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April 2013 Archive for EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

Corn Open Interest Declines

Apr 30, 2013

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Monday’s limit up move was followed by more strength overnight but couldn’t hold through the day session for corn and soybeans. December corn closed 2 ¾ cents lower at $5.56 ¾, November soybeans 5 ¾ cents lower at $12.23 ½, and July wheat 14 ½ cents higher at $7.31.

Corn was only 5% planted as of Monday’s report which was slightly less than the market had been anticipating.  Despite this slow planting pace, corn was unable to close higher even after testing the critical $5.70 level in the December contract.  Yesterday we discussed the potential for this rally to be based on short covering.  Today that was confirmed with corn open interest down by a substantial 32,338 contracts!  This is on top of the 35,978 contracts of corn liquidated on Friday.  In a declining open interest market with sharp moves we can’t rely on the direction holding course.  This is because when we see that many contracts leaving the market in a disorderly "fear-trade" fashion it can result in mispricing as traders drive the market higher or lower than they would when they are not in liquidation.

Obviously the market has been pricing in a strong weather premium.  This can be seen in the new crop corn-soybean ratio as many acres are expected to switch from corn to soybeans. The new crop corn-soybean ratio is at the lowest it has been since January.

November Soybeans / December CornNovember Soybeans - December Corn

Meanwhile wheat was the strongest market on the board today. Much of the strength was based on crop reduction fears.  The latest crop ratings show wheat at only 33% good-to-excellent compared to 64% last year.  Spring wheat is only 12% planted compared to 37% on average.

Rains are still expected for much of the Midwest this week.  In a weather market sentiment leads the moves and right now the uncertainty seems to be enough for large money to flow to the buy side.  As a producer with guaranteed bushels we want to use these opportunities to make additional hedges, especially if you were able to buy the short dated calls that we recommended last week.  Please feel free to sign up for our newsletter to get our recommendations emailed to you.  Have a great week!

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Fresh Lows for New Crop Corn & Beans

Apr 23, 2013

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It was another day of sharp losses for grains and oilseeds.  December corn closed 10 ¼ cents lower at $5.22 ¾, November soybeans 6 ½ cents lower at $11.96 ¼, and July wheat 7 cents lower at $6.95 ½.

Corn’s planting progress was reported at 4% yesterday afternoon, below the average guess of 5-6%. Although this is below estimates, the market is clearly telling us that this is not an issue as of April 24th.  The heavy precipitation has recharged much of the drought areas of the Midwest.  The forecast is showing warmer and dryer weather in the extended outlook. December corn and November soybeans both hit new lows for the move today.  We expect markets to continue making a series of lower lows with small rebounds in-between barring any major weather concerns.

December Corn Daily - 1 step up, 2 steps down.December Corn Daily

The next support for Dec corn looks to be at its June 2012 low of $5.11.

December Corn Weekly –approaching the June 12 lows.December Corn Weekly

November soybeans dropped to new lows for the move settling below the $12.00 level.  This is the lowest level since June 2012.

November Soybeans WeeklyNovember Soybeans Weekly

The Short-Dated New Crop calls that we recommended to buy were filled today at 4 cents (please sign up using link for full recs).  These are a just-in-case trades to protect our hedge levels should we see unfavorable weather between now and early summer.  If you still would like to place these orders please call your broker.  This is a low-cost approach to re-owning your sold bushels between now and their expiration date on June 21st.  Have a great rest of the week!

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Planting Progress Behind Pace

Apr 22, 2013

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Grains and oilseeds closed lower Monday with the largest setbacks occurring in the December corn and July soybean contracts.  December corn closed 14 cents lower at $5.33 which means we are within 8 cents of reaching new lows for the move again.  July soybeans were 18 ¼ cents lower at $13.64 ¼.  November soybeans traded below $12.00 for the first time since June 18th, 2012.

Temperatures are expected to climb while rain amounts decline over the next couple of weeks which has the market forward pricing December corn lower.  Planting Progress shows corn at only 4% complete which is well behind the average pace of 13% at this time of year (1986-2012 average).  This is the same planting pace we were on in 2008 which ended up yielding 153.9.  In 2009 we were only at 5% planted on this week and we ended up yielding 164.7.  With much of the Midwest recharged with moisture we are still estimating a trendline yield of 157.6.

