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December 2011 Archive for Standard Grain

RSS By: Joe Vaclavik

Joseph Vaclavik is the president at Standard Grain in Chicago. Standard Grain provides futures and options brokerage to farms, feedlots, elevators, processors, end-users and traders. Visit www.standardgrain.com for more information.

 

South American Weather Issues Persist...

Dec 29, 2011

 

·         Grain markets mixed overnight with soybeans and wheat lower, corn steady; Funds actually impressive buyers of ag complex this week despite the holidays
·         South American weather issues and newly found technical strength helping the ag markets; Most “chart bears” now likely out of the short side in the grains
·         Limited rainfall and hot temps across major growing areas of Rio Grande do Sul and Parana will continue to increase crop stress according to forecasters; Rains across the Mato Grosso state will be helpful for producers
·         Analysts in Argentina and US are moving estimates for Argentina corn production lower, ranging from 24 to 30mmt vs. last year’s 23mmt and USDA’s current 29mmt; Many believe damage to corn crop may be done while the bean crop has a much better chance to do well
·         Outside markets mostly mixed with a higher US$, higher crude, flat equities and collapsing metals market
 
Producers who sold cash grain at lower futures prices and re-owned with call options should be looking good. Basis levels widening out in most areas as markets rally. Market action tells us that the weather issue in South American is real; however one forecast change could certainly cause a major setback across the board. Nearby corn trading 60+ cents off recent lows, nearby beans about $1 removed from recent lows. Traders looking forward to Jan crop production report and new weather forecasts after the new year. We have not issued any recommendations on the ’12 crop. We’ll likely not recommend any sales until the Feb-April timeframe, which history tells us is generally the best time of the year to price grain on rallies.
 
Producers: No new recs
 
Specs: No new recs until next week.
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Corn Faces Resistance at $6.26/March

Dec 22, 2011

 

·         Grains mixed to higher overnight; Impressive strength again yesterday on short-covering, technical buying and growing concerns over South American weather issues in certain growing regions
·         Some analysts dropping production estimates for Brazil’s southern states as drought concerns grow
·         Weekly ethanol production at 943k bpd, up 5k from last week; Ethanol stocks at 17.7mil/bar, up 600k
·         USDA Export Sales this morning at 7:30am CST, Pre-report Estimates:
o   Wheat                         300k-500k mt
o   Corn                             450k-675k mt
o   Soybeans                      400k-600k mt
·         Outside markets mostly supportive; Crude/equities higher, US$ slightly lower
·         March corn looking at technical resistance at 626, which is the 50% retracement from the early November highs to the mid-December lows
 
 
This would be the 5th up day in a row if corn were able to close in the green today. Short-covering due to weather issues seems to be the main culprit. We’re going to stay away from the short side for the time being, and let the charts do their job. We’ll likely look to buy a break in March corn in the 600-605 area. Wheat should continue to follow corn for the most part. Soybeans now trading nearly 60 cents removed from recent lows. We remain bullish the grain markets long term and believe that there will be better opportunities in the Feb-April timeframe for producers to price the ’12 crop.   
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Down Overnight, Rain Forecasted for South American Corn/Soy Areas

Dec 21, 2011

 

·         Grains taking a breather overnight after a strong start to the week; Short-covering and fund buying seen on Monday/Tuesday on South American weather concerns
·         Rains forecasted in Brazil/Argentina later today and tomorrow; Forecasters still undecided on whether or not weekend rains will hit key areas
·         Outside markets mostly positive this morning with US$ slightly lower, crude and equities slightly higher
·         Chinese corn imports in Nov were 244,756mt, about twice last year’s amount; Jan-Nov period saw total imports at 1.18mmt, down 24% from last year
·         Chinese soy imports in Nov were down 34.8% from last year; Soy imports during Jan-Nov period total 47.2mmt, down 4.3% from last year
·         Barclay’s issuing a report indicating that investment in commodity funds rose $3.7bil in Nov; Total under management now near $426bil
·         Cattle prices soft yesterday and this morning despite major winter storm event across plains
 
