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October 2009 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.

A Dangerous Time In The Markets

Oct 26, 2009
First off I’m going to be on a telephone conference tomorrow with Beck Ag at 8 a.m. Eastern and 7:30 p.m. Eastern. They will have a university specialist talk about the drying systems, plant pathologist talking about disease and I will be talking about the potential marketing impact for the year. The morning session call in number is (800) 701-9724 pass code 471031 and the evening session is (800) 701-9724 pass code 520551. If you need further details, look at our Web site for the press release.

Rain, Rain.
Last Friday it looked like the lid was going to come off the market with the rain forecast. Many sellers were being forced to the sidelines because of big margin calls. As I told one client, I felt like a sheep being herded to a slaughter by the wolves. So today’s correction is not surprising but obviously uncomfortable for anybody who got out of position and great for those who held.  

What’s ahead?  Since the $3.80 level was breached by December corn, we have set up the potential for a retest of the $3.50 gap breakout levels. “If” it’s going to come, it will be quick and most likely in place by Thursday. The harvest conditions are going to be generally lousy from here on out.  I have faith in the producer that we will get the crop out but it’s not going to be pretty.  How much yield loss due to field loss and disease is a big bullish unknown? How will demand hold up will be a question if ethanol mandates are not increased?

All I know is at current cost if one looks into the future a $4.50 or better selling price for July 2011 for the 2010 crop sounds like a solid place to really start selling hard and scale up sell if the market does improve into the end of the year on continued crop loss. Remember, this rally is not about demand growth it’s all about inflation expectation and yield loss. What happens if neither are as bad as everybody fears? 

The wheat rally has been a direct link to the corn, dollar and oil rally. Without the upside market rallying the wheat market simply can’t move a lot higher because of world stocks. This implies if you have old crop wheat in the bin you better not set your objective on prices much better than $5.80 to $6. Equally, if you are looking to sell next year’s product I believe you need to give yourself a chance for higher prices if more harvest problems develop in corn. So waiting for selling of inventory in the December time period is still recommended even though long term one could be quite bearish to wheat into the July time period because of large world stocks.
 
The bean market was down today but overall was not a complete washout. I have to suggest the bean harvest is moving slowly forward but the wet conditions is really slowing things down since beans have to be dried even if off the combine cash sales are desired.  I’m still concerned about long-term price outlooks for beans with South America and U.S. acres being up next year. This puts the burden of proof on the bulls to drive prices sharply higher because of usage. It will take a close in the January beans above $10.60 to really ignite the bean bulls right now. Equally, a close in January beans tomorrow below $9.70 should trigger some long liquidation as margin call start to press recent buyers. Overall, this is still a very dangerous market right now with both the bull and bears looking for solid direction. Strong money management is recommended. If you are in futures keep your stops reasonably tight. If you are in options roll up your puts to keep close to market.
Send your comments to bob@utterbackmarketing.com.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.
 

Wet harvest and weak dollar adds volatility to the grain markets

Oct 23, 2009
One of the wettest time periods for the corn and bean production has helped lead to one of the slowest grain harvests on record and subsequently a very abnormal October rally.

Today December corn was able to break through overhead resistance of $4.09 rather easily in the early trading session but was unable to hold and profit taking came into the market on late trading. The tone next week will take its lead first from the weather outlooks and then from the direction of the dollar, oil and gold. Right now, the weather forecasts look to have chances of rain with limited harvest activity for beans but some for corn.  

Looking forward I have to say it’s the bulls’ game now. Up to now the bear was holding on hoping for harvest pressure. Effectively, only the most disciplined scale-up seller is still in the hedging side and most short term traders have now turned positive. I would suggest the worst correction one would expect now is down to the $3.82 versus an immediate upside objective of $4.38.

Long term: While the bears have been wounded, they're not dead. They realize the ability to sell 2010 production in the July 2011 at $4.57 represents a very good return. With fertilizer and fuel cost down sharply from the 2008 highs the profit margins that this represents is as good for many when corn was at $6. If you can lock up your fertilizer, gas and cash rents and post a $150 plus return I have to say it’s time to really get your banker on your side and start a solid long term selling program.

