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Hedging Corn and Soybeans

RSS By: Howard Tyllas, AgWeb.com

Howard Tyllas is currently a member of the Chicago Board of Trade and registered with the Commodity Futures Trading Commission as a floor broker and as a Commodity Trading Advisor.

December Corn Daily Numbers & Trade Ideas for 11/14/11

Nov 15, 2011

This report was sent to subscribers on 11/11/11 3:45 p.m. Chicago time to be used for trading on 1/14/11.

December Corn

december corn 11 14 11

After the close recap on 11/14/11: My pivot acted as resistance and was 6.40 1/4, .04 1/2 (only .01 1/4 in open outcry) from the actual high, and my support was 6.30 1/4, the EXACT actual low.

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December Corn


6.78
6.66 ¼
6.50 ½ 6.55 is the 200 DMA
-----------6.40 ¼ Pivot
6.30 ¼
6.22 XX
5.99 ¾
5 day chart.... Down from last week same day
Daily chart ...... Down
Weekly chart .......Sideways
Monthly chart .... Sideways 6.55 is the 200 DMAverage
ATR 16 ½ Oversold 20%

December Corn Chart

For 11/14/11: Downtrend line is resistance, and then the gap of $6.85 ¾. The uptrend line near $6.36 is pivotal and $6.22 supports.

Notice how the uptrend line was perfect support on Friday, this is not coincidence.

In my daily corn numbers on Friday; my pivot acted as resistance and was .02 ¼ (only .00 ¼ in open outcry) from the actual high; my support was .06 ¼ from the actual low.  
 
11/14/11:

Grains: Spot on grain resistance and accurate support numbers. All year long we have seen the marketplace buy corn and sell soybeans. Friday was probably just a breather on the spread, and needs more daily bars to have more evidence that a near term bottom is in place. Bullish report did nothing to prevent the market from seeking lower values in an attempt to spur exports; this is the function of a futures market. Fundamentals are still unknown but not to the extent as 3 months ago. Fundamentals have helped me in the grain market because I only use it for a bias, and trade strictly on the chart performance. All I have seen it do for speculators is to justify the reason they are losing more in a trade idea than they should. I use a stop to take me out of trades because the number or chart level did not hold, and I know what the risk is.

Price parameters I have said for weeks remain the same. Corn market touched the uptrend line and closed just above it. We have not traded below $6.30 since 10/13 so that has proved to be recent support and will be the first target for the bears this week. Below there is $6.22, and after that there is nothing until $6. Downtrend line starts the week at $6.51, and then $6.66 ¼ which has capped all rallies since 9/22. Outside markets could have more of an effect now since grain fundamentals have been priced in. The dollar, crude oil, and then the equities markets will have the biggest influences.

November soybeans threaten $11.52, then $11.35, and I would be surprised if soybeans went below there until SA is more assured of a good crop. $12.10 is where the downtrend line comes in to provide strong resistance now. Not much more to be said and I let my strategy do the talking. The only thing my producers or speculators can do on the breakdown to support areas, is buy back the calls they sold and resell if we can rally for whatever the reason.

Producers can start to roll ½ their corn hedge to the March... Subscribe Now!... Hedge margin right now is $1750 for corn and $2500 for soybeans per contract. That will be more than enough to... I want to continue to trade the numbers without bias and risk $.06 in corn and $.07 in soybeans using a stop to protect.


11/11/11: Grains: Spot on grain numbers. Production is becoming more known as time goes on, and that takes away possible rallies past $6.85 ¾ or $7. Any rally for whatever reason near those resistances warrant taking a sell. SA weather is perfect, exports are like a toothache, and funds are focused more on crude oil and gold than the grain market that lacks potential rally potential. They sold 12,000 corn, 6,000 soybean, and 4,000 wheat contracts on Thursday. On the other hand the recent report shows enough tightness to have the potential for a $1 rally if in January or February SA weather turns for the worst. I think $6.22 corn will hold with the strong sideways action, and that is what keeps me thinking that soybeans should hold $11.52 or $11.35 unless corn closes below $6.22. The last 4 weeks in corn has been the most boring of the year, and I see more of the same for now. You need one of 2 things for a rally in any market, supply and demand. If either is strong alone and the other is not, rallies are always limited, but when you have tight supplies and strong demand the sky is the limit.

Subscribe now..... ...you can always "morph" to reflect you're bullish or bearishness. This limits your risk as you have your thoughts (bias) reflected in the strikes used. It is the slowdown of risk, allow to "trade" so to speak using your bias, and not have to manage risk as you would with a futures or cash position. Farmers should look at the success rate of speculators to know that the odds are against them to forecast future prices and manage risk, but with my strategies it risks little to go after a much greater reward.

Bottom line for producers, whenever you want the upside back you "roll" out of the December options. If you .... I want to trade the numbers without bias today and risk $.06 in corn and $.07 in soybeans using a stop to protect.

11/10/11: Grains: How well did the people who use fundamentals alone for trade ideas do after the bullish report? They were completely right if they were bullish the report and lost money being correct the report result and wrong their trade idea being long. People who were short because the markets were at resistance levels were wrong the report but right on their trade idea derived from the chart. The chart is always correct being they are factual, reports can produce results opposite of what they say, so I use fundamentals to help set parameters of extremes the charts can produce based on the fundamentals known and unknown. This is another example why I have always said, "I would rather be right the market for all the wrong reasons, than right the fundamentals and lose money".