 
The South American weather issue could turn into something bigger, but may now be nothing more than an excuse for a short-covering rally in the grain markets. We wouldn’t be surprised to see a run higher initially, however we believe this will ultimately be a rally to be sold in corn and soybeans. High volatility in the Feb corn options especially leads us to believe that traders are looking for more of a market moving report in early January from the USDA.   
 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438   

Follow-through Buying Overnight

Dec 20, 2011

 

·         Grains mixed-higher overnight after yesterday’s rally; March corn closing above $6 and trading above some key short-term resistance levels
·         South American weather issues main cause for strength in ag complex; Hot/dry weather will increase stress to crops in Southern/Central areas of Brazil this week, showers possible late this week; Argentina rain event looking less significant than it did earlier this week
·         Increased farmer selling noted by cash sources on yesterday’s rally in corn and soybeans
·         Livestock markets, led by live cattle, were up sharply yesterday; Harsh winter weather across the plains caused short covering and some fund buying
·         Outside markets mostly supportive this morning; US$ lower, crude/equities higher
·         Export Sales and Census Crush on Thursday morning
 
 
Generally, early season weather rallies will be sold by pro traders. The bulls may get another day or even week of strong markets, but the odds tell us that this rally will likely not hold IF it is purely due to weather issues. Seasonally, we should be looking for some sort of rebound in the grain markets, also. It wasn’t too long ago that $6 corn was considered expensive. Perception may be a bit skewed these days as funds have inflated our grain markets for the last 5-6 years. The only thing that really matters, if you’re a producer, is margin. For 2012, do your homework and figure out your margins. This will make pulling the trigger much easier when the opportunity presents itself.    
 
Producers: If your basis is still favorable, sell cash and re-own using March or May call options.
 
Specs: No new recs
 
 
Regards,
Joe Vaclavik

(312) 462-4438    

Corn/Soy Sharply Higher Overnight

Dec 19, 2011

 

·         Grains shooting higher overnight on South American weather threats and short covering; Soybeans trading 50+ cents removed from last week’s lows and flirting with major resistance in the 11.50 area in the March contract
·         S. American forecasts call for some rains later this week; Most believe no real damage has been done to crops thus far
·         Funds cut long in corn by 1k to 50k; Covered 8k of shorts in beans, now short 15k; Increased short in wheat by 4k to 83k
·         China buying corn from domestic farmers in a bid to refill government controlled stockpiles
·         India looking for record wheat crop in 11/2; Favorable weather and higher acreage seen
·         Cattle placements rose on Friday Cattle-on-Feed report after analysts had predicted a decline; Some see this as being bearish cattle and bullish feed grains
·         Asian equities drop hard on death of North Korean leader Kim Jong Il, little effect seen on US markets
·         Export Inspections this morning at 10am CST; Census Crush and Export Sales on Thursday morning; Markets open Friday, closed Monday
 
 
In general, early-season weather rallies are to be sold. We view this as more of a technical bounce as the weather threat in SAM seems minimal at this point. Rains forecasted as early as Friday/Saturday. Producers can use this opportunity to sell some old crop cash grains re-own with call options as long as basis levels remain favorable. Friday’s cattle-on-feed numbers should be an indication from the USDA that feed number could be up in future reports. 
 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438

Grain Futures Quiet Overnight

Dec 16, 2011

 

·         Grain mixed-higher overnight; Corn holding its ground just below 5.80/March while soybeans have been able to bounce, trading near 20 cents off recent lows
·         Outsides mostly supportive this morning; US$ lower, crude/metals higher
·         China Ag Ministy pegging’11 oilseed production at 33.05mmt, up 2.3% from ‘10
·         Argentina exchange raising estimate for 11/12 wheat production to 13.6mmt, up from previous 13.0mmt; Wheat harvest near 50% complete; Soybeans and corn planting 73% and 71% complete, respectively
·         Study by Iowa State University shows avg price of Iowa farmland in 2011 rose 32.5% from 2005 levels; Report also shows investor groups made up only 22% of the buyers vs. 39% in 2005
·         Informa to release 2012 acreage estimates this morning; COT report from CFTC this afternoon
 
It’s shaping up to be another slow day in the grain markets. Momentum certainly remains to the downside for corn especially. Soybeans may have found a temporary bottom as long as there is talk about weather issues in S. America. We may have to wait until after the new year for any market-moving news.  
 
