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June 2008 Archive for Outlook Today

RSS By: Bob Utterback, Farm Journal

Bob Utterback has more than 26 years of experience and offers producers a disciplined approach to marketing.

USDA takes the sting out of corn planted acres!

Jun 30, 2008
Going into the report, our expectation was for it to be a disappointment. Well, it was with 87.3 million planted acres. USDA took some of the sting out of the number by reducing the harvested percentage down to 90.3 billion bushels, which is normally around 92%. This accounted for about an 1.7 million acres loss or about ½ of the expected flood damage. One should now expect a lot less bullish news coming out of the August report.  I still expect another 1 million or so acres lost but it’s not going to be enough to make the August report explosive. While there are several other factors at work I would suggest these are the big ones for now. As I’ve been suggesting, the market going to go into a consolidation phase. Right now we are seeing profit taking and panic selling. 
From here on in the major players will be:
1.       Will the western heat move east? Since a lot of the crop is late, could we see dry weather right during pollination?
2.       My greater concern is the lateness of the crop. Will it put a lot of pressure on the maturity of the crop into harvest?  Is there any potential of early harvest problems?
3.       Will the government move forward on its concern about the heavy interest of outside money investing in commodities? I believe its coming. The problem is there is a lot of money at risk for the exchanges and once you start how much do you want restrict the market?
4.       Finally, will oil continue to rally and overpower all the bearish fundamentals? Could we see a big blow up in the Middle East over Iran weapons before President Bush goes out of office?

While there are several other factors at work I would suggest these are the big ones for now. As I’ve been suggesting, the market going to go into a consolidation phase. Right now we are seeing profit taking and panic selling. 

Give us a call at 1-800-832-1488 if you want to go over details
or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.



The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Market up sharply today in the grains!

Jun 26, 2008
The market jumped sharply today in both corn and beans. Wet weather, good export buying and an overall concern about next Monday’s USDA Acreage report where the reasons cited. I have to suggest to everyone it’s not really good for the bull to be so strong before a major report. My bias going in is it will be very difficult for this report to be bullish. Long term, the acres reduction expectation in the August USDA Supply and Demand report reflecting flood damage will eventually show up, it’s still in the future. 
Remember a bull has to be fed everyday. Once we get into July the corn and bean fields will start to look solid from the road. If the Commodity Futures Trading Commission (CFTC) is forced to move forward with regulation to limit large speculators in the oil complex it could add some definite bearishness to the July time period.
It may sound like I’m reverting back to my old bearish ways but I’m not really negative to corn and beans. I want to be a solid buyer of December 2008 corn going into the last week of July if we can get a solid sell off (say some place below $7.25 in the Dec corn). As one looks forward into the December to March time period, I believe we have the potential of having carryover below 250 million bushels or lower. This is going to force demand rationing which we are not seeing at $8 corn.
In summary: If you get big long profits, you really need to take some off the table or defend by buying a put for the report. The bigger decision you really need to decide over the next three to four weeks is how you want to position yourself for the lifetime event of multiple year selling between December and March. Now is the time to be talking to your advisor at Utterback Marketing Service to decide upon process, getting your banker lined up and having all individuals on the same page. 
Remember, with the high profits grain farmers are perceived as making we are not going to have the consumer, end user and government officials on our side as grain producers. If Mother Nature cooperates in 2009 and gives a good crop price, we could have a sharp correction by the fall of 2010 and you are going to be the one having to protect the bottom line.
Give us a call at 1-800-832-1488 if you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.


The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Tough for position traders but great for day traders!

Jun 25, 2008
The market has now adjusted from an overbought situation. Some of the bulls have taken profits on both corn and beans.  The trade is now awaiting more solid update of planted acres and yields and it is going to be disappointed with the USDA June Acreage report.  Add to this that the corn and bean crop are generally looking better from the road and it will be difficult for the market to rally in July. The only wild card now is if Congress would start to act to restrict speculative investment. 

There is growing concern that politicians are looking for somebody to blame for higher corn and fuel prices, instead of looking at themselves and our insane national energy policy. The big long speculative funds in the market are getting the blame for high prices and Congress will eventually do something due to public pressure. The answer is simple; to get prices long-term lower we have to raise prices to such a high level that usage will be rationed and investors will be motivated to find new sources of energy due to high profits.  The problem is who’s going to get elected on a strategy of short- term pain for long-term benefit

Overall, I expect price trends to continue to be a short-term high between now and early July and a sideways to choppy affair for most of July to early August.  This makes great markets for day traders but a difficult job for position traders. 

