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August 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.

Producers need to diversify!

Aug 31, 2009
I would suggest the future is going to force producers to be more focused on controlling risk than ever. This implies that not only do producers have to worry about getting the crop planted and harvested but they are also going to have to manage things such as interest rate exposure, fuel cost exposure, fertilizer exposure and price risk of commodities.   

While most producers are currently focused on if it’s going to frost or not I would challenge producers that you need to start diversifying your hedging program. Sell bonds on rallies to protect against long term interest rate exposure. Second, start looking aggressively at buying natural gas to protect your nitrogen exposure in anhydrous ammonia.  We believe we are in a unique time period to start looking at protecting this risk exposure.  We will be very soon adding a review of the T-year notes and natural gas to our Web site to advise of the development of a hedge position in these two commodities.

At this time we are looking at preparing ourselves to be ready to sell the T-notes on any strong price bounce over the next few months if the Fed is forced to lower interest rates on the concern of a double bottom in the economy in the first half of 2010. As for natural gas we are watching very carefully the triple bottom that’s in place. We like the strategy of scale-down buying at current levels but clients must be prepared for some margin risk exposure. To reduce exposure, sell out of money calls against the long position could be recommended for the first position. We would only move to a maximum position if and when the market closes above the long term averages. 

Again, the producer of the future has to strive to manage risk by managing the profit margin. Producers need to focus on not only the selling of product but on the protection of inputs as much as possible.
If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@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.
 
 

Market tried to rally and failed!

Aug 25, 2009
The markets tried to rally but failed miserably as the increasing crop conditions and limited immediate risk of frost weighed on the markets. So where are we going from here? Is a major rally in store like 2007 and 2008 where we saw an average of 55% rise in prices from the fall to spring and rescued all the producers who stored the corn in the bin unpriced? I know corn and beans are a little behind and there is going to be some frost damage on some of the corn and beans but I really feel the risk is quite high we will eventually see a final corn yield above 160 bu. per acre and a bean yield above 42 bu. per acre. The only question is how much higher?
 
What this means is we are going to have a mountain of inventory this fall. Carry will increase in the market as the nearby contracts drop to the deferred especially for corn. As for beans I’m not completely convinced the spreads will be as dramatic. I would not be surprised to see the market stay in an inverted (no carry) pattern between the 2009 crop and the 2010 crop for most of next year.
 
Market Implications.  We have the supply, now will we get the demand growth necessary to keep domestic and global supplies from building?  We have been spoiled by the growth in ethanol and China usage from 2001 to 2008. What happens if the domestic and global economy has a second low in 2010 due to low private sector demand?  If supply is up and demand is lagging it set will the stage for a protected period of price weakness that I believe most producers are not mentally prepared to handle. 
 
Conclusion: Continue to be a strong seller of 2009 corn on any 10- to 20-cent rally and sell 2010 November beans on any 30- to 50-cent rally. Deadline is the mid-September USDA Supply and Demand report.
 
All clients and subscribers are urged to look at their e-mail accounts and website. We have sent out a special article on upcoming fundamentals for beans and its impact on the 2010 price prospects. Please read and get back to us immediately. If you are not a client or subscriber please email laura@utterbackmarketing.com for a free trial

If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@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.
 
 

Concerns of Early Frost and Soybean Demand!

Aug 24, 2009
For many colleges, today is the first day of school. It’s hard to admit it but over 35 years ago I was starting my first day of college. Scared, excited and looking forward to the future all once. All I can say is good luck to all, enjoy the time spent in the great halls of college and prepare your self well to take advantage of the opportunities ahead!
 
As for the markets, beans were the leader of the pack on solid demand interest. Concern is still very high that the crop is not out of the woods and could be hurt by a fall frost. Old crop is leader of the pack now with November beans back above $10. This strength has helped to pull up the corn and wheat markets out of an oversold condition.
 
Our bias here at UMS is the corn crop is out there, the only question is how big—160 bu. per acre or 165 bu. per acre. Every 1 bu. above the USDA estimate of 160bu. per acre is going to have real impact. We continue to believe the USDA demand estimates are over stated at current prices. Lower prices for a longer time period are called for to get the demand projections they suggest.
 
In a nut shell, take advantage of any strong price bounce into the September USDA Supply and Demand report on concern about frost to make sales. We will be taking off much of this week but will become much more aggressive on selling positions as we move into the first two weeks of September.