 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

Grains Hold Recent Lows...For now

Dec 15, 2011

 

·         Grains slightly higher overnight; Corn and soybeans both tested recent multi-month lows yesterday while crude and other outside commodities collapsed
·         Outsides are mostly supportive today to begin, however we wouldn’t rule out more downside in the markets that took the biggest hits yesterday (gold, silver, crude)
·         Export Sales this morning at 7:30am CST; Pre-Report Estimates:
o   Wheat                                   300k-400k mt
o   Corn                                       400k-600k mt
o   Soybeans                             400k-600k mt
·         China-based commodity analysts doesn’t see the government there adding to corn stockpiles through imports until LH of 2012
·         Russian grain analyst SovEcon raised estimate for Russian grain output to 92mmt from 90mmt previously
·         EIA weekly ethanol production at 938k bpd last week, down 16k from the previous week; Ethanol stocks at 17.1mil/barrels down 800k
·         Canadian Wheat Board will ask courts to block a bill that would end its 68-year-old grain monopoly
·         Rains in the RGDS state of Brazil, will continue to be dry for a couple of weeks as planting wraps up; Rio Grande do Sul is the 3rd largest growing state in Brazil
 
The trend in the grain markets remain lower, bottom-pickers beware.   Most technicians are looking for a break below 5.80 in March Corn sometime during the next couple of sessions.   We remain friendly both the corn and soy markets long term, however short-term downside appears imminent given the circumstances. With the collapses in gold, silver and crude yesterday, heavy margin-call selling seems to be a reasonable assumption today and tomorrow. Gold is trading below the 200 DMA for the first time since Jan ’09, possibly signaling a trend change in what has been the strongest of all commodities during the past several years.
 
Regards,
Joseph Vaclavik

Corn Settles into Range

Dec 14, 2011

 

·         Grains mostly lower overnight; Nearby March corn failed above the $6 mark yesterday and has settled back into the recent trading range
·         Outsides mostly negative for ag complex with US$ slightly higher, equities/crude lower to start to the day
·         Some siting South American weather issues as cause for recent strength in soybeans; Forecasters saying La Nina will likely reduce rainfall in Argentina’s main soybean producing area
·         China’s winter wheat acreage was up from last year; Wheat crop there is showing good progress in most major producing areas
·         Last trading day for Dec grain contracts is today
·         NOPA Crush this morning at 7:30am CST; Traders expecting 140.9mil/bu vs. 141.2 in October
·         Cattle-on-Feed on Friday; Analysts looking for 104% on feed, placements expected at 99%, marketings expected at 98%
 

After yesterday’s failure above the $6 mark in nearby corn, the grain markets seem content to settle back into the recent trading range. Many analysts believe the January crop production report will be more exciting than the December report. South American weather issues have not been enough to push the soybeans out of the recent downtrend, but could eventually cause a larger rally if they persist. Wheat should continue to follow corn, however we believe it’s only a matter of time before a major short-covering rally is seen in wheat. Longer term, we’re friendly the Nov ’12 soybean market, as price ratios will not encourage any significant amount of acreage.

 

Straits Financial does futures/options brokerage for farms, feedlots, elevators and processors.  Call Joe Vaclavik at (312) 462-4438 for more information.