Even if we believe that final yield is not currently in jeopardy the market may think otherwise.  The average guess for today’s planting progress was 5-6%.  Since it came in under those estimates we may see a slightly stronger start overnight not to mention the last three weeks have started out lower on Monday but had a decent rebound Tuesday.  If we do see the traditional turn-around we would like to use those opportunities to get caught up to the EHedger recommended sale levels (please sign up using link for full recs).  The top of the range seems to be the 30 day moving average of $5.50 while the trendline support comes in at $5.30.

December Corn on a daily chart.December 2013 Corn

Meanwhile, November soybeans are making a series of lower lows.November 2013 Soybeans

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Corn-Bean Ratio Still Higher Than 2008

Apr 19, 2013

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Corn and wheat closed higher while soybeans were lower, basically the opposite of yesterday’s market action.  December corn settled at $5.47 which is up 5 ¾ cents from yesterday.  November soybeans were 10 ½ cents lower at $12.13 and July wheat 7 ½ cents lower at $13.82 ½.

Weather is still playing a major role in price as many acres of corn are expected to switch to soybeans from delayed planting.  The corn to soybean ratio is down to 2.22, tying the low from late March just before the stocks report rocked the markets.

Corn-Bean Ratio for 2013Corn-Bean Ratio 2013

I have also included a chart of the new-crop corn-bean ratio for 2008 since this was the last year we had a true spring planting problem only that year it persisted all the way into late June.  Obviously we got below 2.0 for much of that spring and early summer as massive flooding prevailed across the Midwest.  To put that into perspective, that ratio would equal corn getting back above $6.06 ½ while November soybeans remained flat.  That price is a long way off from here but we have recommended purchasing some relatively inexpensive short-dated July corn calls to protect our hedges just in-case the planting problems persist far longer than what is forecasted.  I can also see the very plausible scenario where the ratio falls into line with 2008 but it’s because of a falling bean market, not from strong corn.  A lot of that may depend on old crop soybean tightness from export demand.  Either way it is still only April 19th, there is plenty of time for the weather to improve and for both markets to "unprice" this weather premium.  We recommend staying with the current EHedger sale levels.  For more details on our current hedging strategy, please sign up for our newsletter absolutely free using the link at the top.  Have a great weekend!

Corn-Bean Ratio for 2008Corn-Bean Ratio 2008

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Old Crop Bean Sales Strong

Apr 18, 2013

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July corn closed with a double digit loss while July soybeans had a double digit gain.  The heavy bull spreading of soybeans is related to the strong export demand.  Corn planting delays are still a market concern despite today’s selloff.  At the same time that extra precipitation is helping the subsoil moisture problem.  Our outlook remains the same.  We want to stay hedged and look to buy some short-dated calls to help protect the upside should spring problems persist.

Export sales were better than expected for wheat, at the high end of expectations for corn, and middle range for new crop soybeans.  We did see an additional sale announcement for new crop soybeans on the 8am announcements. The old crop bean sales were 339,400 MTs or 12.47 million bushels, well above what was needed to keep pace with the USDA estimate.  In fact, we are less than four million bushels away from meeting their estimate of 1.350 billion.  We still have 108.5 million undelivered bushels some of which may end up getting rolled to 2013 before it is all said and done.  Still, we are in a very tight old crop situation and that is why futures and basis are holding strong.  What is surprising is the fact that European countries are still purchasing US soybeans, South America will obviously have to pick up most of that business very soon or else we will have to see more price rationing.  With a huge South American crop this year, we should see a "long tail" of exports that will compete with our new crop.

May corn had the largest selloff today without much "market talk" as to why.  This could be from large funds selling their bull-spreads ahead of first notice or some other reason we aren’t aware of yet, either way it certainly led the rest of the contracts lower and we have to watch out for signs of long liquidation.