Corn will be the dominant commodity between August to early next year to rally. Bottom line: I like being long corn via short puts, long calls or long futures.  In regards to beans, my convictions are not as strong. I see the potential of larger acres being bearish but potential for yields closer to 40 bu. being bullish. When I sum it up I don’t believe we can go to $20 on current fundamentals but neither can we get below $10. This implies to me producers would be better off taking the $15 beans and lay off risk to the upside with a 4 to 5 vertical and being done with beans.
Give us a call at 1-800-832-1488 if you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

The market is simply catching its breath!

Jun 23, 2008
For some time now we said there was the potential for a mild correction as we moved closer to the USDA acreage report. We expect the report will be neutral to slightly bearish because it’s not going to reduce acres as big as the trade would like. It will not be until the August USDA Supply and Demand report before we get some solid information about how bad the flood damage was in regards to acres lost. So our bias is for the market to move sideways to perhaps lower unless weather changes.
The big factor that will determine exactly how fast the market will rally will depend on how hot the weather gets in July. Remember, much of the crop is two to three weeks late and this will affect pollination but how much?
So right now the market is simply catching its breath. We are experiencing a decent correction which actually makes the market better off for a solid fall and winter rally. As for time to buy, I still like buying late July to early August, as for value I would like to see price below $7 but I believe it’s going to be very difficult to achieve.
I’m getting a lot of requests regarding buying the market. I know many of you have sold a lot of cash inventory and want upside risk exposure. Exercising good money management will be the key to surviving what could be a crazy six months.  First, don’t over trade your account. Second, make sure your positions are adequately capitalized and third, have a solid plan for how you going to handle downside risk if it occurs. In general, I like buying futures first in late July but the selling of puts and buying of calls could be a solid alternative. Give us a call at 1-800-832-1488 if you want to go over details or would like to read more of my daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.


The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Pre-report guessing game!

Jun 20, 2008
We are now entering the period of pre-report guessing! What will the USDA June Actual Acreage report say? How much of the reduced plantings due to poor planting conditions in the Midwest will they reflect? Will we see double crop corn in the south behind wheat acres? Are there any increased acres in non-traditional corn production regions? Since the surveys were done before the floods, the baseline number will not reflect the flood damage. USDA is sending out surveys now about flood damage that will be reflected in the August USDA Supply and Demand report.
So what are the acres and yield? Right now the market is starting to feel like a dog chasing it’s tail. It’s exerting a lot of energy but not getting anywhere. Concern is growing that the report due out on the 30th of the month will not be a bullish event. As I’ve learned over the years a bull needs to be fed, so I’m not going to be surprised to see a correction in July. Seasonally, it’s suggested and I would not be surprised to see a lot of producers selling during this time because of the fear we have over done the rally.
The problem is the market is currently in a once in a lifetime event. We are now seeing a historical 500 year flood intersect with historic strong demand and growth world-wide. The end result I fear is a slower rationing of demand than we have historically experienced.
After everything balances out I believe we will see planted acres some where between 84 million acres on the low side to 86.5 million acres on the high side. The big bull will see confirmation of flooded acres which have the potential to exceed 4 million. Let’s say we split the numbers and suggest a number in the June report at 85 million acres and reduce another 4 million to take us down to 81 million acres planted. This is where things get exciting.

You then must assume at least 93% is harvested, which is a historical number, which reduces the acres down to 75.33 million acres. The next big question, what is U.S. yield? I believe you must assume a lower yield at least to 145 bushels per acre. So this implies a total production at 10.922 billion bushels. In the last Supply and Demand report, USDA estimated usage at 12.5 billion bushels. So if we produce 10.922 billion bushels and use 12.5 billion, you are using 1.578 billion bushels more than you produce. We have 1.433 billion bushel in carryover status which implies a negative carryover of 147 million bushels. This simply can’t happen! The market will not allow carryover to remain long below 450 million bushel. The implication is clear, currently we are setting up a situation this winter and next year where 597 million bushel of usage must be reduced from the already lowered numbers in June. 
How high will prices have to go for a lifetime pork or dairy operation to quit, ethanol producers to stop production or an exporter to stop buying?  These are all difficult questions. Granted $8 corn has done some of this but I really don’t believe it’s accomplished its goal of rationing usage. This event is still in front of us.
The problem is a bull needs to be fed every day and we are now entering a period between July and September where the crops are going to look good from the field. The maximum acres will have been lost but no final confirmation until January. All the wet spots will be covered up. My expectation continues to be that the market is going to trade sideways to lower on profit taking but I would find it very difficult to argue the market will close below the long term 21-day moving averages or the 45 degree uptrending support line off the major rally.
Conclusion: If you have forward sold inventory, you must be looking at defending your upside risk exposure between now and early August. Second, because of my concern for a major price rallying event I believe you must be concerned about your basis exposure on all futures to arrive contracts. I believe you must get these locked up now before they get worse.
If you have any questions or would like to read more of my daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.