Maybe I will go into more detail this weekend about the fundamentals on this report, but in a nutshell, corn production was lowered 1.4 BPA to 146.7 BPA and was offset with 100 MB less usage. Soybean yield was shaved .2, .1 BPA below what was expected, leaving 3 MB more in soybean stocks, and 48 MB more in corn stocks than expected. I would expect both to come in with actually smaller yields on the January Final Report because less yields become less on the final. When yields dropped from Sept to Oct, and then again from Oct to Nov, 7 times out of 7 times since 1989 it was less on the January final.

There is much I could talk about when it comes to the future implications, but we have plenty of time to contemplate the future, I want to focus what is in play for my speculators (trading mostly in the now) and for my producers while keeping an eye on the 2012 crop to be hedged. As long as my producers have enough funds.......

I read a service today seem very proud to have reported they got a $5.44 board price for 2011 corn, and they were un-hedged for a long period of time only selling percentages away at a time. My producers all locked in $7 to $7.60 board price minus expenses, and had some protection on all they wanted to hedge (about 75%) of expected production until the crop matures and they needed to hedge more.

Outside market certainly had something to do with the negative action, but with a bullish corn report that was not enough to bring higher values, has more potential downside to probe. This report does underpin corn and should find good support at $6.22, and then even more at $6. The bullish picture fades below the uptrend line that comes in now at $6.36, and I would be uncomfortable being long below there. I would try to buy again at the $6.22 or $6 marks, but I would need to see the preceding day's setup in order to determine to buy for more than a day trade. If the sky is falling worldwide, I would not try to hold any asset overnight. The downtrend line is pivotal on Thursday, and I want to be a seller below this line, and a cautious buyer when above but for only a minimum contract trade size. Even though $6.66 ¼ has been my number for weeks as resistance that will be hard to hurdle, I could not work it in on a report day being so close to settlement. It was $.00 ¼ from the high of the day. This remains to be the resistance, as well as my other numbers being used, and I continue to look for the trading range affair I have been forecasting.

Soybeans bearish fundamental picture has been seen in the charts for weeks, and continues to have the downtrend line which comes in at $12.12 today as being resistance and the line for the bulls to hurdle if they want to regain control. Only real support is the low of October at $11.52 and then $11.35 FG. Below there, only the bracket line at $11.10 keeps the market from trading $10. I think the fundamentals will keep it trading from $11.10 to $12.70 going forward, and choppy $.50 rallies on profit taking.

I have reminded in almost every report, "the winner does not win and the loser gets killed". The "at the money" December $6.60 call settled at $.14 ½ down $.06 5/8, and the $6.60 put settled at $.18 ½ down $.02 1/8. The December corn futures closed at $6.56. The $6.60 put...

I want to help you stand on your own two feet. The purpose of this service is not to give trade recommendations because that does little to improve you as a trader, or to even be able to help you select a trade idea out of the many that are sold or recommended to possibly get a commission. I do tell you what I want to do and why I want to do it, and those trade ideas are also a learning tool to see how I have an approach, money management, risk management, reason for entering, exiting, and taking profits. You can see how I trade at an extreme, and when in the middle of a trading range. I try to teach how I look at the charts, and the confidence I have had for decades on the lines and formations I adhere to.

The transition to FC Stone has been made amazingly easy due to the excellent service that firm has provided me. All but 2 accounts have been opened, and the average time to open every account was 2 days after being submitted. Tomorrow I expect that most accounts will be funded, as we want to be ready to trade when we roll out of the December options that expire in 2 weeks from now. Many wired money into RJO so they would be allowed to do something if need be on report day. We will exit the RJO position and at the same time we will roll to ...subscribe.... at FC Stone just as we would have done at MFG. The nightmare would have been if the options were to have expired last Friday, and we would have been exposed since most not having a place to hedge, and even if they did, the cost and pain to get filled using a trade desk instead of my 3 way call to the floor is not something my producers want to go back to doing. I did not think we were going anywhere after the report, but if we did rally strongly, my producers would have needed to use more of their own cash rather than if at MFG they had the money made to lose without additional funds. So it's working out well for all at my firm. Once we exit the current position at RJO, we will close and have our funds wired back to us. Nobody at my firm has been forced into meeting their margin call at RJO, but is limited to liquidation only. I will say that at RJO have been understanding of my producers and realize that the strategy has a known risk and continues to not be near a "debit" situation. They have been very helpful.

The best time to roll or start to is when you want the upside back... Subscribe.... I want to trade the numbers with a bearish bias (not take the buy signal above the pivot) and risk $.06 in corn and $.07 in soybeans using a stop to protect.

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Howard Tyllas

Tel.1-312-573-2699, 1-312-823-9189

Disclaimer: No guarantee of any kind is implied or possible where projections of future conditions are tempted. Futures trading involve risk.In no event should the content of this be construed as an express or implied romise, guarantee or implication by or from Howard Tyllas, that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.

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