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November 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.

Continued Long Liquidation!

Nov 22, 2010

The continued long liquidation due to lack luster exports and concern about the status of ethanol blender credits has continued to weight on the corn complex. The market started the week off on a negative tone and is expected to continue well into the First Notice Day. That’s the bad news; the good news is, since we are clearing the deck of a lot of weak longs, we are also allowing end users to get inventory bought at attractive values. This implies longs are moving into very strong hands. The March corn contract is trading right above a four-point uptrend support line. If this level is broken, it could move down to 50% of the total June to November rally which comes in around $4.84. This level of correction is not expected; but, if seen, we believe it would be an excellent buying opportunity for all feed buyers and anyone wanting to reown inventory. 

We continue to expect supply will be reduced in the January reports. The current price decline will not excite producers to raise the necessary acres of corn and we really believe China will not reduce its demand of corn and soybean products that much in the first half of 2011. We still believe the odds are better than 60/40, the market will test and perhaps make new highs in 2011. 
Bottom Line: This is not a time to panic and sell cash or futures. The only action we like now is rolling down long calls or making catch-up purchases.
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.

Professionals like bear markets!

Nov 19, 2010
Many professionals like bear markets because of their speed. The current January soybean contract had a report high of $13.48-1/2. In just four days we have seen a $1.73-1/4 break or about 38% of the total rally from July now.
 
Now that we have experienced such a strong correction, we suggest most of the weak longs have been [liquidated] forced out of the market. Producers with old and new crop inventory will most likely be more motivated to sell on a retest of the recent highs. The short-term net impact is move inventory will move into strong hands and develop a pool of short positions in the market. The long-term net impact is, if anything does happen to the South American crop or we do confirm a loss of 2 million acres and carryover gets dangerously low, the possibility of squeezing the market to the upside is significantly improved. Thus, we believe producers should move slow on selling their expected 2011 crop. If and when producers do sell, consider buying puts rather than cash or short futures position. Remember, we’re not predicting a big price event; the conditions are possible. So when we recommend producers start selling $12 to $13 NOV 2011 SOYBEANS to lock up PROFIT, we don’t want wide swings in the market to force those using this strategy out of their hedge position.
 
Please note that we have focused more aggressively on buying corn calls rather than soybeans calls because of the cash flow required. If anyone is interested in buying calls, we suggest moving sooner rather than later. While today’s 30-cent move is impressive, the upside potential is still significantly greater than the downside risk, in our opinion.
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.

Modest Correction to Start Off November in Grains

Nov 01, 2010

The corn, bean and wheat market started November off with a modest correction. The corn market opened higher but could not hold and then sold off for most of the day.  Beans were exceptionally quiet in light of the last few weeks constant climb up.  The wheat market was the hardest hit today reflecting some concerns that the weather bulls may have pushed a little too hard.

Overall, the tone seems to be that corn yield will be adjusted down in the upcoming November Supply/Demand report while bean yields are expected to drift up. There is very strong buying interest below the market if we get a bullish report and bearish action. I would not be surprised to see big buying in the lead month Dec corn below $5.50 and it should be difficult getting lead month beans below $11.80.
 
Currently the price in China is over $18 for beans and 8.65 for corn. These prices have rallied with the domestic price in U.S. We are not seeing demand rationing at this time. There could be a transition coming in reference to the dollar. If we see a big shift in Washington in reference to spending, we could see a bottom in the dollar. This is something we will have to watch as the first half of 2011 unfolds. Bottomline: How high does prices have to move to ration usage? At this time it appears livestock usage is going to decline before ethanol and exports.
 
The supply reduction event due to U.S. crops should be factored into the market by late January. Therefore, the real action will turn to South America. If the crop is reduced, it will really get the bean market excited first. Bottomline: We are one event away from a Global commodity panic.
 
How will consumers  react next year if unemployment persist and food inflation becomes very high? How fast will the administration react to exceptional bullish speculation in the commodity markets?  Remember, when they start talking about it on national news and congress starts to have hearings we are very near the top.
 
Finally, how many acres will be planted to corn, beans, wheat, and cotton. Right now it looks like cotton and wheat are going to gain. If this happens how do we get the 4 million plus corn acres and 3 million plus bean acres necessary to get carryover back to acceptable levels. If we don’t get the acres does this mean demand slows down with price or will government policy set in and change the landscape?
 
So for you sellers out there we are going to have some real excitement and hard decision to make. How much profit is enough?  We are currently shipping out a special report to all brokerage clients on how to approach this issue. If you are interested, it can be bought- Call 1-800-832-1488 for more details.
 
 
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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