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.
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