Monthly Archives: October 2014

India And Pakistan Tensions Heating Up

India and Pakistan have a long history of conflict, but it’s been some time since things were considered “tense.” New skirmishes along the border are now threatening to derail the relatively peaceful relations the two have maintained for years now. The problems started in May when a group of Pakistani militants attacked India’s consulate in Afghanistan. The Islamic terrorists had planned to kill the India’s staff at the embassy, but security forces were able to kill the terrorists first. The would be assassins belong to a group known as Lashkar e Tayyiba (Army of the Pure), or LeT for short, which has in the past served Pakistan’s military intelligence service. This fact has India accusing the Pakistan government of “sponsoring” the attack and India on high alert assuming another attack is in the works. That led to India beefing up its border security along the ceasefire line in Kashmir, known as the “Line of Control.” Since that time, the zone hasexperienced some of the worst fighting its seen in over a decade. Over 20 people have been killed in the crossfire just this month, and hundreds of civilians on both sides have been forced to flee. Some of this heightened aggression is due to new Prime Minister Narendra Modi’s hardline stance against terrorism, a pledge that was part of his winning campaign platform. India border commanders stepped up these aggressions even more this month, though it’s not really clear why? The last time the two countries went head to head was the 1999 Kargil War, at which time then US President Bill Clinton put pressure on Pakistan to stand down after they put their nuclear forces on high alert. Yes, Pakistan has nuclear weapons, a lot more now than what they had in 1999. India has a nuclear arsenal as well, with missiles that can launch them all the way to China, a key Pakistan ally. So far, India has shown no signs of backing down. In fact, Modi has cancelled all diplomatic talks with his Pakistani counterpart, Nawaz Sharif. As for Sharif, he was Pakistan’s prime minister during the 1999 war. After he gave in to US pressures to stand down, he was overthrown by a military coup. He only returned to power in 2013 so also faces a lot of pressure to stand his ground. And this time around, the US has much less influence in the region.

What About Diesel Fuel?

We’ve had a lot of folks writing in asking about diesel and specifically if they should be locking in large quantities on the price break. I definitely think the break has been a buying opportunity, but I wouldn’t get overly aggressive. In other words you might want to hold off on buying extra-large quantities.  Several good sources actually believe we may have a bit more room to the downside. On-Highway_Diesel_Fuel_PricesPersonally, I’m target​ing​ late-Jan into mid-February as our potential lows in the marketplace. The “wild-card” is obviously OPEC and how they will elect to play their hand. Remember, it was Saudi Arabia that surprised the market by vowing to keep production levels high in order to put pressure on US energy companies. There is now some speculation the recent slide might be too painful for other OPEC members, and prompt then to cut production in oder to prop up prices. The next OPEC meeting is scheduled for Nov. 27 and should shed some additional light. I should point out there are new reports circulating that show major US production would not be impacted until crude oil prices fell below $40. Citigroup recently released a report saying it would be closer to $50 when the big producers in the US would have to stop. Thoughts are about 25% of the producers would have to stop if prices fell below $70. What we have to understand is the so called “break-evens” are much higher in other parts of the world: Saudi Arabia’s break-even is thought to be somewhere between $85 and $90 a barrel; Russia between $100 and $105; Iraq between $110 and $115; Iran between $120 and $130; Venezuela between $150 and $160; Libya between $160 and $175.

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Corn & Soybean Harvest, Winter Wheat Planting

Corn harvest jumps +15% from the previous week and now stands at 46% complete.  We are still running well behind our 5-year average of 65%, but we are quickly moving in the right direction. The areas currently running the furthest behind are: ND 30% behind; IA 29% behind; WI 27% behind; SD 26% behind; MN 22% behind; NE 19% behind; and IL 13% behind. 

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Soybean Harvest: US producers pushed harvest from 53% complete last week to 70% complete this week.  Even though they made huge strides, we are still running about 6% behind our 5-year harvested average of 76%. The states lagging the furthest behind are: MI 29% behind; IN 25% behind; OH 23% behind; and WI 16% behind. 

