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January 2010 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.

The Sharks Smell Blood!

Jan 20, 2010
The sharks are smelling blood in the water. Today’s failure to hold and take out the $3.63 to $3.67 gap made on Oct. 6, 2009, has now opened up the market for further technical weakness in corn along with the soybeans and wheat as we move into the seasonally weak [February] time period. The locals are suggesting the market is still top heavy with a lot of speculative longs in the market and producers are still holding big on-farm inventory in the cash market which needs to be priced for necessary cash flow needs.  Good crop reports continue to flow out of South America for soybeans, putting pressure on the soybean complex.
 
In the outside markets the equities were off sharply today with corrections in gold and oil, which is adding to the concern that a possible secondary correction in the U.S. economy may occur. This has allowed the U.S. dollar to start to firm, along with big jumps in the 10-year note that we are watching. 
 
Overall, it was a really tough day for the bulls. The question now is, if the grains and oilseeds cash markets continue to contract under seasonal farmer product movement, will the bulls move to the sideline or ante up the margin and wait for the seasonal bounce into the March to July time period. My concern is one cannot really look for any major seasonal hope for strength until Mid-March to early April. This is a long time for a bull to feed margin calls in an already tight cash flow market.
 
Action required:  Producers who have heavily sold expected 2010 inventory need to decide if any change in form of their short positions should be considered going into February. Look into selling deep-out-of-the-money puts to take advantage of any sideways to higher price recovery we see from April to June.
 
I believe producers who have old crop futures to arrive cash sales on the books need to watch their basis very closely. Remember that basis starts to narrow when the market gets weaker due to farmer inaction. My fear is a lot of inventory will be held forward into summer because of price. This could possibly have a big influence on getting basis back to the narrow levels that we have enjoyed over the last couple of years. It is time to be alert to locking up basis against all old crop sales and any off the combine cash sales.
 
If puts have already been sold, roll forward and down in strike price immediately if the original puts are now in-the-money.
 
Finally, I believe feed buyers should now move into full stride to get their spring and summer needs locked up in a scale down basis starting at current levels and planning to be done shortly after the February supply/demand report.
 
Bob’s Upcoming Speaking Engagements:
Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”
   
January 2010:  Louisville, KY … Indianapolis, IN.   
February 2010: Louisville, KY … Anaheim, CA.
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.
 

Down trend in grains!

Jan 15, 2010
I’ve been on the road all week. I spoke at the Ag. Connect trade show in Orlando Florida and at the North Carolina Corn, Soybean and Cotton annual meeting. As one might expect after this week sharp price break, there were two classes of individuals. Those who sold aggressively and were very happy and those who have a lot of old crop in the bin and were looking for reasons to be optimistic. I can safely say most of the people were in the latter position.
 
Here are some of the highlights I did pick up from the road.
 
  1. Producers still have a lot of unpriced corn and bean inventory in the bin for old crop.
  2. Not much of 2010 corn has been sold on the recent move to $4.50 and $10.40 respectively.
  3. Farmers don’t believe the yield numbers because of low test weight. Some of this adjustment is explained by the increase in the feed residual.
  4. USDA is going to resurvey numbers and it will be seen in the March report. This may give us some upside price recovery. Expect most of the bullish action before rather than after report.
  5. There is plenty of moisture in areas where wheat acres were not planted and if possible, most will go with corn if spring conditions allow.
  6. Environmental Protection Agency (EPA) is more than likely going to approve blended credits this summer. While the approval sounds bullish, it should not significantly affect increased corn bushels for ethanol. All it does is help reach current government mandates levels and allows ethanol plants to move back to full production capacity. Bottom line: Don’t budget more than 4.3 billion bushels of corn usage in 2011 production estimates.
  7. All the fund index buying that’s been done in a realignment basis is being positioned in the March. Most of the index funds will roll the March to December rather than May. This does imply some significant influence on the March/December spread in the end of February to early March time period.
  8. While we need to keep corn acres up around 88 million, I would suggest if spring weather conditions allow we are in position to move planted acres close to 90 million acres.
  9. Fertilizer prices continue to slip which is reducing the cost of planting corn.
  10. It is estimated that over 185,000 contracts as of Jan. 6, the latest report, was attributed to index funds getting long corn. From Jan 6 to the report, open interest increased. Since the report, open interest has gone sideways. This implies many of the longs in the $4.15 to $4.26 level are still in place. If they say they are trend followers and we take out the 10/6 gap on March corn between $3.63 to $3.67, will they blow out or hold and hope to double-up?
In summary: We have a real potential mess developing right now. The farmer is long in the bin, and the funds are long on paper but the fundamentals don’t support either. Can both hold or will they be paniced out before the market turns?
I encourage everyone to get their market plan written down now for the 2010 and 2011 crops. Only by knowing where you want to get to, does one have any hope of accomplishing their objectives. If you are need help, call us at (800) 832-1488 [Rowland & Laura] or at (877) 898-4324 [Bob].
 
