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May 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.

Commodities Finish The Month Stronger

May 31, 2013

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Corn, beans, and wheat all closed higher to finish the month strong.  The close marks a 10 ½ cent monthly gain for December corn, an 80 ¾ cents gain for November soybeans, and a 25 ½ cent monthly loss for wheat.

Export sales were strong for new crop corn and soybeans on this morning’s report with China taking the majority share in both products.  The weather fears are still helping the market trend higher and soybeans have crossed above some major technical levels including the long term trendline resistance.

November Soybeans – (Red 50 Day MA, Blue 100 Day MA, Grey 200 Day MA, Green Trendline Resistance)

November Soybeans

The preventive plant story is still the main market chatter but as we have said in previous letters we do not believe it will be a major supply disruptor at this time.  What happens if we lose 3 million acres of corn?  Three million acres at 92% harvest rate and a 160 national average yield is only 441 million bushels.  The government currently has corn usage jumping 1.785 billion bushels from last year, mostly coming from feed.  At current prices we don’t see a reason for usage to be much higher than last year especially with the cattle on feed numbers reported.  A total production loss of 441 million bushels would not be astronomical by any means and this fear trade may be overdone.

There are rumors that the USDA might be planning to extend the prevent plant dates but again these are still only rumors.  Producers need to carefully consider the financial impact of taking preventative planting and talk with their insurance agents.  Basic prevent plant coverage only pays 60% of the guarantee and removes the possibility of receiving the harvest adjustment.  If you are considering taking the prevent plant payment please call us immediately to discuss your options in detail.

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. You may not place an order to buy or sell commodity futures contract by e-mail. 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 LLC will not disclose anyone's position due to their confidential and proprietary nature. Recipients assume the risk of reliance on and indemnify and hold EHedger LLC harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information. The contents of this e-mail message and any attachments are intended solely for EHedger LLC's customers and brokers. This communication is intended to be and to remain confidential. Any duplication or distribution without the express written consent of EHedger LLC and this disclaimer is prohibited. If you are not an intended recipient of this message or if this message has been addressed to you in error, immediately alert the sender by reply e-mail and delete this message, its attachments, and any related messages from your computer and destroy any hard copies. If you are not an intended recipient or this message has been addressed to you in error, you are prohibited from delivering, distributing, disclosing, printing, copying, or relying on this message and/or any attachments. Opinions are solely those of the author and subject to change at any time, and are not a solicitation or recommendation to buy or sell commodity futures or commodity options. Past performance is not indicative of future results.


Ethanol Production Lower

May 30, 2013

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Grains and oilseeds traded both sides of the market before closing mixed to slightly lower.  It was a rather slow news day with little changes made to the forecast and a neutral ethanol report.  December corn finished 3 cents lower at $5.62 ¾, November soybeans ¾ of a cent higher at $12.89 ¼, and July wheat 4 cents lower at $6.98 ¾.

Ethanol production was down 12,000 bbl from last week but ethanol stocks were also down 0.1 again.  This brings total stocks to 16.0 which is the lowest level since November 2010.  The lower ethanol stocks could be considered friendly except for the fact that we are still not keeping the weekly pace needed to reach the USDA’s projected corn usage for ethanol (assuming a conversion rate of 2.8 gallons per bushel).  Estimated profit margins using Iowa prices have been positive for 11 weeks in a row which correlates with the uptick in production.  In summary ethanol production and stocks have shown some recent strength but not enough to worry about a large change in corn ending carryout for the 2012 marketing year.

Even though the grains closed lower they are still well above their intra-day slumps.  This rally into the close may have been propelled by the weak US Dollar Index.  The dollar fell 600 points back to its 50 day moving average.

Dollar Index

Dollar Index

November soybeans are finding some resistance near the 200 day moving average as well as the psychological $13.00 level.

November Soybeans

November Soybeans

July corn has been unable to fill the recent gap and is once again losing some of its premium to December as exports remain slow.