Grains Hold Up Despite Outside Pressure

Dec 13, 2011

 

·         Grains slightly higher overnight; Corn/soy/wheat able to shake off negative currency action yesterday to close higher; Soybeans making new lows before rallying to finish in positive territory
·         Outside markets generally supportive this morning with the US$ slightly lower
·         Some concerns over dry conditions in South American helping to support the soy market
·         CME to change CBOT/CME Ag settlement rules this coming spring; Closing prices have been set in the pit since side-by-side trading began in 2006, CME will be moving to use the electronic trade to set closing prices in a move that has floor traders very upset
·         Brazil corn 96.5% planted, soy 94% planted according to Celeres, who notes that dry weather is becoming an issue in some areas
·         China forecasting its Dec soybean imports at 5.39mmt up from its previous estimate of 4.2mmt
·         UK wheat exports were up in Oct, but continue to run below last season’s levels according to customs data
·         Brazilian farmers have forward sold 40% of the 11/12 soybean crop vs. 39% last week
·         Tech Numbers:                                 Support            Resistance
o   Corn (H)                               5.85                 6.05
o   Soybeans (F)                         11.00               11.30
o   Wheat (H)                            5.85                 6.05
 
Despite negative outside markets yesterday, and a mostly negative USDA report last week, the grain markets have been able to hold their ground. Technically, the markets are still in major downtrends that have yet to be negated. Charts are telling traders to sell rallies, however the way that the ag complex has held up under such huge fundamental pressure may be telling a different story. As one technician put it, we’re "bearish but cautious."
 
Hedgers: As long as basis levels are good, we will recommend selling cash grain and buying call options.
 
Specs: We want to be long soybeans, but are waiting for confirmation on our technical signals. Stay tuned. Hold long positions in H/Z and N/Z wheat spreads.
 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Down Overnight with US$ Rally

Dec 12, 2011

 

·         Grains trading lower this morning in sympathy with sharply higher US$ and lower outside commodities; Soybeans trading back near Friday’s report-day lows
·         Friday’s USDA report was generally negative; Soybean taking the biggest hit, testing multi-month lows; Large China production estimate causing shakeup in the world carryout number for corn
·         Chinese data showing 5.7mmt of soybeans imported in Nov, up 50% from Oct and up 4% from last year
·         Commitment of Traders report released on Friday; Funds dropped 15k from their long corn, added 3k to their short soybean position and covered 5k of their shorts in wheat
·         China sees soybean imports rising to 5.4mmt in Dec, forecasting total 2011 soy imports at 52.6mmt
·         Some South American weather forecasts looking drier now, a confirmation may be the bean market’s best chance to rally
·         Ratings agency and traders alike were unimpressed with Friday’s EU summit causing week euro currency action today
 
 
 
 
Friday’s report did little to help reverse the downtrend in the grain markets. World numbers were especially bearish while US numbers were more of a non-event for corn especially. A South American weather issue would be the best case scenario for bulls at this point. Funds continue to add to shorts and liquidate long positions. Many fearing that recent outflow of fund money is a result of MF Global disaster and concerns over customer safety.  This is not the time to jump in and short the market, but is a time exercise extreme caution on unsold cash grain especially. 

Straits Financial does futures/options brokerage for farms, feedlots, elevators and processors.  Call Joe Vaclavik at (312) 462-4438 for more information. 

World Production Estimates Continue to Rise...

Dec 08, 2011

 

·         Grains lower overnight; Nearby March wheat now trading below $6, Corn traded through yesterday’s lows and is flirting with support near the lower end of Tuesday’s range
·         Outside markets quiet again this morning, currencies near unch with crude slightly higher
·         USDA to release December Crop Production report tomorrow morning at 7:30am CST;  Trade looking for a slightly smaller corn carryout, larger soybean carryout and near unch for wheat; Full pre-report estimates on following pages
·         Export Sales this morning, pre-report estimates as follows:
o   Wheat                          375k-625k mt
o   Corn                             325k-475k mt
o   Soybeans                     475k-700k mt
·         Weekly Ethanol production for last week was pegged at 954,000bpd, up 24,000bpd from the previous week; Largest weekly number on record
·         Brazil’s CONAB suggesting corn production there will be 60.3mmt, up 2.8mmt from the previous year; Corn acreage seen up 6% from last year, soybean acreage near flat
 