Pleas note once you decide to sell the market because of profit only two variables should be considered: 1 Converting futures to a cash sale when the basis is good. 2. Try to keep the short hedge in the month that is going up the slowest in bull markets and in the months that are weakest when the markets contracting.  Right now I would suggest the further you are into the future the better off you would be.

As for soybeans producers, they are focusing hardest on getting the beans out. I’ve heard producers are even willing to harvest and put in the dryer to get down the moisture rather than wait. I continue to suggest soybeans are not potentially as bullish because of weather as corn is right now. Granted the trend is up but it’s rather weak. Right now I continue to be a seller off the combine rather than put in the bin. If you are putting in the bin I would not want November beans closing below $10 or any sudden rally in the dollar above $77 or crude oil breaking below $75 before having beans moved. If you are bullish but want a defensive selling strategy, consider putting your offers at your local elevator around the 13-day moving average. Right now this is at $9.80 a little lower than my taste but it does keep give you a line in the sand level where you will not allow prices to move below before moving inventory. Otherwise, simply keep moving the stops up as the market rallies. 

Long term, my concern continues to be acres are going to grow domestically and globally. So the demand that everybody is expecting is going to be forced to show up!  So my suggestion is once November 2010 beans get above $10 you should not allow them to go below before having a core of your inventory protected.

Send your comments to bob@utterbackmarketing.com.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.
 
 

Combines are running! Will we see harvest pressure?

Oct 20, 2009
Finally some sunshine in the Midwest and the combines are really starting to run. Every extra combine is being pushed into service. Tuesday’s weather and crop conditions ratings put the crop at 17% harvested which is way below the five year average of 46%. The bean harvest is at 30% way below the five year average at 72%. One has to anticipate that a big harvest number will be seen in beans this week if the rain holds off to Thursday. I would not be surprised if we were not 60% done by then. As for corn, some will be done but still way behind seasonal harvest next week.

I have to suggest the corn market is at a critical short-term technical point. Today we tested and broke the recent $3.88 high. This would imply the market is either at a double top on day 31 off the September lows and new bear move is immediately called for, or the bulls have trapped the bears again. The other perspective is it’s a consolidation before a technical breakout to the next overhead resistance. I can not stress how critical the price action early next week is to the next few week’s trend. If the market is able to gap above the $3.88 we should get a significant round of short liquidation and speculative buying to drive to the $4.09 level.  Long term if we take out the $4.10 level then major short covering and speculative buying will develop.

What has to happen to make this occur? The rain must continue to hinder the corn harvest, the dollar resumes its downward slide and the stock market continues to move higher.  

So should you buy it? I know it’s more fun to be a bull than a bear. I know that many of you believe I’m being bull headed by not get bullish in September, but this is October and we still have a big crop coming on board.  I would however consider buying if we could get a decent 18 to 21 day correction and a move back below $3.50. If this would occur I would get more excited about buying for future inflationary gain,  but buying now at 31 days up and a 83 cent rally is simply too stiff of a rally for me to want to get on the bulls band wagon. So I’m going to be content to simply sit on the sidelines and wait for my spot to be a hedger of the 2010 crop. As a speculator I’m not going to participate on the inflation bulls side, I hope he’s right and we drive prices to sharply higher levels to sell but my gut tells me we are being herded like sheep for the slaughter!

Send your comments to bob@utterbackmarketing.com.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.
 

Fundamentals Continue to Improve for Corn

Oct 14, 2009
Friday will be 29 days up off of Sept. 9th's $3.052 low which is an important time count. I don’t remember very many bear market rallies over the last several years which have been longer, and we still made new lows, so it’s important for the bears if we start seeing some type of overhead resistance hold. As of today we have seen an .863/4 cent rally off the low for December corn, again by any measure stick for this time of the year it’s been an impressive rally. We have not filled the June 29th gaps at $3.96 but we are close. The momentum indicators are all very overbought. The technical picture is flashing caution for the bulls so this is why we saw some profit talking. 
 
