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.
Corn and Wheat Drop, Beans Hold Together
Feb 21, 2012
· Corn and wheat markets down sharply overnight while soybeans hold to trade near unch; Terms of a 2nd Greek bailout package agreed to overnight, however an initial rally in the Euro has faded drastically
· Weekend weather in S. American was mostly within expectations; Short-term dryness mostly alleviated in Argentina, a few more storms expected in 10-day period; Storms also return to Brazil and Paraguay this week
· Crude oil trading $1+ higher near $105, metals also higher across the board
· USDA hosts annual Outlook Conference on Feb 23 and 24; Baseline projections were issues last week (last year, baseline acreage projections matched projections given at outlook meetings)
· Major Chinese corn and soybean areas preparing for possible drought during the spring planting period; rainfall in the northeast has been 30-80% less than average
In association with Indiana Grain Co., we held out first annual "Trade the Farm" seminar on Friday in Demotte, IN. We were fortunate to have a wide ranging demographic of producers from all over the Corn Belt in attendance. I feel as if we did a pretty good job of presenting producers with new ideas about trading, marketing, technology, and social networking among other things.
Like most producers in the US, many in attendance were extremely concerned about new crop corn prices. Both I and the other hosts of "Trade the Farm" made one thing very clear: Nobody can predict where these prices will be in 1 month, 6 months, or a year. It is our opinion that analysts and newsletters will not save a farm operation with their predictions or bias.
It is my job to point out opportunities in the market and provide producers with the best information and technology available. December corn is trading near $5.65 this morning. The December $5.60 PUT options are trading near 53 cents per bushel. Volatility levels are low, meaning that the options are actually fairly inexpensive relative to where they could be trading. Corn growers can set a floor in Dec contract near $5.07 this morning without having any margin risk. If you choose to sell a call against your PUT, you can raise that floor significantly, depending on how low you’d like your price ceiling to be. Don’t hesitate to call or email me at the trade desk any time for quotes on options or option spreads.
As always, call the office with questions or concerns.