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February 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.

Grains Down on Outside Market News!

Feb 25, 2010
The bullish rally came to a screeching halt today. We saw weakness in many commodities—corn, beans, wheat, oil, gold, the Dow and a stronger U.S. dollar. When so many commodities act in unison like they did today, it does cause one to pause and ask if something is happening.  
 
While all of Washington is focused on the health care bill debate, life does go on; other things are occurring that are really troubling the market. I find it interesting how little discussion was given to the Fed Chairman’s statement this week that interest rates would be allowed to stay low for a longer time period than normal after a recession due to the unusual weakness of our general economy. This plus the European mess with Greece and other countries continues to put uncertainty in the market as to what will happen to the Euro. In summary, it appears the domestic and global economies may not be falling into another recession, but the odds are equally high the level of economic recovery is will be slow. This essentially means that job creation will be slow, tax revenues will be low and the battle over spending will be even greater than ever. If massive spending programs are implemented by Congress with big tax hikes, it only burdens an economy that is struggling to stay afloat. 
 
Implication: With limited growth in demand and the current high domestic and global stock numbers, traders see limited reason for a sharp price advance at this time for corn and beans.  Bottom Line: To move higher we will need a serious spring planting delay.
 
Finally, I sense that many producers are holding back a lot of unpriced corn and beans that must be moved this spring before planting or until after the March supply and demand repot in hopes of a bullish revision in numbers. My caution is we are setting ourselves up for a bullish report and bearish reaction if we are not careful. If you need cash flow, I suggest selling inventory into the report rather than waiting until after the report.
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].
 
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.
 

Are Corn and Beans Turning the Corner?

Feb 24, 2010
In general, the corn and beans markets are trying to turn the corner from a bear market started with the January supply and demand report. Today is 33 days off the old high, but more important 12 days up from the low. The problem is the 50-day moving averages along with RSI and SSTO indicators we watch are reaching not quite overbought status. We are going to need a fundamental event like a major change in the March supply and demand report indicating a significant reduction of inventory or continued concern about a cool, wet spring planting conditions to drive the market higher.
We are working on some research about profitability. While we are in the beginning stages of this research, one thing that has surfaced it how little time the market spends below a decent return on investment in corn.
This leads to a question: Has ethanol and China’s strong demand prospects in agriculture enabled U.S. farmers to make over 25% return on investment annually continue in the future? If this occurs how will the government react; will it start reducing the farm program safety net because it wants to reduce spending? This leads to the eventual concern: what happens in those years when short-term supply does exceed demand. How low will we have to go to clear prices through the system?
I believe it’s my job to help farmers/ranchers merchandise their production. The natural tendency of producers is to be bullish and I believe it is my mission to keep them grounded. 
Conclusion: While we did see spectacular profits in 2008 above 75% to 100% over USDA projected data, it was the exception rather than a rule. If returns start to approach 30% this spring, we strongly believe 100% of crop should be sold to protect profit in both corn and beans when offered regardless of the concern about summer weather concerns.
 
Bob’s Upcoming Speaking Engagements:
Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”
   
February 2010: 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. 2010.
 
 

Commodity Outlook!

Feb 12, 2010
The big news today is China’s decision to increasing banking reserve requirements. This is forcing banks to reduce their investments. Since many banks are invested in U.S. equities, the “talk” was of total volume of almost equal to the total daily trading volume on the New York exchange would have to be liquidated. While this is a big number, the bigger concern is with China contracting, Europe potentially slipping into another recession and our economy continuing to sputter and could overall demand continue to contract. Subsequently, the demand for commodities will be on the retreat. So overall the outside market is becoming a drag on the corn and bean complex.
 
In regards to corn and beans, I was overall favorably impressed by their overall ability to hold up in light of the general bearish outside market. It does appear corn has a little more short term concern about all the bad quality corn that has to move into the system.  This could keep a lot pressure on the market until we first see a positive March USDA Supply and Demand report and potential weather concerns about getting the crop planted.
 
