Quick Take: The Ag Outlook
NEW YORK (TheStreet) -- Although many crops have been taking a hit this year on estimates of high supply, they are seeing a nice bounce today. Futures International President Gary Sandlund tells TheStreet's Jill Malandrino what he's seeing.
With corn down 31%, beans down 11% and wheat off 24% so far this year, this latest upward bump is one of the few things bulls have had to cheer about.
Due to near-perfect planting conditions and record acreage, supply is expected to be large, which is bad for the price of corn.
Although corn conditions have worsened over the past week, the ten-day weather report is rather favorable for the top 18 corn-producing states, according to Malandrino, so prices have continued to grind lower.
Sandlund, though, says that chatter is starting to emerge about the Corn Belt becoming a little too dry, causing today's pop in corn prices, since traders suspect there may be a smaller harvest than thought.
He added that forward contracts (such as the December expiration), are starting to show strong signs of life, with demand coming both from China and from ethanol fuel use.
Shifting to soybeans, favorable growth conditions have raised the good-or-excellent conditions to 65%, up from 34% last year.
Sandlund added the front-month contracts are in an "extremely tight crop situation" from last year's planting (meaning higher prices), whereas futures contracts expiring in November are trading at a big discount due to the increased supply from this year's plantings.
Malandrino observed that wheat seems to be the most in-line crop, with 70% in good-to-excellent condition. This is compared to 72% from last year.
Sandlund added that wheat is essentially a weed and can grow in a lot of adverse conditions, which makes it slightly easier to predict the future supply.
The next five to six weeks will be critical for the three crops. He concluded that whatever happens then will set the tone for the next 12 months of trading.
-- Written by Bret Kenwell in Petoskey, Mich.
Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.