Planting delays are expected to keep us well behind pace on Monday’s crop progress report. However the planting delays ultimately affect yield, they certainly affect sentiment.  If the planting delays continue into May the markets may get antsy and start putting additional premium into prices. For this reason we want to protect our hedges using the short-dated new crop July calls.  For more details on our current hedging strategy, please sign up for our newsletter using the link at the top.

December 2013 Corn

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Evening Grain Commentary | 4-17-13

Apr 17, 2013

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Grain markets were mixed on Wednesday with heavy bear spreading in corn and bull spreading in soybeans.  The threat of late planting has traders buying corn and selling beans with the idea that some acres will have to switch if planting delays continue.  Our outlook remains the same.  We want to stay hedged and look to buy some short-dated calls to help protect the upside should spring problems persist.

Soybean basis was stronger again Wednesday on slow producer selling.  Traders may also be trying to get long before tomorrow’s export sales report is released with expectations of "stronger-than-needed" old crop soybean sales.  So far we contracted 1,334,800,000 bushels for export while the USDA is estimating total demand to be 1,350,000,000.  With 21 weeks left in the marketing year we have to average less than a million bushels a week in sales to stay under the current estimate. Last year we managed 11.6 million per week during this timeframe, but obviously this was a different year/situation.  South American production is much larger than last year but some traders are worried that shipments may not be quick enough to suit China’s near term appetite and we could see more old-crop US sales as a result.  On the flip side, the March 1st stocks count found more bushels than expected and crush is showing signs of slowing down.  That large South American production can quickly turn into a long tail of exports which may lower new crop US bean demand.  The bottom line - old crop/new crop soybean spreads once again hinge on the upcoming export demand.

I read an interesting article today about late planting written by Bob Nielson of the Purdue Agronomy Department.  Please follow the link below to read about some historical data on late planting.

The Planting Date Conundrum for Corn

However the planting delays ultimately affect yield, they certainly affect sentiment.  If the planting delays continue into May the markets may get antsy and start putting additional premium into prices. For this reason we want to protect our hedges using the short-dated new crop July calls.  For more details on our current hedging strategy, please sign up for our newsletter using the link at the top.

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Evening Grain Commentary

Apr 15, 2013

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It was a rough start to the week for the grain markets as corn, soybeans, and wheat all finished sharply lower. Poor economic data out of China caused their markets to trade lower and we then saw follow through selling by morning in the US grain markets. The real story of the day however was the massive sell-off in gold and crude oil. There have been numerous reports since Friday that the country of Cyrus is being forced to liquidate their gold holdings in order to help fund the country’s massive bailout. This situation has caused investors to wonder if there will be more countries in similar situations in the near future.

This morning’s export inspections were extremely disappointing for soybeans at 4.81 million bushels when the trade was looking for 14.5 million bushels. Corn exports were a little better than expected at 14.70 million bushels and wheat was below the trade estimates at 23.47 million bushels.

NOPA crush was also released this morning and contributed to the sell-off in the soybean market as the crush was reported to be 137.08 million bushels when the trade was looking for closer to 140 million bushels.

Today’s weather reports were mixed with the morning run showing a warmer dryer pattern for the majority of the corn-belt for next week’s time frame followed by a slightly wetter pattern during the mid-day. We will continue to pass along any updates as we closely monitor the weather situation as it pertains to planting progress.

Corn is now 2 percent planted which is being the average pace of 6% (average of 1986-2012 planting at this time of year).  Traders were looking for 4-5 percent planted which may be slightly supportive on the overnight session. Winter wheat conditions were left unchanged from last week.

There was a gap fill in November soybeans going all the way back to June 2012.  With the $12.00 psychological level so close, we may see some support near here. If we don’t see that $12.00 level hold, it could be that next "resistance" point where heavy hedge pressure is found.  Have a great week and please call if you have any questions!

November 2013 SoybeansNovember 2013 Soybeans

If you missed our 2013 Corn Outlook, Click Here.

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

2013 Corn, Sub $4?

Apr 12, 2013

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In light of the new growing year we wanted to give a broad outlook of where we feel prices are going and why. Corn is coming off of all-time highs and we feel the strong prices of old crop have been a deterrent for many producers when it comes to pricing new crop. The complacency of "holding out" for better prices is certainly not what we recommend for a year like this. We have reason to believe corn could fall below $4.00 before the end of 2013. Here’s why...