In regards to beans, we opened lower and then bounced. This week in Louisville, Ky., I got the sense that producers have done a decent job of selling old crop corn. While this will take some pressure off the cash markets domestically, I still have real concerns for beans. One our clients has called from South American with the observation that bean yields overall are up in excess of 10% and USDA is going to be forced to adjust up. This plus the fact China is trying to slow down the economy could easily flood the cash markets with a lot of beans very soon. My bias is March beans at current levels are a sell. If prices are firmer you should be using it to sell new crop beans closer to the $9.60 to $9.80 level for off the combine cash sales.
 
Wheat has stabilized but still has some real concerns. As the euro continues to fall it makes European wheat more price effective than U.S. wheat. We continue to see very poor exports. While I would love to tell you wheat is going to bounce but it really looks heavy and potentially setting up for one more serious downside leg into harvest. We would encourage you to really focus on getting some inventory priced in this March time period. Selling the carry is a solid way to get a better price for wheat.
 
The 10-year T-Notes have seen a rather active week as one would expect with all the problems we are seeing on the international scene. The positive note was the March contract was unable to break above 119 this week. Once the current problems with the Euro are over in say a month, the T-Notes are expected to start retreating slowly. We are actively encouraging selling of the march T-note between 118 and 119 and holding to last trading day. We continue to believe the current low values are long term multiple year lows and should be aggressive positioned for long term protection of upside long term interest risk exposure.
 
Natural gas has peaked off its December high and is trading sideways to lower. We are nearing a time period of peak price activity. We are would suggest producers stay on the sidelines right now and position themselves for June to start buying natural gas as a offset of future nitrogen price exposure.
 
The hog market continued its nice bounce off last week’s low. The June contract is now at $78 and appears positioned to try for a rally to the old high. Since we are moving into a time period of seasonal strength it only makes sense that one has a positive bias. The problem is the global economy. If talk of a another recession starts to gain momentum, it will kill both domestic and foreign demand. This all suggest to producers if we get back into the 80-cent level some measure of downside price risk should be considered.
 
The harsh weather is starting to impact rates of gain which is helping to bounce up cattle. As we suggested in hogs, we are really worried about the economy and subsequent consumers attitude about taking risk. The big concern I have is beef could really experience a double dip in demand if consumers start to be come spooked and close the pocket books. I strongly urge any producer who is unprotected not allow June cattle to drop below $87.25.
Bob’s Upcoming Speaking Engagements:
Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”
   
February 2010: 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. 2010.
 
 

Grain Markets Up On Oversold Conditions!

Feb 08, 2010
Well the Super Bowl indicators suggest if a team is part of the old NFL it’s bullish for the markets. While I’m a Colt’s fan and I have to say hats off to the Saints for their aggressive play and winning of Super Bowl XLIV.

The other change in tone was on Friday, there was a very negative cloud spreading over the market in regards to the European default situation. The Euro was breaking and the dollar was rallying, along with a very bearish U.S. stock market. While the U.S. stocks were down again today, the dollar was weaker and overall the energy markets were firmer. Bottomline: Fears of a global melt down have tapered a little. There is still concern but not the panic attitude that was sweeping into the market last week. This allowed the grain markets to even up an oversold condition prior to this week’s USDA Supply and Demand Report.
 
So the grains have enjoyed a bounce today. I would suggest its a technical bounce to a very oversold condition.  My expectation for the supply and demand reports this week, is neutral on corn and wheat and slightly bearish on bigger global supplies as directly related to good crops coming out of South America. Since cash prices have dropped significantly, farmers have effectively stopped selling. The market knows we are coming into a time period when producers have to move cash inventory to raise cash flow to pay off debts. 
 
Our working assumption is we are looking for a price low to be put in very soon in the grains and oilseeds and then the market will start looking forward for reason why we have to bounce up. Essentially, I believe the there are only two reasons for a rally. One is technical because of an oversold condition. This is not by itself enough of a reason. The other has to be a major revision of supply numbers in the March report. While we can hope I still believe this is a thin reason to hope for an extensive rally. There is only two reason why prices are going to exceed much more than a 1/3 retracement of the last months correction. First, the domestic and global economy starts to show a faster growth rate than expected (i.e. President Obama's economic policies are working) and second there is a significant weather event to reduce planted acres.  I would suggest the odds are less than 1 in 5 that prices will now exceed the 50% retracement levels. However, even with these low odds prices and time are at levels where there is little options left other than to hold on and hope.  
 
