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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.

EHedger Closing Grains Commentary 10/12/09

Oct 12, 2009
 










































 
SETTLEMENTS 10/12
         
 
Dec 09 Corn
381   
+ 18 ¾   
Nov 09 Beans
999 ¼
+ 35 ¼
Dec 09 Wheat
495 ½  
+ 27 ½
Dec 09 KC Wheat
511
+ 26
Dec 09 Min Wheat
526 ¼     
+ 22 ¼   
Dec 09 Meal
306.1
+ 8.8
Dec 09 Oil
36.62
+ 1.42
 
 
 
 
 
 
 
 
 





 

 
Soybeans, corn and wheat all closed sharply higher. Widespread frost/freeze over the weekend and a wet harvest outlook rallied prices overnight. Strong commodity buying and a weaker dollar added more buying. Wet weather continues to slow harvest and more rain is expected next week. Frost/freeze is expected across much of the belt next week and this is also causing some concern. With little grain harvested so far, this has caused many in the industry to question the size of the crop. This combined with strong commodity buying and a complete lack of farmer selling has helped rally our markets very sharply ahead of harvest. I will not claim to know what the crop size will be, but right now it still looks like we will see national yields for both corn and soybeans increase from today’s estimates. I have included a link to a story released by the University of Illinois and I think it is helpful for determining yield loss due to frost/freeze. The link is: http://www.ehedger.com/2009/10/12/u-of-i-report-on-corn-frost-damage/   
Whether or not prices decline from here is a different story, but it does look like the crop is out there. Maybe I am completely wrong about the crop size, time will tell. However, as a producer you should look at your individual situation and decide what is best for you. If your crops look good and you can make good money at current levels then you should make some sales. You should also be looking making sales for next year’s crops. We have had our customers mostly sold for ’09/10 since the rally last spring, and now we are working on the ’10-11 crop year. Inputs are much lower than last year and many producers will have break-even levels around $3.25 or lower this year. This is another rally that should be taken advantage of. As a marketer this is when you should be locking in some profits and avoid having to sell below break-even levels. Once harvest picks back up, prices could really struggle once again. Corn is on an 80-cent rally and soybeans are on a 120-cent rally. Even if you are wildly bullish, it would not be a good idea to buy this rally right ahead of harvest. Wheat rallied $2/bushel right ahead of harvest only to break nearly $3/ bushel afterwards. People blamed disease and wet weather and quickly lowered their yield estimates. The fact was that money was entering the market and without hedge pressure the market rallied. Once harvest was underway, the market quickly broke back to contract lows. This is very similar to what the corn and soybean markets are doing. I am not saying that prices will go to new contract lows, but I am saying that prices have rallied very sharply because “new money” has poured into our markets and there hasn’t been any hedge pressure to cap the rally. Once harvest picks up (and it will), we will see hedge pressure pick up and this could create a quick break. I will be the first to admit that I didn’t see such a strong rally coming. But, I do think this rally is a gift to the farmers that missed last spring’s rally and for farmers to make sales for next year’s crop. Give E Hedger a call if you would like to discuss the best strategy for your situation.
 
 
 
 
 
 
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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. 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 E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
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COMMENTS (10 Comments)

Anonymous
Where were prices at when you bought those high inputs?
12:06 PM Oct 13th
 
Anonymous
Allendale Pegs Corn Crop at 13.127 BB
Firm: Good August Weather Allowed Crops to Make Up for Spring Planting Delays

7:58 AM Oct 13th
 
 
 
 
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