The fundamentals however continue to be improving for corn. The dollar continues to retreat and gold and oil continue to move higher. This has the effect of creating a vacuum which encourage speculators to buy the cheaper commodities. The attitude has shifted from one of potential deflationary pressure to one of potential inflationary pressure like 2008 will develop in 2010.
 
So for corn to move higher we are going to have to see active buying. This will be seen if we:
  1. See the administration continue to favor a declining dollar and the Fed continues to allow low interest rates.
  2. The wet harvest conditions continue and concerns about yield turns into reality and decline below 162 bu. per acre.
  3. Finally, the administration allows corn ethanol to increase from 10% to at least 13%.
  4. The Dow stays above 9,500 and concern about banking defaults fades away.
 
If all of the conditions prevail, I would expect the market to test the overhead December $4.09 gap by expiration. Please note: this is not a forecast but what has to happen for it to happen. Right now I would have to say it’s no better than 30% odds since we have already rallied so much before harvest has even started. As for the downside I have to say there will be stiff resistance at $3.50 and very aggressive buying at the recent $3.27 lows. 
 
Conclusion: a near-term high is close. We should correct a little under harvest pressure but with the growing concern about inflation it will be difficult to get the level of correction feed buyers and hedgers want to buy the market. The old saying “the market normally tries to frustrate most of the market, most of the time” is now alive and well.

Send your comments to bob@utterbackmarketing.com.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.
 

The tone of the market is changing!

Oct 13, 2009
The bears tried to run the market lower and did early in the day but the bull was not to be denied and prices moved higher. Traders and advisors (like myself) which were encouraged to be strong sellers less than two weeks ago are having great difficulty in selling. What’s changed?

First, we have taken the top off of the corn crop, I continue to suggest 125 million to 250 million bushels. This will keep the crop from getting bigger as we go into the winter.

Second, the tone of the outside markets has changed. Back in August and September the attitude was the economic growth was going to be slow and deflationary pressure was persisting. With the Fed’s strong statement that they supported keeping interest rates at historically low levels its given rise to concern about building inflation. Dovetail this with talk by the Obama administration that a weak dollar would not be fought, along with an attitude that a lot of stimulus money is yet to be released, sets the stage many believe for a 2008 price event when crude oil exploded above $100 and corn and beans were pulled up along the way.

The third thing that’s really adding to the bulls’ confidence is the continued rain and slow harvest conditions. Essentially, the cash market is not being over run with inventory.

So in light of this shift in the fundamental supply/demand situation for corn and beans the technical action has been able to take out critical overhead resistance levels and trigger aggressive short covering due to margin call pressure.

Can we go higher? This is the big question for clients who have unpriced inventory or have hedges in place and is also a serious question for the end user who has not priced inventory.   

A modest correction is still better than a 60/40 chance for December corn in the last of October and first of November simply because we still have the lion's share of the crop to harvest but the ability to move December corn below $3.50 and November beans below $9.25 will be very difficult now with the growing inflationary attitude. 

For the market to move lower now, you will need the dollar to close above 78, gold below $1,000 and the T-Note below 117, if they do it more than likely it will be considered by the big money as simply a short term correction in an overall bull move up into 2010. 
In summary: As sellers we have fought the good fight. If the market is making new highs in corn and beans next week we must start looking to convert futures positions to cash sales or long puts to reduce margin call exposure so we can live to fight another day.

Send your comments to bob@utterbackmarketing.com.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.
 
 
 

Flip of a Coin if We Go 25 cents Higher or 40 cents Lower

Oct 09, 2009
Today the USDA Supply and Demand Report came out and this is when the USDA tells us what they believe is being produced and used. As always there are some surprises. First, in regards to beans, the USDA did not reflect the great yields that we’ve heard coming in on early beans. This allowed the bulls to push the market after a lower opening. We however strongly believe the beans yields will be adjusted up in the November report. This rally is an excellent opportunity for any clients who have cash beans to sell of the combine next week.