Bob’s Upcoming Speaking Engagements:
Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”
   
January 2010:  Louisville, KY … Indianapolis, IN.   
February 2010: Louisville, KY … Anaheim, CA.
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.
 

Many were caught off guard today!

Jan 12, 2010
The bulls said they were going to get their positions evened out before the report, but the increase in open interest over the last two weeks suggests they have been steadily buying corn. Today’s report has now caught even the most hardened bull off guard. Not only do we have better stocks in both corn and soybeans; but we have experienced stronger than expected yields for an overall increase in supply. The haymaker, however, was the big surprise reduction in planted wheat acres, down in excess of 6.3 million acres. This acreage is essentially going to go directly into corn and soybean production. Short-term the question will be how low the bulls will allow prices to go before getting out. We could easily see a 3- to 5-week period of extremely negative bearish tone for the corn and soybean complex.
 
Feed buyers and any speculative bulls waiting for opportunities to buy inventory prior to the normal seasonal bounce into spring should focus on getting something done by the early part of February. Bottomline: If an excessively oversold situation develops in late January to early February, take it and do not wait until mid-February.
 
We will go into more depth in our online advisory service but overall the bears are going to feed on the bulls’ carcass for much of the next two months. It’s going to take a surge in the outside markets plus a solid concern about weather to get prices back to levels seen yesterday!
 
I encourage everyone to get their market plan written down now for the 2010 and 2011 crops. Only by knowing where you want to get to, does one have any hope of accomplishing their objectives. If you are need help, call us at (800) 832-1488 [Rowland & Laura] or at (877) 898-4324 [Bob].
 
Bob’s Upcoming Speaking Engagements: Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”   
January 2010: Orlando, FL ... New Bern, NC … Louisville, KY … Indianapolis, IN.   
February 2010: Louisville, KY … Anaheim, CA.
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 Are Hot As Midwest Freezes

Jan 07, 2010
While most of the Midwest is in the grip of Old Man Winter and everyone is getting cabin fever, the markets are showing plenty of sparks to keep them warm.
 
The corn market opened higher, but started to fail under pressure of a very bearish bean market. It appears producers are starting to realize the time of high soybean prices may be coming to a close as the South American crop appears to be looking very solid and the potential for an increased carryover in next week’s supply and demand report looms over the market. If I heard it once, I sense many think soybeans are running out of time.  We assume those following our strategies (posted to our website) have about 70% of their expected production hedged and they want to move to 100% sold if the market moves above $10.40 in November soybeans. We encourage producers to catch-up on sales if there is any bullish reaction to next week’s report.
 
In regards to corn, the market has been unable to move above $4.25. This has proven to be very stiff resistance and $4 is very stiff support. To move the market out of this trading band the market is waiting to next week to see the result of two events: 
1. The level of outside index fund money that is expected to be reallocated to the corn market, and;
2. Tuesday’s USDA Supply and Demand report.

Essentially, has supply increased or decreased with last fall’s poor harvest conditions versus the expectation of good yields? We have been hoping for a bullish report and bearish reaction, but it looks like the market is preparing for a bearish report because of expected significant cash inventory for both corn and beans that is going to be moving into the production channels between now and early March. We believe that selling both old and new crop corn at current levels represents a great value. Once short, we suggest focusing on taking advantage of any type of serious correction into February to buy summer weather protection.
I encourage everyone to get their market plan written down now for the 2010 and 2011 crops. Only by knowing where you want to get to, does one have any hope of accomplishing their objectives. If you are need help, call us at (800) 832-1488 for Rowland and Laura, or Bob at (877) 898-4324.
 
Bob’s Upcoming Speaking Engagements:
Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”
   
January 2010: Orlando, FL ... New Bern, NC … Louisville, KY … Indianapolis, IN.   
February 2010: Louisville, KY … Anaheim, CA.
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.
 
 

2010 starts out with a bang!

Jan 04, 2010
Grain markets started the year with a bang! Cold weather, a weaker U.S. dollar, strong equity market and fear of large fund buying drove March corn above overhead resistance at $4.20 and January soybeans above $10.65. While the early gains were exciting, they could not hold and we experienced a mid-session correction. The issue that is on many minds is whether or not these price moves are the start of a new speculative buying drive to move corn back to the $4.80 and soybeans back to $11.50, or is it simply a bear trap? Our bias remains that it is a bear trap rather than a technical bull breakout signal. I believe we will know more after the January supply and demand report. As always, trade accordingly and within cash flow ability to handle the swings in the market.
 
We still feel strength into the January supply and demand report will be followed by bearishness into the February when cash products have to be moved into the marketplace. We encourage those following our recommendations to view this as a scale-up selling opportunity to get a base level of expected inventory sold for 2010 and focus on cleaning up a lot of cash inventory that must be sold by early March.
 
Again, if the market does break out of the current trading range on aggressive index fund buying, sellers of grain should wait in the wings to aggressively sell the product.
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.
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. 2010.
 
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