6/10 07:30 CDT June 10 U.S. soy, wheat, corn highlights - USDA
6-10-2008 07:30 June 10 U.S. soy, wheat, corn highlights - USDA

June 10 (Reuters) - The U.S. Agriculture Department issued
the following key U.S. crop information in its monthly world
supply-and-demand report.
The data includes last month’s forecast for comparison.
SOYBEANS
(Million bushels, except where noted)
2006/07 2007/08 2008/09 Projections
Actual Estimate May June
SOYBEANS
Planted (mln acre) 75.5 63.6 74.8 74.8
Harvested (mln acre) 74.6 62.8 73.8 73.8
Yield/acre (bu) 42.7 41.2 42.1 42.1
Production 3,188 2,585 3,105 3,105
Crushings 1,806 1,840 1,850 1,840
Exports 1,118 1,110 1,050 1,050
Ending stocks 574 125 185 175

SOYBEAN OIL (mln lbs)
Production 20,487 21,250 21,090 20,975
Exports 1,889 3,100 2,650 2,650
Ending stocks 3,085 2,885 2,679 2,660

SOYBEAN MEAL (thou short tons)
Production 43,027 43,784 43,985 43,785
Exports 8,786 9,200 8,800 8,900
Ending stocks 351 300 300 300

WHEAT

Planted (mln acre) 57.3 60.4 63.8 63.8
Harvested (mln acre) 46.8 51.0 56.3 56.3
Yield/acre (bu) 38.7 40.5 42.5 43.2
Production (mln bu) 1,812 2,067 2,392 2,432
Exports (mln bu) 909 1,265 975 1,000
Ending stocks (mln bu) 456 254 483 487

WHEAT BY CLASS
(mln bushels)

Year beginning Hard Hard Soft
June 1 Winter Spring Red White Durum Total
2007/08
Production 962 449 358 227 72 2,067
Exports 530 310 220 165 40 1,265
Ending stocks
June 106 64 46 26 12 254
May 96 64 41 26 12 239

WINTER WHEAT PRODUCTION BY CLASS
(thousand bushels)
Hard Soft Hard Soft All
Red Red White White White
2007/2008 961,588 357,897 21,460 175,044 196,504

2008/09 (projected)
May 1,011,255 550,826 23,172 192,279 215,451
Jun 1,029,523 571,627 23,212 193,002 216,214

CORN
(Million bushels, except where noted)
2006/07 2007/08 2008/09 Projections
Actual Estimate May June
Planted (mln acre) 78.3 93.6 86.0 86.0
Harvested (mln acre) 70.6 86.5 78.8 78.8
Yield/acre (bu) 149.1 151.1 153.9 148.9
Production 10,535 13,074 12,125 11,735
Exports 2,125 2,450 2,100 2,000
Ending stocks 1,304 1,433 763 673

U.S. ETHANOL PRODUCTION
Ethanol for Fuel 2,117 3,000 4,000 4,000

U.S. SOY OIL FOR BIODIESEL
Methyl Ester 2,763 2,800 3,200 3,100

FORECASTS:
Analysts polled by Reuters expected the USDA report
to show the following U.S. crop data:

Corn 2007/08 end stocks…………1.429 bln bushels
Corn 2008/09 end stocks…………755 mln bushels
Soybeans 2007/08 end stocks……….134 mln bushels
Soybeans 2008/09 end stocks……….172 mln bushels
Wheat 2007/08 end stocks………….241 mln bushels
Wheat 2008/09 end stocks………….508 mln bushels
All Wheat crop 2008/09……………2.420 bln bushels
Hard Red, Winter 2008/09…………1.038 bln bushels
Soft Red, Winter 2008/09…………562 mln bushels
White, Winter 2008/09……………213 mln bushels
All Winter 2008/09…………….1.812 bln bushels

NOTES: To access a table highlighting key data released
by USDA, Reuters 3000Xtra clients can either type AGUSA in a
quote browser and hit ENTER or double-click on .