November beans, with Friday’s close 5 days up, is testing overhead resistance. The market will have to find solid fundamental support to move significantly higher Monday. Please note a close in November beans above $9.75 will trigger stops for a retest of the $10.25 price level. If this is going to happen we would expect it early rather than later in the week.

As for corn, the overall report was neutral. The bullish surprise was the fact harvested acreage was reduced by 700,000 acres. While USDA takes away, it also gave the bears something in that it push corn yields to a record 164.1 bu. per acre. There was some minor adjustment in demand with feed and residual usage being increased, go figure. Now I’m not saying USDA is trying to bias prices up in October but this report does help to reduce the government’s exposure on insurance payments. Carryover was increased slightly to 1.672 million bushels. The overall tone is the upcoming frost could take 150 million to 300 million bushels out of corn production. This coupled with the attitude that a wet fall could lead to crop loss or at least no significant harvest pressure has all lead to the belief that upside risk is still present.
The corn charts right now are suggesting the market is entering an overbought status. This implies the market is going to need daily positive fundamental reinforcement to move higher.  If you are short, you don’t want the December 2009 market closing above $3.75. If it does, your immediate risk would be $4.05.  Equally, if you are long, a market close below $3.55 is very dangerous and a close below $3.50 should trigger an adjustment of your position.

STRATEGY MODIFICATION FOR BROKERAGE CLIENTS. 
The weather and dollar direction are short term very uncertain which makes this market very difficult to predict. Right now I would rather be long a November $3.70 corn put based upon the December 2009 corn futures rather than be short futures. The reason is if you do place stops to blow out of positions at $3.75 it will be very hard mentally, emotionally and operationally to get back short if the break is a bear trap and we start to close lower. Remember, you have to move back below $3.50 not get bearish, I don’t think waiting 20 cents for bear signal in this time period is a good operational plan. I would rather ante up now and convert my short positions to a long put and know I can handle anything that the market wants to throw at us. If it rallies my put goes worthless and my cash is worth more. If it breaks my put is only behind a December corn futures by 5 cents and has all the downside price protection. The big drawback is this position is only valid until October 23. 


SUMMARY: The odds are just about a flip of a coin if we can go 25 cents higher or 40 cents lower. The weather and the dollar direction will determine the outcome. Now is the time to manage risk but maintain our focus as bear. Moving from an active short futures to long put we would suggest is the best for all concerned.

Send your comments to bob@utterbackmarketing.com.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.
 

It all comes down to yield and demand

Oct 07, 2009
Corn, beans, wheat and most other commodities opened higher as the dollar broke hard today on continued movement of money from the U.S. dollar to other countries exchanges.  As many of you know I’ve been bearish for some time in regards to corn and bean and have held hedges in anticipation of a harvest low. Today’s gap higher action forces one to ask: “Is a short position still justified”? 

First, I don’t believe a position should be liquidated just because you are losing money. There are always bounces in the market that causes one pain regardless if you are short or long. The key question is has the core fundamentals changed? Days like today are not enjoyable experiences but are a part of marketing and one has to learn to deal with them. Some producers insist this is exactly why they trade only cash but realize in many ways you have more risk in cash because you can’t adjust your decision once it’s made.

The big concern immediately in front of us is corn and bean yields. We know the crop’s behind and a frost is going to hurt. I really don’t believe anyone thought the frost was going to be late this year. Frankly, I’m glad we did not have a frost in the last week of September. The implication is it’s going to take the top end off corn and bean yields. However, I will suggest to you the top end of the crop that was so freely being talked about a couple of weeks ago, is now disappearing fast.  So the rally today is more perception than actual confirmation of a fact. 

