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August 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.

Market continues higher

Aug 31, 2010

Market continues higher based upon disappointing early harvest corn yields and expectation of continued export buying. The corn market is now becoming the leader of the current bull move. Early yield reports are suggesting that it will be very difficult to meet the current USDA estimates.  Expectation is growing that USDA will be forced to reduce crop size in the upcoming September report. 

End users and producers who have previously sold inventory are starting to become concerned that limited fall weakness will develop.  We have been waiting for a correction to buy next year’s feed needs but it’s looking increasingly like the seasonal price action will not work this year.
 
We would recommend feed buyers start buying based upon the calendar rather than flat price. We however would suggest buying via an in-the-money call rather than futures just in case the bulls get surprised by yield once the harvest gets into full swing.
 
As for the soybean market, it’s rallying but nowhere near as strong as corn. Harvest has already started in central Indiana. The yields are overall average but nothing exceptional. The trade attitude is still concerned that the current high USDA estimates will be revised down significantly because of the hot and dry August weather.  Remember a 1.5-bu. drop in the U.S. yield will take us from a adequate supply back to reasonably tight stock levels. The trade currently is trying to put weather premium into the market. At this time we will be recommending moving slow on selling 2011 inventory.
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 the corn bulls on the retreat?

Aug 24, 2010
The corn bulls woke up to a bearish market and could not stop the slide today. I expect the commitment of traders report will show some general long liquidation as key technical support was taken out at $4.25. Looking forward I have to suggest a correction of more than $4.06 should be difficult prior to the September USDA Supply and Demand Report. This is a 1/3 retracement of the recent rally. A 50% correction of the June to August rally falls clear back at the $3.90 level. This level of a correction will require the September report to confirm yields at or above the 165-bu. level. 
 
Beans and wheat broke today, but percentage wise the corn market was the clear winner for the bears today. I would not be surprised to see a modest technical bounce tomorrow or Wednesday but then a retreat to the lows by Friday as expectation of harvest pressure starts to creep into the market.
 
As for watching our input cost exposure, I am hearing reports that producers are having difficulty locking up next year’s fertilizer prices. Concern of growing corn acres has many supplies reluctant to quote a price in some areas.  If the corn market is able to post a correction in the December contract to the $3.90 or lower level we strongly encourage all end users and corn farmers to buy corn to protect up side risk exposure.
 
We would also like to point out the 10-year T-Note is on the advance. Talk of reduced home sales are causing great anxiety for the markets in general.  If you have not talked to your banker about refinancing your home or business interest lately I would strongly encourage you to do so.  Many banks have long term house loans down to 4.5%.
 
Finally, the crude oil market is retreating under pressure from the concern that the domestic and general economy may be slipping back into a secondary low.  Producers should be watching oil for signs of a fall low to lock up next spring inventory needs.
 
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.

What does one do with old crop corn?

Aug 18, 2010
I’ve been on the road this week, speaking to New York corn and soybean producers.  I have to say the drive up from Indiana was a very beautiful drive.  The corn and bean farmers in Northwest New York are going to have some of their best yields in several years. Again, I want thank all the producers who attended the NYCG Summer Crop Tour for their generous hospitality and welcoming me to New York agriculture.
As for the markets, the corn and bean complex are slowly creeping back to the recent highs made last week on the wheat market surge.  Overall, the attitude for long term bullishness is building that demand to be very strong. The end users overall are getting worried they have missed the boat.
As one producer asked me today what do you do with old crop corn trading currently at $4.50 in the cash market?  My response went like this. While I continue to feel there is grounds for some technical weakness into the harvest time period, the level of the correction is going to be limited.  My fear is growing that December 2010 corn will find it very difficult move below $4.00 for any length of time if we confirm in the September supply demand report that yields are sliding lower due to the hot and dry conditions in August for some corn and bean producers.
Subsequently, I have to suggest the odds are better than 60/40 that the corn market will eventually move very close to the $4.50 level in the December time period. Therefore, at this time unless you need immediate cash flow, I would defer selling any remain corn until the after the Thanksgiving, but before the Christmas, time period.
In regards to beans, we are equally nearing some very important resistance levels. I can not express the importance of the next five to eight trading days. The longer the bulls can hold things together the greater the odds the market will be able to breakout of the current trading consolidation. A close in November beans above $10.50 should trigger a short term move to $10.75.  If the momentum can be maintained above this level then a major bull market would be suggested. The only way I believe the market can be this aggressive is the overall yield has to start declining towards the 42.4 bushel level.  I unfortunately, don’t expect this major of revision in the number until we get well into the October supply demand report.
In summary: if you’re hoping for a major bull market to develop between now and next spring I have to say it would be in your best interest for this market to not get “too” overhead this fall. A correction of say 1/3 of the recent rally in beans and corn I believe would make it much healthier for a long-term bull move.
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.
 

Wheat is in panic mode!

Aug 15, 2010

The wheat market moved into panic mode today with the announcement by the Russians that they are suspending all wheat and corn sales. End users are in a panic mode to cover needs. This sharp rally is causing concern equally for all sellers in the form of margin calls. The big positive is the market is now getting into solid price levels not seen since last November for wheat, corn and beans.

The main leader today was wheat. The December wheat contract has mushroomed up to $8.154 up the 60-cent price limit.  This I have to suggest fits the classification of a market in panic mode. Everybody remembers what happened to trapped shorts in 2008 and no body wants a part of the short side right now. I find this very interesting, while I’m hearing there is still a lot of inventory being stored in the bin by elevators. Wheat is all about fear!
How high can we go is the big question of the moment. I could give you a technical swing objective or previous overhead resistance levels but they are really insignificant in this type of market. My suggestion as a producer is you have to slowly scale-up sell into the this market as it attempts to reach a level where demand is rationed and new supply will be assured. I’m all ready getting solid evidence that July 2011 at $7.75 to $8 is going to attract acres back into production.  My suggestion is you should be at least 50% forward sold in the July 2011 contract with the strategy of rolling forward to capture carry if the inventory can be stored on farm.
The December 2010 corn tested $4.386 while December 2011 corn tested $4.50 before retreating after the open. I anticipate there have been several open orders filled by the commercials as farmer orders are being filled for cash sales. I have to suggest we are into solid overhead resistance. A lot of the bullishness will be factored into the market before next Friday’s USDA Supply and Demand report. One should be scale up selling into the report. Now is not the time to be buying this market. In fact the July 2012 contract traded as high a $4.716 bears close examination by any producer interested in protecting profits.
Finally, November beans moved up to $10.49 on the open but started to retreat in late trading and closed unchanged. Today’s inability to hold the gains must be viewed as a small concern for the bulls. I would not be surprised to see this market remain firm until it see the next week’s report. While there are pockets where beans are not getting rain, overall most of the bean production areas are receiving some moisture in August. Farmers tell me this makes grain.  A U.S. yield any place close to 44 bu./acre should work, turning prices lower as we move into harvest.
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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