profitability of livestock production again.



The current weather forecast continues to indicate the likelihood of an El Niño weather pattern developing during this growing season.  The impact this weather event would have on crops is arguable knowing that historically the ending results of this sort of weather pattern can vary considerably.  Some analysts feel that the corn yield could hit close to 167 bushels per acre, giving us a 2 billion bushel carryout.  There are others though that believes the yields could actually attain totals closer to 190 bushels per acre putting the carryout closer to 4 billion bushels based on current projected demand numbers.

The cold air pushing out of Canada to the south will be bringing cold temps to sections of Montana, North Dakota and into the Plains states.  Some areas may reach overnight lows of 20 to 30 degrees.  This will also cause daytime temps to remain below normal causing further delays in the dry down time and hampering the warming of the soil.  Temperatures are expected to remain cool for the remainder of the week.


Watching the flow of money has become increasingly important to the grain markets.  Since the beginning of 2014 the value to the U.S. dollar has been slipping, it is actually close to falling through a major support just below 79.000.  Kevin Van Trump of the Van Trump Report believes that “if the U.S. dollar breaks loose to the downside we could in fact see even greater rotation of money flowing back into commodities.  On the flip side, a bounce off this level to higher ground could bring on greater commodity headwinds and prompt some to start easing back into their macro type hedges.  We are clearly at a turning point in the market.  The Japanese Yen, the Euro and even the Canadian Dollar have all been strengthening vs. the U.S. dollar…that is until the past couple of sessions.  So is this simply a minor short covering bounce for the U.S. dollar or could an earlier than anticipated rise in rates start to add more long term strength?” 

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