If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@utterbackmarketing.com or laura@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.
 

Sell Rallies!

Aug 24, 2009
The phones are very quiet today. The producer is turning off the radio and simply not paying attention to the market. He’s gone fishing!

The Pro-Farmer crop tour would suggest the crop is out there, it’s simply late. One should note that the tour results are historically skewed to the positive side so when they get bearish this does mean something. Overall, everybody right now is holding off on selling because of the fear of frost.

Cool weather is going to move into the market the first of September which will make the market very nervous and keep the bulls hope alive that something is going to happen to lift prices. While I grant you there is some risk, I would equally suggest this is exactly what you need to get any chance for make up cash sales. I can not stress strongly enough the risk you are taking if you plan to harvest the crop and put the corn in the bin unpriced.

Producers still have a lot of old crop corn, we are finding increased production of corn, and potentially increased supplies of feed wheat are showing up. This all suggests to us here at UMS that a significant price drop from mid-September to Thanksgiving could develop if we confirm that the corn yield is in excess of 165 bu. per acre.

Our suggestion: SELL RALLIES!

If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@utterbackmarketing.com or laura@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.
 
 

Corn Producers: Lock Up Basis NOW

Aug 19, 2009
The market traded both sides of the market as it continues to try to decide how to position itself for the upcoming harvest. Officially, we are suggesting today to all clients who have any hedge-to-arrive or cash contracts where basis has not been locked up and will need to sell in the harvest time period to, “LOCK UP BASIS NOW FOR CORN”.
My fear is the risk of a crop increasing in size. I have been very reluctant to increase the U.S. crop above the 159 bu. per acre level up to now.  However, we must face the reality that the crop conditions are not deteriorating with the current weather conditions. Granted it’s a little late and frost in September would have some very troubling effect on both the corn and more on the bean markets. However, we MUST have a frost now to reduce supply or we could be heading to a good old fashioned wood shed flogging!

I still hear of reports daily of producers having significant inventory of old crop corn on hand. A lot of unpriced producers are still waiting for the “event” to bail them out. I grant you we still have the potential but the odds are increasing significantly that you will not see lead month futures get back above $4 until we are well into the 2011 season. My weather man is suggesting a cool snap is going to show up the end of August into September and there will be some 40 degree mornings.  So we still have the potential to scare this market. I must stress if nothing happens by the middle of September the bear is going to “ROAR”!  Great for forward sellers and clients who bought Crop Revenue Insurance, very bad for the unpriced producer.

Summary: I’m very concerned about downside risk in corn. Producers should be using any price bounce in July 2010 above $3.60 to scale up sale.
Planning note for speculators: I sense that wheat acres are going to be down along with corn and cotton in 2010. This puts a lot of pressure on 2010 November beans. I strongly urge all clients to get a plan of attack put together on how they are going to use a September frost scare to sell beans. As for speculators looking for a revenue source, I will be looking at selling out-of-the-money March or May cotton and wheat puts as we move into October. More on this later, for now aggressive net put selling should only be talked about but not implemented.
If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@utterbackmarketing.com or laura@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.
 
 

Will Bigger Supply Drive Prices Lower to Increase Demand?

Aug 12, 2009
Today’s USDA Supply and Demand report held a few surprises for me. First, in regards to corn, I really thought acres would be revised down from 87 million acres but they left them alone. Second, while I believe the crop is good, increasing the crop to 159.5 bu./acre before the potential September frost scare time period I thought was very aggressive on the USDA part.

However, this is not where I believe the biggest liberty was taken by the USDA staff to balance out the numbers. While production was increased 420 million bushels from the July estimate, they also increased usage by 350 million bushels. Specifically, feed usage is up 100 million bushels when dairy, pork, cattle and poultry herds are being liquidated, go figure. Second, the increased industrial usage, I give you that one along with exports up 50 million bushels. The other demand prospect that really bothers me is ethanol usage up 100 million bushels to 4.2 billion bushels. Great if they can get it, but boy does this conflict with what I’m reading about the distressed state of the ethanol production industry.


In summary: Bigger supply is going to drive prices lower to increase demand.  Take advantage of any bounce into September on concerns about weather to sell the carry in corn.

