Adviser sales for the 2011 corn and soybean crops crept higher by 3% and 1%, respectively, this past month. Meanwhile, hedges placed to protect 2012 corn crop inventory were reduced by 5% on October’s price break and 2012 soybean hedges declined by 3%.
The lack of significant fundamental news has provided few attractive opportunities to advance hedges. In addition, the unpredictability of outside influences, especially as they relate to the European debt situation, has reduced overall activity in commodities.
"Timing plays an important role in the level of sales we’ve recommended, often trumping price," says Dan Manternach of Doane Outlook Hedger. "Generally, the more uncertainty about supply and demand, the less likely we are to take a very aggressive approach to sales."
In the case of corn, another factor is Doane’s best assessment of future direction in ending stocks forecasts relative to usage, he says. It was Doane’s view that USDA estimates of corn and soybean yields would decline in the November WASDE report, resulting in tighter ending stocks.
"We were correct about the further decline in yield," Manternach says. "What we did not anticipate was a 100-million-bushel reduction in projected feed use. We still have trouble reconciling USDA’s numbers on grain-consuming animal units. Nonetheless, we are comfortable with 50% priced, given supply tightness and expectations for demand to meet USDA’s forecast."
If you have any questions or comments regarding the track record information, contact Mark Soderberg or Scott Harms of Archer Financial Services, Inc., at (800) 933-3996.
- December 2011