LINKS:
* USDA monthly world supply/demand report
* USDA quarterly Grain Stocks data
* CBOT soybean futures prices <0#S:>
* CBOT corn futures prices <0#C:>
* CBOT wheat futures prices <0#W:>
* NYBOT cotton futures prices <0#CT:>
* NYBOT orange futures prices <0#OJ:>
* Reuters top softs news [TOP/SOF]
* Reuters top commodities news [TOP/C]

((Washington commodities desk, +1 202 898-8415;
washington.commodsenergy.newsroom@news.reuters.com))

And on top of this very bullish report for corn and soybeans we have horrific flooding in most of the Midwest, and it will continue much of the week. Sorry about the additional mailbag but that will be up soon too. it was delayed due to market volatility.

.

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I had to clean my glasses a few times over the last few days as I looked up at one of my big trading screens in my office. After all, it’s not every day (actually anyday) we see an $11 move in crude oil.

If you add it up over a two day period we saw oil move almost $17 higher. I had to chuckle as I heard Morgan Stanley announce that $150 oil will be here by July 4th.

Talk about a lame prediction, hell I have been saying $150 oil for several months, if they want to impress me then they should tell me when it will correct. Don’t expect them to go out on a limb with that one.

It’s easy to tell someone there is a fire when you see their house burning down.

So here we are at $140 oil and gas was already at $4.50 near my house in Connecticut and that’s for regular gas. I fully expect when I go to fill up this morning that it will be over $5, easily.

Fill’er Up with a View

————-
More on my thoughts about $140 oil later this weekend. I will also be answering a lot of reader email too. So now some thoughts on the latest decisions from the CFTC. Tanner Emkhe of AGweb.com has some very keen opinions on the subject…Read on.

CFTC Writes A Good Bedtime Story

6/6/2008
Tanner Ehmke

Want a good bedtime story that will virtually put your kids to sleep in seconds? Read them the CFTC’s new initiatives to addressing the volatility in the marketplace. It’s a yawner.

Earlier this week, the Commodity Futures Trading Commission outlined their plan to address the extreme volatility in the commodity markets that has caused a lot of farmers and ranchers huge headaches - and fortunes – via gigantic margin calls. (Read more on Jim Wiesemeyer’s blog.)

And of course, let’s not forget about basis. The amount of distortion between the cash and futures markets can only be matched by the sound coming out of Jimi Hendrix’s guitar amp. Just recently, soft red winter wheat (SRW) in central Illinois was at $5.00/bushel. And the futures market in Chicago? Over $7.85/bushel for a July contract. That’s a basis wide enough to drive a truck through.

And oh, by the way, the price of food and energy isn’t getting any cheaper and the public is screaming for something to be done about it. Put another way, the public is saying, “Let’s find who’s responsible for high food and energy prices, drag them out into the street and lynch them.” That’s a lot of political pressure to deal with.

Aside from simply growing more food and producing more energy, what can really be done about the insanity of today’s marketplace? The CFTC’s initiatives outlined on Tuesday fall far short of addressing the problem.

Here’s basically what CFTC proposed: Stepping up the monitoring and reporting of index funds and swap dealers (read more about swap trades and index funds here) and holding position limits for speculators at current levels instead of raising them as planned. An investigation of the cotton market is also underway (a lot of blood was spilled when the price of cotton plunged more than 30%), lending practices in the agricultural industry are getting more scrutiny, and alternatives to managing price and basis risk are being explored for the benefit of producers.

The new initiatives will definitely provide more clarity and understanding of what’s going on in all this confusion – which is exactly what the industry needs when it’s tearing a hole in the rug while chasing its tail. But are we reaching the end of crawling out of this tar pit, or is this just the beginning?

I got the opinion of one guy who knows hedge funds pretty well. He ought to, anyway, since he works for one.

Here’s what he said: “There are so many variations on swaps. It’s probably going to be a little bit more challenging. It’ll be interesting to see how they’ll get their arms around it.”