For soybeans the report must be considered positive. They did not increase acres as much as anticipated and lowered yield to expectation. This resulted with a modest reduction in usage to reduce carryover projections from a potentially stressful level of 250 million bushesl to potential be tight at 210 million bushels. While the market did not initially bounce because much of the numbers were factored in, it does set the stage for beans to get "wild" if any further drop in yield is seen due to poor September crop production prospects. For this reason I have to suggest all producers should change the form of their selling position if cash flow is a problem. I would much rather be making new sells as long puts right now rather than short futures. I would suggest such a bias until we get into the first part of September. There will be tipping point but I would expect it will not be until after the September USDA Supply and Demand report that I would be comfortable being net short futures vs long puts.

As for wheat, I saw little to inspire me. Domestic carryover was increased 37 million bushels while world stocks were increased as well.  The strategy of rolling all short futures forward to capture carry is proving to be the correct one. The only positive I can see developing is prices are so weak that little incentive will be given to plant if corn or beans is an alternative. Eventually, we will see the economic forces lower production and increase usage. The problem is it’s just going to take time when unfortunately we need higher prices for producers to economically survive.

If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@utterbackmarketing.com or laura@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.
 
 
 

Markets Mixed Prior to the Report on Wednesday.

Aug 10, 2009
Last week’s unemployment statistics got the stock market fired up that the recession was ending. This lead to a strong dollar bounce which has seen follow-through today.  Subsequently most of the commodities are still giving back much of the recent gains on dollar weakness.  On top of all the outside market influences, there were good rains over the weekend with the heat. The feeling is corn conditions are going to continue to show better than normal seasonal positive improvement. While it is only antidotal evidence, I went for a quick trip down to northern Missouri, back up through southern Iowa and back to Indiana this weekend [about 900 miles in total].  I saw nothing to change my mind that corn yields are going to be strong. Soybeans however were a little different. Granted there were some great looking fields but also some very small beans. Bottom line: We are going to need all the good weather we can get in August and September to get the beans to produce a yield above 42 bu. in my opinion.  
 
Looking forward to the USDA Supply and Demand report out this Wednesday, I believe going in everybody has a 157 bu./acre corn yield and 41.5 bu./acre bean yield factored in to the report. As for planted acres, beans will be up slightly and corn acres down around a million acres. So the final question will be demand prospects. I have to believe with the continued decline in livestock prices, feed usage is going to start taking a hit. The best one can hope for is ethanol demand to stabilize around 4.1 billion bushels of corn so overall demand merely holds demand expectation levels.  I believe corn carryover is going to move eventually above 1.8 billion bushels and bean carryover above 250 million bushels.  It should be very difficult getting lead month corn above $3.40 and beans above $10.50 once harvest starts until well into 2010.
 
Bottom line: Barring a ”major early freeze” the crops are going to be out there and prices are going to stay under a lot of near term price pressure. Use rallies to sell the carry that exists for corn and beans.

If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@utterbackmarketing.com or laura@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.
 

Soybeans Firm While Corn is on the Retreat

Aug 07, 2009
The beans were firm today while the corn continues to retreat.  We find the bean strength interesting while crop conditions still seems to be more of a concern right now. The crop is behind and "will it catch-up?" seems to be the bull’s big question. I have to suggest the weak dollar and continued strong export buying is the strength behind the market rally.

This leads to the major question I have as an advisor to producers: Should they be selling the beans off the combine? I went back and looked at the historical numbers for some patterns to guide me.  If you look strictly at the last 8 years, soybeans rallied 6 out of the last 8 years.  If you base your strategy on this recent history it would suggest the odds are good that bean storage would pay. 

If however, you look over a much longer history, say from 1970 to present, the odds drop to only 40% of the time. So the question is, have things changed? The answer is yes in that China is now a much bigger player but also South America is a much bigger producer. On balance I have to say the rules of supply and demand are still valid. The best cure for high prices is high prices. I have to suggest 2008 and 2009 have to be considered high priced years. 
 
In the end, will the increase in bean acres and average crop along with increased acres in South America be greater than the potential demand from China in a global economic building time perio? It’s tough to know what China is going to do but the pattern seems to be they want to stimulate domestic production and not overheat the market. The current $10 cash bid being offered for fall delivery would be a solid price to take for your inventory. If you want to speculate on a rally due to some type of weather event down in South America why not do it on paper where you know your risk.