So will big crops get bigger? I side with the argument that this year is going to be a different and we more than likely “going to grow” the bean yields a little in Friday’s report but the corn yield is "not going" to grow. Overall, I don’t want to argue for a corn yield above 163 bu. per acre. So I have to face the fact the bulls have some argument for strength because things have improve more than expected but is it enough to change the fundamental trend of the market?
Today is the first day the market hit buy stops. This is where traders are buying blindly because of the breakout of a certain chart point. For corn it was a close above $3.50. Equally, we are day two into some serious margin calls for the bears which is going to feed the rally potentially into tomorrow.  The problem is we are now over 21 days up from the September low which is starting to suggest the fundamentals will have to turn truly bullish to extend. The momentum indicators will be getting overbought as well. So I have to say the overhead resistance level in December 2009 corn at $3.75 and December 2010 at $4.25 should be very still resistance.
The other side of the equation we must address is the demand side. I’m seeing conflicting stories here. There are areas of the country where no corn harvest has been done and basis is staying firm. Equally, there are parts of the country where corn harvest has started and basis is quickly widening. What I’m suggesting is today’s rally in the futures was not a fundamental, cash-driven rally. This makes me very suspicious of the durability. Some noted positive fundamentals that are developing is the increasing demand for ethanol. It has experienced a notable increase in refining demand over the last several months. Brazil announced it’s going to import some U.S. ethanol, could the U.S. be moving into a corn ethanol export market. I think not but it’s good for the bulls to talk about.
Summary: While the corn yields are being tempered, the overall carryover is still going to be in the 1.6 billion bushels to 1.74 billion bushels range. This is adequate inventory. To go higher we are going to need solid proof of demand growth. So today’s rally was all about short covering. The real test of if this market has confirmed a low will come later next week into mid-October when corn harvest gets under way. My bias is one needs to remain short for most of October and watch how the market handles the pressure of harvest. If the market can’t break back below $3.20, we will have to accept the reality the bottom is in.

Sidenote: For every body that’s unsold and extremely happy about today’s rally—before warned if you took crop insurance, this rally is in effect reducing your insurance payments.  What happens if we rally in October, you store unsold into February and then the market dumps inventory into the market because it’s not storing well?

I would be interested in your opinion on what producers who have sold the inventory should do. Should the roll or liquidate? Send your comments to bob@utterbackmarketing.com.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.
 
 

Continued Strength in the Corn Market

Oct 05, 2009

The corn market on project a broke to support and then short covering came in strong today. It looks like some of the bears decided to take profits before the October Supply/Demand report. My concern is the bulls are trying to buy this corn market based on the calendar date but have not truly figured in harvest pressure. I will not be comfortable in suggesting a bottom is in until we are beyond the November Supply/Demand report and the harvest is close to 70% done.
 
The big issue that’s going to keep strength under this market is the level of crop loss due to the lateness of the crop. With the frost coming in the second week of October many want to argue that the crop is not getting bigger but in fact could surprise everybody with a crop below expectation.
 
Essentially, everybody is talking their position right now. If you are sold, you are looking for new lows and if you are unsold or long you are looking for the lows to be confirmed. Right now I’m content to simply sit back and allow the market to work. I’m not especially bearish for a move below $3.02 but equally it’s going to be very difficult getting lead month futures to stay above $3.50. The trend should be sideways to lower for most of October on harvest pressure. 
 
The big questions coming up that I will be writing about over the upcoming weeks is “does one roll the hedge to capture carry and sell puts to enhance” or “does one take off the hedge and look for a flat price rally to improve the hedge”.   I’ve been going back and forth on this one.  My lean is that we are going to have a distribution bottom with limited upside potential beyond the $4 level in July 2010 corn.  The risk I see is with big supplies being held by producers is once we assure planted acres next spring lead month futures could fall to the $3 level. So selling the carry has a lot of attraction for me at this time.  The issue is will demand growth and inflation trump supply? 
 
I would be interested in your opinion on what producers who have sold the inventory should do. Should the roll or liquidate? Send your comments to bob@utterbackmarketing.com.
 
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2009.
 
 
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