The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Rain, Now Weeds

Jun 18, 2008
The rains have come and now come the weeds. Producers are running hard to get all of the spraying and side-dressing done before the corn is laid over. It will not be long before the corn is too high to see the wet spots and the unevenness. Essentially, it will look great from the road.
This situation, along with much of the bullish anticipation of the acreage report, is already in the market and everyone is scared to be a buyer right now, which should contribute to a significant high just prior to, or right before, the 4th of July.
Look to see very choppy price action in the corn market where all end users and speculators would like to buy December corn back around the $7 level but the trade is scared of potential ending stocks getting too tight and wants to keep prices high to ration usage. Essentially, don’t look to Washington to put any clarity into the market. They are going to try to avoid doing anything major now until the grain is in the bin and a new administration has to handle the situation.
Essentially, my suggestion is if you have big profits in long futures or calls you really need to be looking at taking profits and being neutral going into the end of the month. The only thing I like doing right now is selling deep out of money puts with a delta less than 25%. It gains you money if the market moves sideways to lower. If assigned I will be at a price I can accept going into the fall.
As for the bean market we are in full retreat today. The correction is not surprising but a little troubling in light of the continued problems we are hearing about soybean production. I would suggest the current correction is more about profit taking than a new bear trend. Overall, I really like the current price of beans. As a producer I see nothing wrong in selling the inventory and then defend with a known risk vertical call spread.
Special note: All producers who have made hedge-to-arrive cash sales and must sell between harvest and March must be looking into the risk they have with the basis. If this market does move up and experience a blow off top, the basis could really widen significantly. This will lower your net selling price. I would encourage you to consider locking up all basis now for corn and beans. I know it’s wide but it could get a lot worse. Just ask the wheat producers. Basis has almost doubled in many areas.
If you have any questions or would like to read more of my daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Let the big guessing game begin!

Jun 16, 2008
This year the producer may finally have an edge on the market since he’s actually closer to what’s happening out in the fields. The 1993 flood is the current bench market the trade will be evaluating this years’ flood by. I’ve received reports from many farmers down the river from Iowa who say the rivers are actually higher now than in 1993.
So the big questions that will now be asked are:
  1. Exactly how many acres have we planted when you look at all the preventive planting and flooding that’s been done in Iowa, Illinois, Indiana, Missouri, and Kentucky? Are there any other states increasing acreage that will offset these areas?  Remember losing planted acres has a bigger impact than reduced plantings.
  2. What type of U.S. yield will be seen? The USDA has already been proactive and reducing corn yields in the last USDA Supply and Demand report. Do we really have the loss potential of 1993 when it was down 25%? We are now going through the bullishness of reduced acres. I don’t really believe the trade can get a handle on reduced yield until the combines start to run. Anything below 148 bu. will eventually lead to demand rationing.
  3. Finally, with all the supply bullishness hitting the market how will the demand side react? At 12.5 billion bushel corn usage, the USDA has already cut usage by 300 million bushel. So if we do see production in the low 11 billion bushel, who’s going to quit corn usage first—the hog and chicken producers or the ethanol? My opinion is both. The key however is, will supply be reduced before we have confirmation of reduced acres off the combine or will we wait until we see further price rallies? This will have a major impact on how high the market has to go to ration usage.
In summary: We have some extremely powerful fundamental factors reducing supply. The key is how fast will demand react? Since getting out means major adjustments I really believe there will be a lot of talk but the bulk will only reduce usage once they are sure the yields are not there. This means October to March is going to be interesting for not only the grains but the livestock complex as well.
Marketing implication: If you have sold bean or corn inventory via a futures to arrive contract and you must sell off combine, you need to be getting inventory locked up now. Just ask the wheat producer.  Second, if you want to defend against further weather problems such as going from wet to hot and dry, I would defend in a limited risk vertical call strategy rather than a net long future at these high values. Finally, in regards to 2009 to 2012 marketing, it’s not going to be easy. It’s going to require huge cash flow obligations. You need to be getting in touch with your banker now so you are not under capitalized once you start to enter long term positions. For now I would not suggest you extend your coverage of 2009 and 2010 beyond current positions. I would wait now until the December to January time period before extending coverage.
If you have any questions or would like to read more of my daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.
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