I’d like to cover two related topics in today’s post…first a piece of anecdotal commentary from my grandmother who owns a farm in Illinois and second a couple COT charts.
I got an email from my grandmother over the weekend about her farm. There has been a piece of Illinois farm land in my family for I don’t know how many years, but the farmer who owns the land next to my grandmother’s farm is the one to tends to it. My grandmother just handles timing of when she sells her crop.
I’ve tried to keep up with my grandmother regarding the drought the Midwest has been experiencing the past few months and it’s impact on the land. At first it seemed Illinois farmland was holding up better than that of Indiana (the state I live in). However, In her latest email she said that farmers aren’t expecting to have any hay by September to feed the cattle. She said the entire state of IL is in worsening shape except the north-eastern portion (i.e. Chicago). Originally her crop was holding up fairly well, with the corn crop having deeper roots than previous years which allows it to endure the wind. Unfortunately, I’ve heard some farms in southern Indiana have already mowed down their crop for the year since there was little chance of saving it. It’s extremely sad what many farmers are going through this summer. Few people I’ve spoken to believe it’s too late for rain and that even if we got some it wouldn’t make a material difference on many of crops here.
Now this is just the opinions of a single person who owns a farm. It doesn’t mean this is the characteristics of other farms, but I thought you all would find it interesting as a different view than just USDA data.
Now onto the COT charts for this week….
With that being said about the worsening conditions for farmers, we are seeing historically high net long positions in feeder cattle. The highest through 2007.
We are seeing opposite action in the wheat market. With commercials extremely net short and large traders historically net long.
I look at COT data each week because I think it’s key data when evaluating various markets. It’s one of the few places you can get a glimpse of what traders are actually doing. However, the drought we in the Midwest are experiencing is considered by many a game changer. There is a chance the awful crop season is priced in to the affected futures markets but the summer isn’t over and the weather could shift the playing field at anytime.Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.