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The USDA shows the winter wheat crop at 84% planted, which is on average as a whole, but states like IL are still running 34% behind their traditional pace. In their first estimate of the year, the USDA rated 59% of the winter wheat crop in “Good-to-Excellent” condition compared to about 61% rated “Good-to-Excellent” last year.

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Comparing Soybeans …”Past to the Present”

As you can see there have been some drastic changes in the “stocks-to-use” ratio during the past five years.  Something else to keep in mind is that the 2014/15 crop might actually end up over 4.0 billion bushels, especially if yield is moved to 48.0 bushels or higher.   

2010/11 = Planted 77.4  million acres; Harvested 76.6 million; Yield of 43.5; Total Production 3.329 billion; Total Use 3.279 billion bushels; Stocks-to-Use ratio 6.6%; Avg. Farm Price $11.30

2011/12 = Planted 75.0 million acres; Harvested 73.8 million; Yield of 41.9; Total Production 3.094 billion; Total Use 3.155 billion bushels; Stocks-to-Use ratio 5.4%; Avg. Farm Price $12.50 

2012/13 = Planted 77.2 million acres; Harvested 76.2 million; Yield of 39.8; Total Production 3.034 billion; Total Use 3.099 billion bushels; Stocks-to-Use ratio 4.5%; Avg. Farm Price $14.40  

2013/14 = Planted 76.8 million acres; Harvested 76.3 million; Yield of 44.0; Total Production 3.358 billion; Total Use 3.478 billion bushels; Stocks-to-Use ratio 2.6%; Avg. Farm Price $13.00

2014/15 = Planted 84.2 million acres; Harvested 83.4 million; Yield of 47.1; Total Production 3.927 billion; Total Use 3.583 billion bushels; Stocks-to-Use ratio 12.6%; Avg. Farm Price $9.00-$11.00

Source: USDA historical data and current projections 

Comparing Corn …”Past to the Present”

I took a quick look back this weekend and compared the basic data from the past-five crop years.  As you look through the numbers, its not real hard to see why prices are so much lower.  I’m also worried that 2015 “total production” may actually work itself higher.  

2010/11 = Planted 88.2  million acres; Harvested 81.4 million; Yield of 152.8; Total Production 12.447 billion; Total Use 13.054 billion bushels; Stocks-to-Use ratio 8.6%; Avg. Farm Price $5.18 

2011/12 = Planted 91.9 million acres; Harvested 84 million; Yield of 147.2; Total Production 12.360 billion; Total Use 12.528 billion bushels; Stocks-to-Use ratio 7.9%; Avg. Farm Price $6.22

2012/13 = Planted 97.2 million acres; Harvested 87.4 million; Yield of 123.4; Total Production 10.780 billion; Total Use 11.111 billion bushels; Stocks-to-Use ratio 7.4%; Avg. Farm Price $6.89

2013/14 = Planted 95.4 million acres; Harvested 87.7 million; Yield of 158.8; Total Production 13.925 billion; Total Use 13.546 billion bushels; Stocks-to-Use ratio 9.1%; Avg. Farm Price $4.46

2014/15 = Planted 90.9 million acres; Harvested 83.1 million; Yield of 174.2; Total Production 14.475 billion; Total Use 13.655 billion bushels; Stocks-to-Use ratio 15.2%; Avg. Farm Price $3.10-3.70 

Source: USDA historical data and current projections 

For the First Time… Memory Loss​ In Alzheimer’s Reversed

This wicked disease is scheduled to become a much larger problem as the baby boomers move beyond the age of 60. Alzheimer’s was first discovered some 100 years ago, according to Science Daily, ​but ​this might be the first time researchers have been able to reverse the memory loss caused by the disease. It has always been thought of as an irreversible brain disease that slowly destroys memory and thinking skills, and eventually even the ability to carry out the simplest tasks. In most people with Alzheimer’s, symptoms first appear after age 60.