Here’s what I heard: “This hairball of a mess is big and is only going to get bigger.”

So, what can we make of the CFTC’s blueprint? Minor tweeks around the edges of a bigger problem and an honest effort to quell the political storm, but something tells me this is hardly the end.

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Has the Helicopter been grounded, or are they going to start using a plane instead?

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Talk is Cheap and So Is the Dollar

So Mr. Bernanke has finally decided to step up and defend the dollar…Yawn.

Long live the King, King Dollar!

SO after such strong words from the Fed Chairman I expected some kind of action. After all it’s the Treasuries turf to defend the dollar, isn’t it? It’s one thing to say you want a strong dollar,it’s a much different thing to actually do something about it. If Bernanke was serious he would simply have raised rates and be done with it.

No, it seems more likely that he is trying to “prime the pump” and get investors and currency traders nervous and then have them do the heavy lifting.

Mr. Bernanke carries a big stick, that’s for sure, but will he use it? Can he use it?

I think Wall Street has a much bigger stick, (threats of insolvency, recession, etc.) Does Bernanke really want to risk a massive deep recession in an election year by raising rates on the greenback,not likely.

The risk here is that the global currency markets may just call his bluff and the Fed will fold like a cheap tent. The talk of a stronger dollar is just that, until you see higher rates, much higher.

The only way to win in the end is not only to have a strong defense it is also to have a strong offense.

Strong words are not enough, tough choices (boy are they tough) are the only way.

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Corn Crop 101

It’s still wet and ugly all over the Midwest, (see e-mail below). It’s my farmer friend and Reserve member Geb, in Waseca….Sounds like they are ok since they got the crop in the ground they are lucky, but now not being able to spray what chemicals they need to on the crop could mean it was all for nothing…

It’s June 4th…..Bad news if this rain keeps up and then the searing July heat sets in…..You will be able to put a fork in this crop if the corn isn’t tasseling and silking before then.

So how far along is the corn, not very far at all. A very rough estimate can be made by counting the leaves developed or by measuring plant height, which I did last year . However, the first solid indicator of crop progress is the average silking date.

Begin looking for silks soon after the tassels appear. Under normal conditions, 20 to 25 % of the plants in a field will silk each day. When approximately 75 % of the plants show silks, we record that date as the silking date. In a typical year, the average silking date for Iowa for example, falls between July 20 - 25…Not this year, not a chance.

Once silking dates are known, we will have a better feel for the maturity prospects for the 2008 crop. It’s a fairly simple equation, mainly because the number of days from silking to physiological maturity is more or less constant, you can estimate maturity by adding 60 (±5) days to the silking date. The obvious value of a silking date plus 60-day estimate is to compare the expected maturity date with the average frost date. This is one of the best ways to estimate “real” crop progress. Frost is a factor because harvest will be later this year and an early hard freeze can be the final nail in an already fairly well sealed coffin for corn yield.

In case I lost you at tasseling, it’s when you start seeing the stringy stuff coming out of the corn husk.

Late silking is associated with lower yields and wet grain. Trading a couple of weeks of grain fill during late July and early August for a couple of weeks in late September or early October is not a fair trade off as far as the corn plant is concerned. On top of that since farmers planted (and are still planting) late, the problems are magnified when a killing frost comes early.

I think the story is growing even worse for soybeans, at least in my opinion. More on that tomorrow.

Hey if you tune into the CBS Evening News tonight you may see me along with several other traders discussing oil prices and what the heck is going on,that’s tonight on the CBS evening News with Katie Couric.

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Ok, this just in from Dubai. Here is my appearance a couple of weeks ago at CNBC in Dubai, I was asked to come by and talk about the agriculture markets while i was there. The interview is in Arabic.

The latest on the growing crop disaster for 2008!

Forget tractor sales, buy shares of boat stocks. Farmers will need boats to tend to their crops this year as the cold, wet Spring has set up the US crop for disaster. Last night’s crop progress report tells the tale. Still far behind compared to year over year numbers… Many farmers will have to completely re-plant.