Total corn usage of US supplies was down sharply this year (6.6%) obviously due to the drought which brought us to record high prices and heavily rationed demand.  The question now is "how quickly will that demand return?"

We looked at data going back to 1960 to see how quickly demand recovered. There have been 12 times where total usage dropped by more than 5% below the trendline. Only twice the usage bounced back the following year.

The slowed demand caused the price to drop on average by 15.7%.  The table on the left shows the correlation between usage and price for the following years for those 12 occurrences including the ethanol era. This analysis gives us a reason to believe that 2013 will follow the same pattern.

The current trendline usage is 12.221 billion bushels. Trendline yield is currently 157.6 bpa and surveyed corn acres are 97.28 million which gives us total US production of 14.028 billion bushels.  Last year’s carryover will add 800 million bushels creating a total surplus of 2.627 billion bushels.

There are many who do not believe corn usage will be that low.  With bullish circumstances, the usage could potentially get to 13.100 billion (see table below). Even using higher demand estimates we still end up with a total carryover of 1.743 billion which would warrant sub $4.00 corn in our opinion. Last time we saw similar ratios was in 2009 when corn averaged $3.62 for the year.  To get back to a record demand, just look at how substantial the increases would have to be.  Corn for ethanol would have to jump almost 10%, feed usage 11%, and exports would have to more than double.

ETHANOL DEMAND:

The big hurdle for ethanol demand is still the blending wall.  The maximum amount of ethanol we can blend is approximately 13.4 billion gallons in 2013.  At today’s bushel to ethanol conversion ratio of 2.8 gallons, that suggests a total corn usage of 4.786 billion bushels.  There are certain political issues that could change this number. With the mandate currently at 13.8 billion gallons obviously that is more than the industry needs which is why ethanol RIN prices are skyrocketing. The debate over the mandate and ethanol blending levels is just heating up. The petroleum industry is lobbying to reduce the mandate claiming the added costs of RIN prices are translating to higher prices at the pump.  The Renewable Fuels Standard lobbyists argue that the blending wall is artificial and higher levels of ethanol should be blended. This debate over the blend wall is going to come to a head soon and any changes will be worked into our forecast but for now we are staying with a rather conservatively high estimate of 4.950 billion bushels for ethanol.

EXPORT DEMAND:

If we get a price break we think the demand will return to its 10 year average of 1.842 billion bushels, our current estimate is pegged at 1.8 billion.  The northern hemisphere has had great winter weather and world wheat feeding is expected to remain high.  Also South America is expected to have an additional 5 million metric tons of corn compared to what they had last year.

 

FEED DEMAND:

Feed is estimated to represent 37.4% of total demand in 2013. While export and ethanol demand can rebound relatively quickly, feed demand is going to be slower to rebound. The massive drawdown of cattle inventory will take a long time to rebuild.  The average gestation period is 283 days.  The March report showed total cattle on feed down 7% from 2012 and placements down 14%.  We still put in a conservatively high demand estimate of 4.900 billion bushels even though we think it will be a stretch to reach.

Now that we have reflected on demand let’s move to production.  There are some that would argue that it is impossible to reach trendline yield this year with the memory of last growing season.  The long term trendline suggests that it is unlikely to see yet another yield shortage in 2013 (see chart below).  In 2012 we had a 21% reduction in yield below trend.  There have only been two other years since 1960 that we have seen over 20% decline below trendline – 1983 and 1988.  In the following years the national average ended up above trendline yield.

In fact, we need to see a yield reduction of 5% or more to meaningfully alter demand and carryout.  Let’s take a look at how unlikely it is to get such reduction.  Since 1960 we have had 12 years where yield has dropped below 5% of trendline including last year.

With the current supply and demand outlook we see the potential for sub $4.00 December corn prices before the end of 2013.

For the Complete Report, please Click Here.