My only suggestion is to remind yourself how frustrating this feels—and when the market at some time in the future allows you to lock up 30% high profits you act so you don’t have to go through this problem again.
 
Special note: I will be speaking at the National Farm Machinery Show in Louisville, Ken., this week. My speaking times are Wednesday at 2:30 p.m., and Thursday at 10 a.m.. Finally, I will be part of a taping of U.S. Farm Report at 2:30 p.m. All of these events will be in South Wing B, Room 105. If you are coming to the show, please come on by and say hello.
 
Bob’s Upcoming Speaking Engagements:
Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”
   
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.
 
 

A Solid Bounce in the Grain Markets!

Feb 02, 2010
The market saw a solid bounce today. In fact chart followers would say we had a gap higher open on the daily charts. If this gap were to remain open for the rest of the week, many chart watchers would say it’s a breakaway gap. For this to occur, the market would need to see a solid increase in volume tomorrow on higher prices. Even further open interest needs to increase as well to give the technical bulls confidence this rally has some potential upside momentum.

Why the rally? Well, the dollar was weaker and crude oil was stronger seems to be the most cited. This coupled with rather slow farmer movement has forced end users who want to buy inventory to bid up prices to attract more grain.  I would also suggest sellers who have seen sharp gains over the last 13 days or so want to take some profit and get neutral before next week’s supply and demand report.
Personally, I see limited changes. We may see the Chinese corn crop reduced a little but we could also see the South American bean crop increased. Going in, I believe corn is the strongest, with beans and wheat as followers rather than leaders right now. As we look forward, it appears big on farm corn and bean supplies and the ability to hold, conditions will need to be balanced against the potential of a March supply report revision due to a USDA resurvey of the corn and bean harvest in selected areas. Overall, my experience tells me that the unpriced seller should be prepared to sell ½ retracement of the recent break. We will be keeping clients on our electronic copy informed of these levels.
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 need help, call us at (800) 832-1488.
Bob’s Upcoming Speaking Engagements:
Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”
   
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.
 
 

Bounce in Corn was More About Taking Profits!

Feb 01, 2010
Today is the first day of February and the bulls are hoping that the worst is behind them. The problem is plenty of grain is available to the market, the outside markets are sputtering and limited new bullish fundamentals are developing for the grain and oilseeds. Today’s bounce was more about easing an oversold condition than a new buying spree. I would suggest its simply a case of the shorts taking some profits before next week’s USDA Supply and Demand report. In fact with all the open interest still remaining in the March corn and beans, we have plenty of downside risk still left for the end of February.  
 
Looking forward I have to suggest several things have to happen to allow prices to move up to the level seen less than 13 days ago.
 
  1. The March USDA Supply and Demand report has to show a modest reduction of the corn and bean crop due to harvest problems.
  2. The global economy has to start showing solid job growth.
  3. We need to see modest delay’s in spring planting of Midwest corn.
If all of these conditions are seen over the next 45 days, we will see a strong rebound in corn. So for now I have to say we are nearing a time period of weakness. One should be adjusting positions and preparing for some type of seasonal bounce. How much of a retracement of the last 13 days is dependent upon variables that we simply can’t predict at this time. So all we can do is prepare ourselves to sell based upon time and hope we get the best potential recovery possible.
 
Special alert: From time to time we will be talking about locking up input costs for our clients for the 2011 and beyond time period. We are of the opinion that we are quickly ending a period of low interest rates and preparing for a long-term uptrend. We would suggest the need to start looking at selling the 10-year T-Notes to help offset upside risk exposure in interest rates. Our target price levels are 118 to 119 basis the March. If you are interested in long term interest rate protection strategy, give us a call at (800) 832-1488.
 
Bob’s Upcoming Speaking Engagements:
Periodically go to www.utterbackmarketing.com and click on “Upcoming Seminars.”
   
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.
 
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