We went through a little exercise today with Texas soil moisture data and condition indexes for each district. Using the posted moisture readings released by the TX NASS, we then inserted yields for each district, broken into dryland and irrigated. Keeping abandonment unchanged from the July report, we came up with production of 4.173 Mb for Texas, which is dead on with the USDA estimate at 4.1 Mb. Only district 7 showed soil moisture readings above average. It must be noted that current soil moisture numbers have changed much since early June, and one must not put too much emphasis on numbers now vs numbers in mid June, or say in early Aug. The crop can maintain or rebound from very poor moisture levels, and we have seen that a good “finish” is often better for yields than a good start. Tomorrow we will analyze Texas again, but will use condition indexes and see how this production method compares to using soil moisture.
Condition figures this week continue to confuse us, especially in North Carolina, South Carolina, and Alabama. The yields there seem much too low when looking at conditions. Other states seem to agree with the USDA July yield estimates.
The Dec contract has come back to exactly the halfway point between the major June 2012 low and the Aug 2013 high. This market seems to be reverting to the mean price, even with a scarce supply going into harvest. It would not surprise us to see a pivot around this level, with something in the high 70s on the low side and maybe 87c for the ups. With full harvest still a few weeks away, and a pipeline that is almost empty, odds are fairly good for a bounce into what we perceive to be a good selling opportunity. Specs and farmers look to sell the 8500-8700 area.
One of the momentum indicators, relative strength, is at 38 today, and is within a band of values that have seen the spot market make important lows going back to Dec 2011. The low dates and RSI readings are: 14 Dec 2011 at 33; 23 Feb 2012 at 37; 4 June 2012 at 26; 28 Sep 2012 at 35; 8 Nov 2012 at 38; 24 Apr 2013 at 39; and most recently 31 May 2013 at 34. Only one of the lows registered an RSI reading outside the range of 34-39. That occurred at what was the definitive multi-year low of June 2012. The current market decline appears to be more routine, more like the other 6 lows in this study period. One other minor note is that most of the price lows occurred one or two days prior to the actual low for the RSI. With values now reaching the mid 30s, history indicates a low of importance may be close at hand.