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Wheat Gains on Weather Concerns and Export Sales

Apr 09, 2013

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Grains and oilseeds were stronger to start the week except for new crop corn.  December corn closed 3 cents lower at $5.32 and is still in the same range it was last week.  Wheat held strong support from Chinese interest and freeze worries in the US.

A wire story reported that the CNGOIC confirmed the sale of 14-16 cargoes of US SRW to China last week.  Still no confirmations were made from the USDA yet during the 8am announcements; maybe the sales have been slow to report.  HRW also found support from the chances for freeze damage on Wednesday and Thursday.  Front month corn likely found support from wheat but has trailed its rally.  May corn is now trading at a 79 cent discount to May Chicago wheat after trading at a high of 15 ¼ cents over less than a month ago!

May Corn – May Wheat SpreadMay Corn - May Wheat Spread

Fund positioning has a lot to do with these major moves.  The "managed money" had been aggressively buying corn in the weeks leading up to the March 28th reports.  The latest Commitment of Traders report shows that the "managed money" net long corn position dropped by 98,245 contracts as of Tuesday, April 2nd!  Why is this important?  For one it can help explain why every small rally corn has had was immediately met with heavy sell pressure… a huge underwater position has been trying to GET OUT.  Now that the funds are liquidating (or have liquidated), which group is going to step in to support or even rally this market again?  End users are coming back into profitability but rebuilding demand is a slow process, especially on the livestock side.  The northern hemisphere has had excellent wheat growing conditions while South American corn and soybean production is expected to be substantially higher than last year.  The bottom line is we don’t expect prices to trend higher unless we see another weather event.  In fact, we expect new crop corn and soybean prices to trend lower as more uncertainty is priced out of the market as time goes on.  On Wednesday the USDA will release the April Supply and Demand report.  The average guess is calling for corn carryout to be 812, soybean carryout 136, and wheat carryout 727.  We will have our long term analysis in tomorrow’s letter including our own 2013 Supply and Demand estimates and price projections.  For now we want to stay with our current hedge recommendations. Have a great week!

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

More Corn Liquidation

Apr 04, 2013

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Old crop corn fell to new lows for the move Thursday on more liquidation. Wheat was supported on more rumors of Chinese purchasing while soybeans closed lower on heavy bear spreading and bird-flu worries.  There are no changes to our market outlook.

Although wheat held better support than corn and soybeans, we still haven’t seen confirmation of those rumored export sales that keep popping up in the headlines.  There were no 8am sale announcements again and the weekly wheat sales were less than anticipated.  That doesn’t mean we aren’t going to see additional exports, especially with the competitive price, I am just pointing out that this could be more "headline chasing".  The bird flu story is still the main headline for soybean/soymeal weakness.

Old crop corn looks very bearish on the chart and that underwater long position held by the managed money could still lead the way to further liquidation and downside pressure for corn.  Any strength we have seen so far has quickly been sold. We still haven’t had any USDA sale announcements since the large setback in prices.  The market has done its job rationing and now we are possibly looking at a 900 million to 1 billion bushel corn carryout this year.  What’s bearish for old crop is also bearish for new crop, especially with 97.28 million acres of corn expected this year.  For now we will have to watch the Commitment of Traders report for fund position trends as well as the 14 day outlook as any favorable planting weather could add to the weakness or vice-versa should there be delays.  Have a great Friday and weekend!

May CornMay Corn

May SoybeansMay Soybeans

May Corn-May Wheat SpreadMay Corn - May Wheat Spread

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Wheat Rallies from Competitive World Pricing

Apr 03, 2013

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Wheat rallied sharply Wednesday over rumors that China may be buying US wheat.  This helped bring corn prices higher on the day but soybeans still closed with double digit losses.

The rumors that China may be buying US wheat could be true or it could be just "headline chasing" as large fund position changes usually warrant.  The fact that US wheat was underpriced to European wheat is probably the best explanation because that spread was "out-of-line".  The managed money has been net-short wheat and this could be simply short covering.  When the report was released old crop corn was virtually untradeable because it was lock limit.  Some were synthetically getting out and some were just selling wheat to get spread.  May wheat is coming back to a healthy premium to May corn closing at exactly +55 cents.  That spread had been trading as low as 15 ¾ cents UNDER corn before we saw huge quantities of corn for feed switch to wheat.

