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.
Mixed Overnight; China Interested in U.S. Beans?
Feb 06, 2012
· Grains mixed to higher overnight, led again by the soybean complex; outside market mostly negative for grains with US$ higher, crude/equities lower
· USDA to release Feb Crop Production report on Thursday; Pre-report estimates in following pages
· Most analysts looking at China demand as reason for recent rally in soy market; Drought issues in S. America may have Chinese buyers taking a bigger interest in US beans
· China boosted imports of ag products in 2011, with the farm trade deficit rising 47.4% from 2010 as their production fell short of demand
· No major changes to SAM weather to start the week
· Corn spreads have calmed down after July/Dec traded into the mid 80s during the last couple of weeks, July/Dec currently traded near +76
· CME Group planning to take steps to set up an insurance fund for farmers ranchers, the proposed fund may include $100,000,000 and will insure every farm/ranch account for $25,000; Details to follow
Traders should spend most of the week preparing for Thursday report from the USDA. Look for a pop in option volatility tomorrow and Wednesday. We don’t really have an opinion on the report one way or the other. Some analysts now questioning whether or not current corn vs. soybean ratios in the new crop ’12 contracts will result in the massive corn acreage many have predicted. In our opinion, any corn acreage number under 94.5 million at the end of March would put Dec corn back near $6.50. Farmers around the country are looking for a move near $6/Dec futures to start hedging/pricing a significant portion of this coming year’s crop. Old crop corn supplies still up for debate as many questions USDA estimates. We look for a two-sided trade today with an upside bias.
As always, call the office with questions or concerns.