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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.

 

Sell Cash Corn Ahead of Tomorrow's Report?

Feb 08, 2012

 

·         Grain up overnight after a lackluster session yesterday; Traders look to square positions ahead of tomorrow’s USDA Crop Production Report
·         In general, traders looking for a  “friendly” report tomorrow for corn, soybeans and wheat; Pre-report estimates on following pages
·         Reuters poll of 24 analysts showed average estimate for ’12 corn acreage at 94.2 million vs. 91.9 last year; Soybean acreage estimated at 75.3 million vs. 75.0 in ‘11
·         March soybeans trading up to major resistance at 12.44 ¾ overnight, now a double top;  Many technicians looking for a penetration of this level
·         Outsides mostly mixed today; Currencies/equities flat, crude slightly higher
·         US House Committee approved a bill on Tuesday seeking to block sales of a higher ethanol blend in motor fuel until more safety tests have been completed; EPA and National Academies would administer tests
·         Opening calls higher across the board
 
Producers may want to use today’s higher open to unload some old-crop cash grain, corn especially, ahead of tomorrow’s report. There is a tremendous amount of risk in holding cash grain: Futures are overbought and the basis market is strong. A simultaneous weakening of both markets is possible. A “limit down” event tomorrow combined with weakening basis could find holders of cash corn losing 50+ cents per bushel in just minutes. Option volatility is still relatively low; May 650 calls can be owned near 32-33 cents today. The risk in owning those calls against cash sales is far less than the risk associated with owning cash corn. This business is about protecting profits and managing risk. Do what makes sense ahead of tomorrow.  I hope corn goes back to $7, too. Hope in one hand…
 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438 
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