May Corn – May Wheat SpreadMay Corn - May Wheat Spread

We know that there has been a large net-long corn position underwater.  Corn open interest was down substantially yesterday which is to be expected with the price action.  We saw Tuesday’s rally quickly turn negative as it was their first chance to lay off some of their position.  We think this could continue to weigh on corn prices unless wheat has some sort of bullish story we aren’t aware of yet.  We still haven’t had any USDA sale announcements since the break.  Will demand come in fast enough to account for the additional bushels?  The market has done its job rationing and now we are possibly looking at a 900 million to 1 billion bushel corn carryout this year.  That could put extra downward pressure on new crop, especially with 97.28 million acres of corn expected.  For now we will have to watch the Commitment of Traders report for fund position trends as well as the 14 day outlook as any favorable planting weather could add to the weakness or vice-versa should there be delays.  Have a great rest of the week!

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Volatility from Report Aftershocks

Apr 02, 2013

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Grains and oilseeds have found a day of reprieve after two days of heavy sell pressure.  May corn closed 1 ¾ cents lower, May soybeans 3 ¼ cents higher, and May wheat 6 ¾ higher.

We are still feeling the aftershocks of the report with a wide-range, double-sided market today.  What appeared to be a "dead-cat-bounce" overnight was immediately met with heavy sell pressure which leads me to believe the liquidation isn’t necessarily over yet.  

May Corn 15-Minute ChartMay Corn 15-Minute Chart

We know that there is a large net-long corn position underwater.  Open interest (open contracts traded) actually rose on Thursday but declined in an equal fashion on Monday.   There were no USDA sale announcements this morning even after the near dollar break in corn and 63 cent break in soybeans in just two trading sessions.  Will demand come in fast enough to account for the additional bushels?  The market has done its job rationing and now we are possibly looking at a 900 million to 1 billion bushel corn carryout this year.  That could put extra downward pressure on new crop, especially with 97.28 million acres of corn expected.  For now we will have to watch the Commitment of Traders report for fund position trends as well as the 14 day outlook as any favorable planting weather could add to the weakness or vice-versa should there be delays.  Have a great week!

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Corn Drops Sharply on Expanded Limits

Apr 01, 2013

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May corn closed 53 cents lower on expanded limits Monday after closing lock-limit down on Thursday on a bearish stocks report.  Soybeans and wheat also closed with double digit losses on follow through selling from last week.

The March 1st stocks report showed another 400 million bushels of corn more than the market was expecting and is the catalyst for the 93 cent drop in May corn in only two trading sessions!  The open interest was up sharply after Thursday which could be from traders getting synthetically flat using the Sept and December futures, or it could be from heavy pricing.  It will be important to watch open interest over the next couple of days because there is a massive fresh long position that is now underwater and hasn’t liquidated yet.  I have included a weekly chart of the May corn contract.  We haven’t been at current levels since June.  Previously corn was finding support at its 50% retracement level but has now gapped below that level and looks poised to reach the 68.2% retracement at $6.25 ½.

May Corn (Weekly Chart)May Corn (Weekly)

May Corn (Daily Chart)May Corn (Daily)

December corn is also making a series of lower highs and looks poised to reach its June low of $5.11, especially if the weather cooperates over the next couple of weeks and planters get rolling.

December Corn (Weekly Chart)December Corn (Weekly)

Acres were in line with expectations for corn at 97.28 million.  Soybean acres were less than expected at 77.12 million and wheat acres were slightly higher than expected at 56.44 million.  These numbers were a little bit lower than we would have guessed and think there is room for an increase before the July report.  Take Illinois for example, their total corn and soybean acreage was down 250,000 acres from 2012, a little low by our estimates.

Today’s crop progress report showed wheat at 34% good-to-excellent, down from 58% this time last year.  Corn planting reports are still a few weeks away from being reported.

For now we still like our current levels for hedge recommendations, please feel free to sign up to receive our letter full time using the signup link below, including hedge recommendations. Have a great week!

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

 

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