A very costly and time consuming delay, and that’s if many can even afford to replant or can get the seed and fertilizer. Bottom line: Significantly lower yields, higher demand and much higher prices. Here is the skinny on the report from my friends at Dow Jones!

CHICAGO (Dow Jones)–”The emergence of the U.S. corn crop remained well
behind average in the week ended Sunday, with very marginal progress made in
some of the top-producing states compared to the previous week, according to
the weekly progress report issued Monday by the U.S. Department of Agriculture.
U.S. soybean planting similarly lagged behind average, while emergence of
the crop paled in comparison to the five-year average, according to the USDA
report. The good-to-excellent condition rating for U.S. winter wheat remained
the same as last week while the good-to-excellent condition rating for U.S.
spring wheat rose above the five-year average.
“You’re going to have a lot of water left and a continuation of saturated
soils,” said Joel Karlin, sales manager and commodity sales coordinator for
Western Milling. “Things are not going to improve.”
Continued warm and wet weather is expected throughout the U.S. corn belt,
with windows of dryness lasting less than 48 hours, according to private
forecaster T-storm Weather.

Corn

The USDA said 74% of the U.S. corn crop was emerged, up from 52% last week
but down from the five-year average of 89%.
“You have two states that are very wet,” said Karlin, singling out the two
top producing states of Illinois and Iowa. “You need scuba gear to go out and
ride the tractor.”
In Illinois, 76% of the corn crop emerged, up from 62% last week but down
from the average of 95%.
In Iowa, 77% of the corn crop emerged, up from 54% last week but down from
the average of 93%.
“The crop is not off to a good start,” said Karlin. “Here we are, in June,
with 4.3 million acres of corn left to plant, and (approximately) 25% of the
crop hasn’t even come out of the ground yet.”
The USDA said 95% of the U.S. corn crop was planted, up from 88% last week
but down from the average of 98%. The USDA estimates that farmers will plant 86
million acres to corn this season.
Karlin expects the corn market to react accordingly to low rates of
emergence and continued wet weather.
“There is nothing in here to make the bears happy,” he said. “The
sluggishness is going to impact the planted acreage and the yield
expectations.”
The USDA said the good-to-excellent condition rating of the U.S. corn crop
was at 63%, which was within trade expectations. Traders had expected a
good-to-excellent rating of anywhere from 50%-65%.
“I’m not going to put a lot of credence into the first crop ratings of the
year,” said Karlin.

Soybean

The USDA said 69% of the U.S. soybean crop was planted, up from 52% last
week but down from the five-year average of 81%.
“They’re trying to get the corn in the ground based on the high prices,”
said Karlin. “They haven’t had time to switch the head on the combine to get
soybean planted.”
Some of the major soy-producing states are very far behind, he said.
“You can still plant corn into June,” said Karlin. “I think they’re going to
switch over (to soybeans) at the last minute.”
In Illinois, 57% of the soy crop was planted, compared to the average of
86%. In Iowa, 82% of the crop was planted, up from 72% last week but down from
the average of 92%.
The overall pace of progress fell below trade expectations. Traders had
expected anywhere from 70%-75% of the crop to be planted.
These are supportive numbers for Chicago Board of Trade soybean price action
in overnight trading and into Tuesday’s session, said Karlin.
The USDA said 32% of the U.S. soybean crop was emerged, up from 12% last
week but down from the average of 55%.

Winter Wheat

The good-to-excellent condition rating for U.S. winter wheat remained at
47%, the same as last week.
“It appears nationally U.S. winter wheat conditions improved during the
month of May and that should result in a higher yield estimate for the June
crop report,” said Karlin.
The USDA’s monthly crop report will be issued June 10.
Kansas, however, showed a drop in the good-to-excellent condition rating,
with just 47% of the winter wheat crop rated good to excellent, down from 49%
from last week.
The USDA said 75% of the U.S. winter wheat crop was headed, up from 64% last
week and down from the average of 84%.