Estimates vary, but experts suggest that as many as 5.1 million Americans may now have Alzheimer’s disease. In a nutshell it w​as the patien​ts​ who were treated with a complete lifestyle change that displayed the largest improvements. Basically a team of scientist​s at​ UCLA’s Center for Alzheimer’s Disease Research and the Buck Institute for Research on Aging, came up with a 36-point program which included changes to diet, increased brain stimulation, optimal sleep, more exercise, particular medications, and specific daily supplements. I wish I could guarantee results, but I thought with so many of our family members suffering from this horrific disease, keeping this information on file might come in handy one day. Below are some of the main parts of the program that Science Daily recently outlined. Keep in mind this program was administered by trained medical professionals and was personalized for each patient. This should only be used as a generality of the program that recently helped improve the symptoms of Alzheimer’s disease.

 

  • Eliminating all simple carbohydrates and gluten
  • Eliminating processed food
  • Eating more vegetables and fruits
  • Eating wild-caught fish
  • Meditating twice a day
  • Starting yoga
  • Increasing sleep to between seven and eight hours each night
  • Daily supplementation of coenzyme Q10, fish oil, melatonin, methylcobalamin, and vitamin D3
  • Improving oral hygiene by introducing an electric flossing tool and an electric toothbrush
  • Reinstating hormone replacement therapy as needed
  • Fasting for a minimum of 12 hours between dinner and breakfast
  • Not eating at least three hours before bedtime
  • Exercising for at least 30 minutes, up to six days each week

It’s worth noting the only major side effects of this therapeutic system were overall improved health and an improved body mass index, a stark contrast to the side effects of many drugs. See all of the details and the complete study at “Reversal of Cognitive Decline: A Novel Therapeutic Program” by ​clicking HERE You can also read more about the disease and its symptoms at the National Institute on Aging.

NEW Farm Bill Might Not Save As Much As Originally Anticipated

Low crop prices are causing some to rethink the savings associated with the newest version of the Farm Bill. The fear is that taxpayers may end up paying more to subsidize farmers in this bill than the previous. What I am hearing is that the Farm Bill passed back in February may NOT save the $14 billion it once touted. The problem is the bill was constructed when commodity prices were significantly higher and now that prices are much lower it may trigger greater subsidies. If you remember, the law replaced direct payments with programs tied to price and revenue. This is very preliminary, but some are estimating that a drop in crop prices, combined with subsidies added in the new farm bill, may more than double payments in 2015 from what lawmakers had originally anticipated. There are early talks that payments could reach $6.5 billion for this year’s harvest, or about $4 billion more than anticipated. Thoughts are the new bill means that government subsidies could both be potentially larger and quicker to kick in. Previously, corn farmers were paid when the price fell below $2.63 a bushel. The new support may trigger much higher. Some sources are saying government payments may average between $30 and $40 per acre in 2014 and 2015 compared to a $24 per acre average from 2007 to 2013.  Wheat, the fourth-biggest crop, is also below the threshold for subsidies. Rice and peanuts crop prices may also spur payments. Personally, I think it’s a bit early to start blaming Congress​ – ​we have to remember that no one has a crystal-ball in regard to price.

Some Thoughts On Soybeans In Brazil & Argentina

I’ve talked extensively as of late about the concerns in Brazil and how producers may not plant as many soybean acres (as the trade originally thought) if the moisture levels don’t start increasing.  There is also some concern that producers in Argentina might ease back as well. Beside the “weather” there is also some political concerns in both nations.  The Presidential election in Brazil this Sunday (October 26th) could go either way. This is causing the Brazilian markets to be extremely volatile. Each poll or survey that is released showing the pro-business challenger Neves gaining momentum causes the Brazilian real to rally. Each survey or poll showing current President Rousseff gaining ground causes the real to slump. Remember, many global investors believe Rousseff has caused four years of sluggish growth and heavy-handed economic policy, so the thought of a NEW government is giving ALL Brazilian assets a boost.  In Argentina, with prices so low, some producers are simply saying they don’t want to take the risk in planting alongside all of the “unknowns” being handed down from the government.