If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@utterbackmarketing.com or laura@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.

Corn Unable to Stay Positive on the Day

Aug 05, 2009
The corn market was higher on project (a) on expected follow through strength in outside market action. The bulls however were not supported by the outside markets. Equities were down, dollar was up and overall the commodity sector gave back what it gained over the last couple of days.

As the day progressed, the corn market got hit by expectation that corn production would increase according to a leading market consulting firm that’s closely watched by the trade.  While there have been some 160-bu. average yield projections, I believe it’s much better for the trade to focus on a yield average between 157 bu. and 158.1 bu. The August 12th USDA Supply and Demand report is going to reflect the potential for a bigger yield this year but should also show at least a 1-million to maybe 2-million acre reduction.  I strongly believe if we don't have a September frost, this crop is going to grow into January!

This combined with reduced livestock demand but growing ethanol and export demand set the stage for some confusion on exactly how high the market must go to effectively ration usage.  I continue to believe the tone will be one of uneasy until the first of September.  I would suggest once we get past the second week of September and forecasters start to suggest the risk of frost is declining the market will start to retreat aggressively to the recent lows. 


If this was not concerning enough, I would suggest the recent bullish expectation on the economy will have run its course by early October. As we start seeing a continuation of poor consumer income growth and persistent high unemployment the outside market will lose much of their bullish impact as we move into winter. Additionally, while it’s not on the front pages right now, one has to be worried a little if the government regulators decide to reign in the size of trading funds it could lead to some real liquidity problems just when we need the speculative longs to be buyers.   

Bottom line: We believe we can build a strong case for the high in corn to be in place well before the combines start to run for corn and beans. The period of maximum upside price risk is between now and the first part of September. We strongly encourage producers to take advantage of this rally and sell the carry that exists in corn. We strongly discourage putting any corn and beans in the bin unpriced and hoping for a 2007 or 2008 style rally into spring of 2010.

If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@utterbackmarketing.com or laura@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.
 

Why the Grain Market is on the Rally

Aug 03, 2009
The dog days of August are no more.  Normally, at this time the market is rather quiet and farmers are able to take a vacation before the kids head back to school. Well this year the old rules have been set aside. Last week, as I suggested the market bottom was on 7/22/09 at $3.1475 in December corn and on 7/8/0 in November beans at $8.82. With today’s rally, November beans went to an impressive $10.424 has now posted a $1.604 rally in 18 days with the most of the rally done in the last three trading sessions.  The next overhead resistance level will be the 6/12 to 6/15 gap which goes from a high of $10.69 to a low of $10.44. It traded into the gap today but did not close it.  If November beans does close above $10.70, the bulls will be raging and the bears will be heading for the doors.  If this level is breached the next major resistance point will be the 9/26/2009 gap at $11.7. 

As for corn with today’s rally to $3.734 it has recovered 58 cents-plus of which most of the gain was in the last three days.  Today’s move tested the 6/29 to 6/30 gap left at $3.96 high to a low of $3.75.
Why the rally?  I see three primary reasons.  First, while the crop conditions are going to remain above the five year average and suggest good corn and bean crops many people are suggesting August weather could turn ugly by the end of the month for beans. Some are saying we could develop a pattern like 2008 where corn yield improved but bean yields dropped.

The second reason, the potential of a yield reduction due to the lateness of the crop and the potential of a frost continues to keep the bulls excited and the bears on the defensive. I don’t believe this concern will really decline until we are well into the second week of September.

The third reason is outside markets. China bought a big unit of beans last week. This is getting end users a little concerned that they may have waited too long to get long. This plus the general earning reports coming out of China are good along with the U.S. business. The bias is increasing that the recession is over and the economic recovery is under way. This has lead to the dollar dropping and the oil market rallying. All this outside price influence has helped to trigger aggressive buying and short covering. 


My thoughts are unchanged. The bull is using up a lot of energy right now. By early October we will have the reduced acres, reduce crop size and the increased economy all factored in. This leads me to the conclusion that the risk is rising significantly that we will see the highs for the 2009 crop just before the combines start to run.  Again, we want to sell beans off the combine and focus on selling the storage premium being offered in corn.

If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@utterbackmarketing.com or laura@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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