 
Grain and oilseed production estimates from around the world continue to rise this morning. The US grain markets are certainly vulnerable to additional downside tomorrow if the USDA follows this trend. As we saw in 2008, high prices will stimulate massive production from around the world. We’re now seeing the effects of that $7+ corn, $14+soybeans and $8+ wheat we saw over the summer. The balance sheets in the US are still very tight, and even a minor increase in demand for corn in particular could change price action drastically.

 

Straits Financial provides futures/options brokerage to farms, feedlots, elevators and processors.  Call Joe Vaclavik for more information at (312) 462-4438.

Corn Looking for Follow-Through Buying...

Dec 07, 2011

 

·         Grains mixed overnight; March corn traded through the October lows yesterday, only to rally back and finish higher on the day
·         Rising world production estimates from China, Australia and South America continue to be bearish factors, while most point to domestic demand for corn from the ethanol and livestock industries as being positive
·         Russian grain exports this year expected at a record 25mmt or more, according to government sources
·         USDA to release Crop Production report on Friday at 7:30am CST; Carryout Estimates: Corn 831 avg guess vs 843/Nov, Soybeans 214 avg guess vs 195/Nov, Wheat 830 avg guess vs 828/Nov
·         Much of the trade has begun to look at the ’12 acreage situation; Many sighting the need for 93-95 million corn acreage; Some believe seed shortage will limit corn acreage expansion in favor of more soybean or wheat planting
·         Outside markets very quiet this morning
 
 
Follow-through buying in the corn market today would be a very good sign. Charts remains bearish, but may begin to turn for the better on a continued rally. Option volatility rose sharply yesterday in the Jan options, especially. We may recommend a short options play ahead of Friday’s report if this trend continues. Long term, we believe that Nov 12 soybeans will gain on Dec 12 corn, as most producers lean towards corn planting given current price ratios. 

 

Straits Financial provides futures/options brokerage to farms, feedlots, elevators and processors.  Call Joe Vaclavik today at (312) 462-4438.

Corn Takes Out Major Support Overnight...

Dec 06, 2011

 

·         Grains mostly lower overnight led by corn, which penetrated major support at 5.86 (Oct low) in the March contract
·         Outside markets mixed
·         State level data shows Ohio corn harvest advanced 4% to 80% last week; Ohio was finished harvesting corn last year, 5 year average at 97%
·         Australian government estimated wheat production there at 28.3mmt, up 8% from Sept estimate; Last year’s crop was 29.9mmt
·         Informa raises China corn production estimate to 190mmt vs. USDA estimate of 184.5mmt
·         CFTC unanimously approved on Monday tighter limits on how brokerage firms can use customer fund
·         Argentine corn and soy crops are in good shape, however forecasts for several weeks of dry weather could affect growth
·         Major US Farm groups said they strongly supported bringing Japan into talks among the US and 8 other Asia Pacific countries on a regional free-trade agreement
·         USDA report on Friday morning at 7:30am CST; Pre-report trade guesses out tomorrow
 
Negative news for the corn market continues to pop up. Larger estimates for both Chinese and South American corn production, along with poor export demand, has taken its toll on the market. March corn traded below a major support area overnight. A close below 5.86/March would certainly open the door to another leg down. 

 

Looking for a new broker?  Straits Financial does futures/options business for farms, feedlots, elevators and processors.  Call Joe Vaclavik today at (312) 462-4438.