Spring Wheat

The U.S. spring wheat crop was 93% emerged, up from 76% the previous week
and above the five-year average of 90%.
“(The emergence) is right on par,” said Karlin.
The USDA said the good-to-excellent condition rating for U.S. spring wheat
rose to 57%, up five percentage points from the preceding week.
Karlin singled out the Dakotas as partially responsible for improvement in
condition.
“The Dakotas have had some decent moisture,” said Karlin. “That’s an area
that needed it.”
In North Dakota, the good-to-excellent condition rating for the crop rose to
51%, up two percentage points from the preceding week.”

-By Ryan Davis, Dow Jones Newswires; 312-750-4117

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First of all I hope you had a good weekend, I am writing to you from the comfort of my hammock on an 80 degree day here in lovely Connecticut.

I don’t know about you but I am celebrating the first day of hurricane season as it is June 1st. And right on time,we actually have our first named storm of the coast of Mexico…Arthur.

It could be a very long season indeed. But right now, even bigger storms are brewing in Washington D.C.

First Kill All the Speculators

Oh what a tangled web we weave…So rumor has it the CFTC is going to announce new rules and regulations for commodities traders this week. The Wall Street Journal is also reporting that the CFTC is investigating not only possible oil market manipulation but also a possible run up in the cotton market by key traders, earlier this year. It all makes for very good press for the CFTC and Congress. After all the more they can shift attention away from the fact that most of this problem is their fault, and not speculators, the better off they will be. So basically they will spend 100’s of millions of dollars and accomplish nothing, as usual.

Have you heard the story of the famous Hunt Brothers? Well they tried to corner the world silver market, and they did a good job of it. That was until the rules got changed, then so did their luck.

Ok take a ride with me in my time machine back to 1980!

Ok, here we are back in 1980. Back then the warehouses of both the CBOT and COMEX only had 120 million ounces of physical silver in them, and the Hunts & partners were buying silver contracts hand over fist, and then even taking delivery!

Lamar Hunt, left, and his brothers Nelson Bunker Hunt, center, and Wiliam Herbert Hunt, right, leave federal court in New York

Meanwhile the powers that be at the Exchanges wondered how could they deliver all these contracts, when they had so little in their warehouses. They knew they could not, and this was a very big problem to say the least.

So they made a now notorious decision and changed the rules to suit themselves. At the end of 1979, the CBOT changed its rules, and stated that no investor could hold over 3 million ounces of silver contracts, and also the margin requirements were raised. Further, all contracts over 3 million ounces had to be liquidated by February, 1980.

Clearly panic was setting in. There was no doubt that a shortage of physical silver was imminent.

Now, Let’s back up a minute and be clear. I want to make sure I lay blame for this debacle squarely where it belongs, with the exchanges. The COMEX and CBOT were doing what they have always done. Namely, selling futures contracts on things which they don’t possess, and which may not even be available.

Fast forward to 2008 and we have already we have seen the exchanges raise margin requirements during our current run up in commodities, all in an attempt to cool prices. While it may have had some minimal initial impact, it’s been short lived.

Anyway, Don Stott wrote a great piece on the rest of the story of the Hunt brothers.Don Stott has been a precious metals broker since 1977, has written five books, hundreds of columns.

I almost want to start of this story with “Once Upon a Time”, because in some ways it starts out like a fairytale, unfortunately it ends as a nightmare. Enjoy the piece below by Don Stott.

“If there wasn’t a shortage, why were the exchange panicking? If there was no shortage, why were the prices going up so quickly? Didn’t matter. The Hunt’s bought more! On the last day of 1979, the price of silver was $34.45 At this point, they held 40 million ounces of physical in Switzerland, and 90 million ounces owned jointly through International Metals. Not only that amount of physical, but International Metals had contracts for 90 million more ounces, due for delivery in March 1980, from the COMEX alone. Brother Lamar, also had taken a $300 million silver position in late 1979 also.

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