July Corn

July 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. You may not place an order to buy or sell commodity futures contract by e-mail. 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 LLC will not disclose anyone's position due to their confidential and proprietary nature. Recipients assume the risk of reliance on and indemnify and hold EHedger LLC harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information. The contents of this e-mail message and any attachments are intended solely for EHedger LLC's customers and brokers. This communication is intended to be and to remain confidential. Any duplication or distribution without the express written consent of EHedger LLC and this disclaimer is prohibited. If you are not an intended recipient of this message or if this message has been addressed to you in error, immediately alert the sender by reply e-mail and delete this message, its attachments, and any related messages from your computer and destroy any hard copies. If you are not an intended recipient or this message has been addressed to you in error, you are prohibited from delivering, distributing, disclosing, printing, copying, or relying on this message and/or any attachments. Opinions are solely those of the author and subject to change at any time, and are not a solicitation or recommendation to buy or sell commodity futures or commodity options. Past performance is not indicative of future results.


Strong Planting Progress Means Lower Corn Prices

May 20, 2013

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Grains and oilseeds settled mixed awaiting the planting progress report.  The bearspreading in corn left the July contract down 3 ¼ cents while December corn was up ¾ of a cent.  Soybeans had the opposite, heavy bullspreading brought July soybeans up 16 cents while November finished 3 ¼ cents lower.  That makes a new high for the year in the July – November soybean spread. 

After the grain markets closed, the USDA released their weekly crop progress report.  Corn is now 71% planted which is well above the average analyst estimate of 60-65%.  Tonight’s market should be a rather weak open for corn with the potential for a gap lower.  The first downside target is the 2012 low of $5.11.

December 2013 Corn

Soybean plantings are now 24% which is still below the 5 year average of 42%.  July soybeans continue to trend higher from old crop soybean tightness.  Meal has been leading the way.  There are rumors of more cargoes getting shipped from South America into the US but overall the futures market doesn’t seem to care.

Winter wheat conditions were down another point from last week at 31% good-to-excellent.  Spring wheat is 67% planted compared to 76% on average.  Wheat will likely follow corn’s lead during the overnight markets.

We still have a lot of year left but with corn plantings basically caught up and the soil moisture levels recharged we still believe the long term price trend will be lower.  For now we want to stay the course with an emphasis on downside protection hedges.  If you would like to receive the EHedger grain commentary including complete hedge recommendations, please sign up using the link.

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. You may not place an order to buy or sell commodity futures contract by e-mail. 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 LLC will not disclose anyone's position due to their confidential and proprietary nature. Recipients assume the risk of reliance on and indemnify and hold EHedger LLC harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information. The contents of this e-mail message and any attachments are intended solely for EHedger LLC's customers and brokers. This communication is intended to be and to remain confidential. Any duplication or distribution without the express written consent of EHedger LLC and this disclaimer is prohibited. If you are not an intended recipient of this message or if this message has been addressed to you in error, immediately alert the sender by reply e-mail and delete this message, its attachments, and any related messages from your computer and destroy any hard copies. If you are not an intended recipient or this message has been addressed to you in error, you are prohibited from delivering, distributing, disclosing, printing, copying, or relying on this message and/or any attachments. Opinions are solely those of the author and subject to change at any time, and are not a solicitation or recommendation to buy or sell commodity futures or commodity options. Past performance is not indicative of future results.


Fieldwork Pressures Prices Lower

May 15, 2013

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Grain markets settled lower Wednesday after a choppy double sided trading session.  December corn closed 6 ¼ cents lower at $5.31 ¾, November soybeans 4 ¼ cents lower at $12.09 ¾, and July wheat down 17 cents at $6.93 ¾.  Now that the May grain and oilseed contracts are off the board, the ongoing fieldwork is starting to put downward pressure on crop prices.

As we climb the wall of worry we are getting past the obstacles that have keep a premium in new crop prices.  A lot of the points we have talked about are starting to catch steam.  We can all worry about late planting but when it gets to be 80 degrees outside soil moisture has been recharged, the rains can suddenly turn from a bullish story to bearish.  We have talked to many producers and industry contacts that have caught up or are nearly finished planting and it is still only May 15th. The next crop progress report should show a large jump in planting progress.  December corn prices look poised to test their lows again in the near future.

