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.
New Crop Corn Struggles, Beans Continue to Move Up
Feb 24, 2012
· Grains lower overnight; Corn and wheat continue to show virtually no correlation to soybeans as spread between corn and soybeans widens further
· USDA Outlook numbers virtually unchanged from baseline projections that were released several weeks ago; Gov’t pegging corn and soybean acreage at 94mil and 75mil respectively; These numbers are not based on survey data
· USDA pegging corn ending stocks at 1.616bil/bu for the 12/13 marketing year, a scary prospect for corn producers looking for higher prices
· USDA pegs soybeans ending stocks at 205mil/bu for the 12/13 marketing year
· US wheat carryout expected to expand to 957mil/bu according to USDA Forum numbers
· Crude oil prices over $108 overnight as traders grow concerned over Iran situation; Many technicians now look for a move to the $113-115 area
· China purchase of 120,000mt of US corn confirmed yesterday; Most likely the cause for the late-day rally on Wednesday
· Dec corn trading below major trendline support this morning (chart on next page); Also approaching "oversold" status
Soybeans Producers: Yesterday, we recommended an option spread in November soybeans to protect no more than 25% of new crop production. Most producers have their eyes glued to the corn market while soybeans are presenting an opportunity. The November soybean contract is drastically overbought from a technical standpoint (pictured next page). As with any early season hedge, we hope to hedge another round of beans at much higher strike prices in the coming months. Details below:
Buy 1 November Soybean $12.60 PUT
Sell 1 November Soybean $15.00 CALL
Pay 60c or better. Sets floor at $12.00 and ceiling at $14.40
As always, call the office with questions or concerns.
Futures and options trading involves risk of loss and is not suitable for everyone.