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Canadian Hog Issues Could Benefit US Producers

Canada’s hog industry is currently facing a host of problems that could end up being a big benefit for US producers. Much like the US, the country is suffering from a supply shortage that stems from the PED virus. The US mostly relies on Canada to supply young feeder pigs, but Canadian supplies are short, with sows and gilts down -25% from where they were ten years ago. With lower supplies coming from Canada, live pig prices in the US could well see an increase. That will be especially so if PEDv hits again this winter. Canada was not impacted by 

the virus nearly as bad as US producers were last year, but they’ve had cases already showing up in Eastern Canada and there are worries they could suffer a larger outbreak this year, which would further limit available exports to the US. Even without the threat of disease, expanding the Canadian herd will be a lot easier said than done. The country has implemented some very restrictive policies lately. In number one US pig supplier, Manitoba, hog farmers are required to install an anaerobic digester before launching any expansion plans. The digester basically breaks down organic material in order to reduce phosphorous and nitrogen runoff into Lake Winnipeg. The systems are prohibitively expensive though, from what​ ​I have heard it runs about $800,000 plus. As you can imagine, this expensive requirement has pretty much brought herd expansion in the province to a grinding halt. The country’s exports of pork products have been impacted by the Russian import ban, but not as much as anticipated. A lot of the lost volume has been made up by higher China, Korea and Mexico imports​​. Lower export demand could be a blessing in disguise for Canadian processing plants when it’s all said and done​ though​. New federal regulations on hiring temporary foreign workers is hitting packers fairly hard, leaving most extremely understaffed. Without enough workers, resulting production is a fraction of most factories’ output capacity. The government in June began capping the number of foreign workers that were allowed to make up a company’s work force at 30%. They also implemented a $1000 fee for temporary worker applications and cut in half the length of the stay granted for workers under the program. Some companies have been forced to shift that capacity to US plants in order to fill contracted orders, a trend that is expected to continue, especially since the cap on foreign temporary workers will fall to just 10% in the next couple of years. Moral of the story, if Canadian producers have to start turning away new business, the next logical place buyers will be turning is to US suppliers.

Corn & Soybean Harvest, Winter Wheat Planting

US Corn Harvest estimated at just 31% complete vs. the 5-year average of 53%. Many of the important states are still running 20-30% behind their average.

  • IA 19% harvested vs. 53% on average  (-34% behind)
  • MN 16% harvested vs. 47% on average  (-31% behind) 
  • ND 7% harvested vs. 37% on average  (-30% behind)
  • SD 19% harvested vs. 45% on average  (-26% behind)
  • WI 11% harvested vs. 35% on average  (-24% behind)
  • IL 43% harvested vs. 63% on average  (-20% behind)
  • IN 31% harvested vs. 51% on average  (-20% behind)
  • MI 10% harvested vs. 30% on average  (-20% behind)
  • NE 28% harvested vs. 45% on average  (-17% behind)
  • MO 58% harvested vs. 75% on average  (-17% behind) 

 

US Soybean Harvest reported at 53% complete vs. the 5-year average of 66%.  As you can see form the graphic below the northern states made big progress last week and are now running ahead of schedule (Minnesota and the Dakota’s).  On the flip there are still a few major producing states that are running way behind:

  • MI 23% harvested vs. 60% on average  (-37% behind) 
  • IN 31% harvested vs. 62% on average (-31% behind) 
  • IL 37% harvested vs. 66% on average (-29% behind)
  • WI 42% harvested vs. 64% on average  (-22% behind) 
  • MO 25% harvested vs. 46% on average  (-21% behind)
  • OH 36% harvested vs. 56% on average  (-20% behind)  
  • IA 61% harvested vs. 77% on average  (-16% behind)  

 

US Winter Wheat Planting continues to stay slightly ahead of pace at 76% complete vs. the 5-year average 77%. The biggest problems obviously remain in the eastern parts of the Midwest.IL 22% planted vs. 59% on average  (-37% behind)

  • IN 37% planted vs. 57% on average  (-20% behind) 
  • MO 24% planted vs. 40% on average  (-16% behind)
  • MI 60% planted vs. 75% on average  (-15% behind)
  • OH 55% planted vs. 63% on average  (-8% behind)
  • KS 78% planted vs. 84% on average  (-6% behind)