December 2013 Corn Daily Chart – 5 and 34 day simple moving averages and exponential oscillator

December 2013 Corn

Meanwhile November soybeans continue to find support near the $12.00 level.  NOPA crush was only 120.11 million bushels which proves that domestic demand is still being rationed at these prices.  The July –November soybean spread continues to have wild intra-day swings settling just above a $2 premium today (see chart below).  If we are importing South American soybeans and crush is slowing down, we could see this spread start to remove some of that premium.

July-November Soybeans 15-minute barchart – green line is prior day’s settlementJuly-November Soybeans

For now we want to stay the course with an emphasis on downside protection hedges.  If you would like to receive the EHedger grain commentary including complete hedge recommendations, please sign up using the link.

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. You may not place an order to buy or sell commodity futures contract by e-mail. 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 LLC will not disclose anyone's position due to their confidential and proprietary nature. Recipients assume the risk of reliance on and indemnify and hold EHedger LLC harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information. The contents of this e-mail message and any attachments are intended solely for EHedger LLC's customers and brokers. This communication is intended to be and to remain confidential. Any duplication or distribution without the express written consent of EHedger LLC and this disclaimer is prohibited. If you are not an intended recipient of this message or if this message has been addressed to you in error, immediately alert the sender by reply e-mail and delete this message, its attachments, and any related messages from your computer and destroy any hard copies. If you are not an intended recipient or this message has been addressed to you in error, you are prohibited from delivering, distributing, disclosing, printing, copying, or relying on this message and/or any attachments. Opinions are solely those of the author and subject to change at any time, and are not a solicitation or recommendation to buy or sell commodity futures or commodity options. Past performance is not indicative of future results.


WASDE Report Bearish

May 10, 2013

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Grains and oilseeds closed lower on Friday on higher carryout forecasts were reported in the May WASDE report.  December corn settled 12 cents lower at $5.29 ½, November soybeans down 13 ½ cents at $12.05 ½, and July wheat down 19 ¼ cents at $7.04 ¼.
 
I have included a snapshot of the report in the table below.  Basically the biggest numbers that jump out as bearish are the US carryout estimates for 2013.  They lowered corn yield to 158 bpa which is roughly 6 bushels below trendline yield.  Some will say this is not low enough but to the opposing point we believe demand is slightly overstated.  The USDA has total feed usage jumping 21% from 2012 which we find unrealistic. Our total feed estimate is 4.65 billion, a mere 5.6% increase from 2012 which is only because we think prices are heading lower and demand will eventually pick up from increased feed margins. The government believes prices are going much lower as well. They have the average price of corn pegged at $4.30.  This is an estimate of average corn prices for new crop 2013.  Obviously we started the year at much loftier price levels and have to fall well below $4.30 for that number to be realized.  More to that point, there is no indication that the higher feed usage predicted by the USDA will happen other than the fact that they believe prices will be lower and demand will have to "fill-in" to meet the supply. The longer we stay in the mid $5 range for Dec corn the less likely we will see those demand numbers met or else corn will only have to get even cheaper later in the marketing year.
At the same time we feel that soybean exports are also well overstated when South America’s crop is the size it is this year.  We feel that exports will be closer to 1.3 billion bushels which is 150 million less than the USDA is predicting.  For now we want to remain with the EHedger recommendations.
 
