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April 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.

Corn up on purchases from China!

Apr 30, 2010
Well the one fundamental that I’ve been most worried about in regards to corn has finally happened, Chinese buying. They waited until after the market technically broke on Monday to make the announcement of the purchase. The weekly exports are clearly above expectations which helped to push the market back over the last two days.
The question now becomes is this a case of sell the fact or is it the start of a new bull trend?  The market has moved back now up to a level where one would expect the market to stall out. To move higher now will take continued strong buying by all exporters. The talk already is some exporters are going to cancels some deals due to the recent rally.
Technically, a close in December corn above the $3.90 is a warning sign.  A close above $3.98 in December would suggest all short positions should become defensive by rolling futures into puts or consider adjusting size exposure. A close above $4.05 is the last real warning sign for all corn sellers.  Finally, a close above $4.13 would be the last signal for all end users to have all feed needs bought and I expect all speculators would be aggressively getting in position.
So the decision right now that one has to make is how do you want to manage the risk of your short position if the demand push can merge with a weather scare. I still believe the odds are less than 30% but they do exist. You need to be making up your mind right now how do you defend very profitable hedges against the seasonal upside tendency of the market even though we are going to have a record corn planting.
In summary: I still believe December corn has a 70% chance of moving below $3.20 this fall so I’m wanting to be a strong seller on rallies. The key right now is to remain committed but have a plan on how you are going to handle upside price advances “IF” they occur.
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.
 
 

Corn Planting Gets off to a Great Start!

Apr 19, 2010
There is an old saying, plant the corn in the dust the bin will bust. Well this year may be where we test the validity of that phrase. I’ve talked to producers all over the Corn Belt and many from southern Indiana to Missouri are almost done with corn planting. In fact, I’m getting reports that nitrogen has run out in the Missouri area and all distributors have been shut down for 6 to 8 days. Bottomline: Corn crops are going in at a record rate!
 
While some producers are planting beans it appears most of them are not as excited about getting soybeans planted this early. The risk of a mid-to late May frost is on everybone’s mind. I would not be surprised to see producers simply work up the fields and sit until the end of April to get their beans in the ground.
 
Overall, Mother Nature is allowing a great spring planting window. The big question now is: Will we turn off hot and dry like 1988 or will we have timely rains and more heat than last year but not destructive? The current opinion seems to be moving to a good production year.
 
Technically, I would suggest the corn market has now told us as sellers where we need to be evaluating our positions. I will be watching closely the 50-day moving average and previous month’s high after May 15th. I would suggest the odds are less than 20% now that December corn will close above the $4.05 level and force sellers to become extremely defensive.
 
In regards to beans the market did break out above the $9.50 level last week which forced us into a defensive position on beans. If November beans closes below $9.25, it is going to get very rough on all the bulls. The last chance for the bulls to move to the sidelines will be a close below $9.05. Once this occurs we believe it will be all over unless a major dry weather event occurs in late July to early August.
 
IN SUMMARY: All hedgers are now being nicely rewarded for their continued conviction of selling into strength.  While we are enjoying financial rewards today, it’s necessary you establish the rules you are going to use to manage your short position as we move into the critical May 15 to July 15 time period. All clients working with UMS knows what they are going to do. Do you have a plan?  If not give us a call at (800) 832-1488.
 
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.
 

Grains Higher on Technical Short Covering!

Apr 16, 2010
The corn market opened higher Thursday on continued technical short covering. December corn is now ten days up from the market lows. We suggest key time counts will be day 11 to 13 up which will be Friday and next Tuesday. If December corn is able to close with conviction above $3.95 the bulls will have something to scare even a more aggressive round of short covering. To our way of thinking this rally is a catch-up selling opportunity before the planters really start to run and the corn gets planted ahead of schedule. The final battle cry for the bulls is it’s too dry and hot too early. If we are this way in April what’s it going to be like in July/August. There was a recent report out by the University of Illinois which suggests that the last two year’s crops are too much above average and we are going to see a drawback in yields. In fact if we would see a 1 in 10 year weather event corn prices could explode this summer. To this point, they are correct but remember, if we have good growing conditions we may actually find out how good the crop can get as well. Our recommendation is to sell March corn at the $4 level but have a game plan on how your going to manage your short positions if we start taking out the April highs in late May to early June.
I see four strategies: 1) is to selectively liquidate on a technical buy signal, 2) change the form of how your short by rolling futures to long puts, 3) defend upside risk exposure by buying calls or futures against short position in cash and finally, 4) sell out of money puts to give some premium value to offset upside price risk.  
Which tool you use is really dependent upon your cash flow, your ability to manage positions and the level of profit you are currently locking up.  We will be working with our clients on a one to one basic on developing a game plan that tailored to their unique requirements.
Hogs
All of the meats where up today. The interesting thing to point out is we are nearing historical highs. I would not be surprised to see  some initial selling at those levels. If they can break the market one should also not be surprised to see some short liquidation if we actually gap through the old highs.
Right now the trend is up.  While its not time yet to stat looking at long term hedging of the hog/corn ration it’s going to get here really quick if this rate of rally continues.  I know its tough to start thinking about 2011 and 2012 pricing but remember great prices now will eventually motivate expansion of herd stock and increase feed cost. You need to be getting a game plan together now on how your going to tackle the future rather than live through another time period of poor profit that we have just come through.
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.
 
 

Sun is Shining, but Weekend Rains May Delay Field Work!

Apr 05, 2010

The sun is shining in Indiana but the weekend rains are simply making the grass grow but allowing limited fieldwork. All eyes are now going to turn to the corn and bean production areas in the U.S. with the following questions on their mind: When will the crop get planted? How fast will it germinate? How much heat will we have going into pollination? 
 
The report last week helped the market in that it did not indicate planted acres much outside of trade expectation. The problem, however is that the acres don’t add up and the general expectation is if given the planting window more corn and beans will eventually be planted.  The second question is with fertilizer and other related costs down but the corn price being down as well will producers work harder to get more bushels produced since they still have very high cash rents and other cost to cover.
 
Finally, as the stocks report suggested there is still plenty of old crop corn and to some degree beans and wheat around. Will the producer hold on to inventory in the expectation of a summer bounce? If the bounce does not occur and we do produce a decent crop, one can only imagine how far we will go below the cost of production this fall for many producers.
 
Our position is unchanged. We are holding onto all hedges placed in the past. We will be selling all unpriced inventory between May 15th and July 4th. Our expectation is Dec corn will have a very hard time getting back above $4 and Nov beans will find it extremely difficult getting back above $9.50. Basis is expected to widen for both corn and beans as we move into fall. If you have off the combine HTA sales in place, you need to be very aware of your risk and act accordingly.
 
Bottom line: Rallies are to be sold rather than dips to be bought.
 
 
Flash comments: Hogs appear on pace to make new life of contract highs. Finally, profit is coming back into the books. I strongly encourage all produces to start thinking about profit margin. We all know by fall some hog expansion will start along with the low corn prices. If you are interested in locking up profit for your hogs for the future, this fall would be a good time to focus on locking up the hog/corn relationships.
 
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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