Higher Overnight, Corn OI Down 25% from Last Year

Dec 05, 2011

 

·         Grains higher overnight led by soybeans, which have caught a bid as of late on China purchases as well as dry forecasts for the South American crop; Some also eyeing abnormal ratio between the 2012 contracts which clearly favor corn planting versus soy planting from a producer perspective
·         Big Australian feed wheat supply seen as being detrimental to US export demand for corn
·         Fund traders again lightening positions in corn according to Friday’s COT report; Funds cut long corn position by 13k to 70k, Trimmed net short by 4k to 82k, Trimmed net short in soybeans by 1k to 22k
·         USDA to issue Crop Production/WASDE on Friday, pre-report estimates to follow; December report generally not a big market mover
·         Open interest in corn at 1.114 million contracts, was 1.503 million last year, a 26% drop year over year
·         Informa to release world production estimates this morning
·         Feeder cattle traded into all-time highs on Friday
·         Outside markets mostly supportive to grains this morning with US$ lower, crude and equities both higher
Look for choppy markets ahead of Friday’s USDA report. Corn, soybeans and wheat maintaining a bearish setup as far as charts are concerned. Drop in OI along with fund liquidation is an indication that the large trader may simply not be interested in the corn market for the time being. The recent rebound in soybean may be attributed to the SAM weather, however the market clearly remains in a downtrend.

Straits Financial provides futures/options brokerage services to farms, feedlots, elevators and processors.  Call Joe Vaclavik today to be added to our email list!  (312) 462-4438

Mixed-Higher Overnight...

Dec 02, 2011

 

·         Grain mixed to higher overnight; New crop ’12 contracts showing impressive strength relative to nearby yesterday; Price ratios currently favoring corn planting over soybean planting from a producer perspective
·         China grain output rose 4.5% from last year to 571.21mmt, beating analyst expectations
·         Russian winter grain crop in very good condition, some analysts see production near 100mmt, which would be the largest since 2008
·         Some traders believe shortages of seed corn could be an issue as farmers plan their acreage allocation for next year; Production shortfall in many areas of the US is to blame
·         Technical Numbers
o   Corn (H)               Sup 595, 588                       Res 610, 619
o   Soybeans (F)      Sup 1115, 1101                 Res 1142, 1157
o   Wheat (H)           Sup 605, 596                       Res 624, 634
·         USDA Weekly Egg Sets and Broiler placements were down 6% and 5% respectively, from a year ago; Some believe drop in broiler numbers having major impact on corn feed demand
 
The grain markets have not seen any major “beginning of the month” buying. The markets seem to have found some footing near current levels, but remain well-offered on rallies. As is normal for this time of year, news on which to trade is light. The EU Debt crisis remains the largest macro-economic factor. The USDA will release its December Crop Production report on the 9th. Don’t expect any major moves until then. 

 

Straits Financial provides futures/options brokerage to farms, feedlots, elevators and processors.  Call Joe Vaclavik today at (312) 462-4438.

Up Overnight...

Dec 01, 2011

 

·         Grains slightly higher overnight; Rally on yesterday’s Fed announcement pushed most major commodities and equities sharply higher, grains were not able to hold majority of the gains
·         US ethanol output rose 13k bpd to 930k bpd last week, highest ethanol output since December 2010
·         Export Sales this morning at 7:30am CST, pre-report estimates:
o   Corn                                       350k-500k mt
o   Soybeans                             475k-825k mt
o   Wheat                                   375k-600k mt
·         China has decided not to stockpile large volume of corn from domestic market, fearing that gov’t stockpiling would push domestic prices higher
·         Argentine soy crop seen at 52mmt, matching latest USDA estimate
·         USDA forecasting Ag exports $5 billion lower for the 2012 marketing year according to yesterday’s Outlook for US Ag Trade Report (http://link.reuters.com/jyw35s)
 
Despite yesterday’s rally, grain markets remain in a bearish technical setup. March soybeans will need a solid close over the 11.75-11.80 area to negate current trendline. Resistance in March corn near 6.19. In a time period where there is little fundamental news, technical trading is sometimes the best option. 

 

Straits Financial provides futures/options brokerage to farms, feedlots, elevators and processors. Call Joe Vaclavik at (312) 462-4438 for more information. 

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