USDA U.S. Wheat Production        
  Friday 2013-2014 Estimate Average Range 2012 Production  
All Wheat 2.057 2.059 1.832 - 2.165 2.269  
All Winter What 1.486 1.477 1.359 - 1.555 1.645  
Hard Red Winter 0.768 0.765 0.676 - 0.834 1.004  
Soft Red Winter 0.501 0.496 0.473 - 0.524 0.420  
White Winter 0.217 0.217 0.204 - 0.226 0.222  
           
USDA U.S Grain Carryout        
  Friday 2012-13 Estimate 2012-13 Analyst Estimate April 2012-13 USDA Friday 2013-14 Estimate 2013-14 Analyst Estimate
Soybeans 0.125 0.124 0.125 0.265 0.239
Corn 0.759 0.754 0.757 2.004 1.973
Wheat 0.731 0.731 0.731 0.670 0.627
Soyoil 1.635 N/A 1.700 1.530 N/A
Soymeal 300,000 N/A 300,000 300,000 N/A
           
USDA World Carryover        
  Friday 2012-13 Estimate 2012-13 Analyst Estimate April 2012-13 USDA Friday 2013-14 Estimate 2013-14 Analyst Estimate
Wheat 180.2 181.5 182.3 186.4 186.4
Corn 125.4 125.8 125.3 154.6 156.3
Soybeans 62.5 62.3 62.6 75.0 70.5
Soymeal 9.33 N/A 9.71 9.85 N/A
Soyoil 3.41 N/A 3.42 3.25 N/A
           
USDA World Grain Production        
  Friday 2012-13 Estimate 2012-13 Analyst Estimate April 2012-13 Estimate    
Argentina Corn 26.5 25.4 26.5    
Argentina Beans 51.0 50.9 51.5    
Brazil Corn 76.0 75.2 74.0    
Brazil Beans 83.5 82.8 83.5    
Ukraine Corn 26.0 N/A 20.92    
 
We think December corn is headed lower but there is a chance that it tries to fill the technical gap shown below. If you need to catch up on sales, place orders at or below $5.52.December 2013 Corn
Please feel free to sign up for the newsletter to receive the monthly outlook and full hedge recommendations.  Have a great weekend!

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. You may not place an order to buy or sell commodity futures contract by e-mail. 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 LLC will not disclose anyone's position due to their confidential and proprietary nature. Recipients assume the risk of reliance on and indemnify and hold EHedger LLC harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information. The contents of this e-mail message and any attachments are intended solely for EHedger LLC's customers and brokers. This communication is intended to be and to remain confidential. Any duplication or distribution without the express written consent of EHedger LLC and this disclaimer is prohibited. If you are not an intended recipient of this message or if this message has been addressed to you in error, immediately alert the sender by reply e-mail and delete this message, its attachments, and any related messages from your computer and destroy any hard copies. If you are not an intended recipient or this message has been addressed to you in error, you are prohibited from delivering, distributing, disclosing, printing, copying, or relying on this message and/or any attachments. Opinions are solely those of the author and subject to change at any time, and are not a solicitation or recommendation to buy or sell commodity futures or commodity options. Past performance is not indicative of future results.

Choppy Range Bound Prices Expected This Week

May 01, 2013

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Markets were lower ahead of the Weekly Export Sales Report tomorrow morning.  December corn settled 6 ¼ cents lower at $5.50 ½, November soybeans 14 ¼ cents lower at $12.09 ¼, and July wheat 10 cents lower at $7.21.

 

We are still in a weather market.  Prices were heading lower while everyone was expecting normal yields, now it appears that we have reversed that decline and have priced in some weather premium.  The next two weeks are going to be crucial for price action.  If we continue to see heavy rain amounts into late next week we can easily see corn taking out the highs of $5.70. If we get some warmer/drier weather we can see corn taking out the lows of $5.17.  The latest GFS model is forecasting a drier model in the 10-15 day range for much of the Midwest which helped contribute to today’s weakness.

 

While many are touting a corn rally from the slow planting pace, we haven’t heard much chatter about how bearish this could be for November soybeans.  A 2-3 million acre swap from corn to soybeans would be very bearish for the November contract.  Where are the latest bullish headlines for soybeans?  We have bird-flu in China, lower than expected Chinese GDP, a large South American soy crop, and soybean export sale cancellations originally scheduled for China.

 

As a producer with guaranteed bushels we want to any rallies as 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.

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