Where Is the USDA Rally?
Oct 16, 2012
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What a train wreck of a USDA report. Even though I held on to my shorts and trusted my November 750 corn calls to protect me, I was really looking forward to selling $8.00 corn again. The tightest corn carry over we have seen so far this year should be enough to test $8.00 right? Well, it is certainly not acting as such. Thursday's low represents key support and we have not yet seen a close below this key level but things are not looking good.
Yesterday we managed a close below both the 9-day and 20-day moving averages, and today we rallied up to test them as what was support has now become resistance. This attempt at a rally to get back on track ended with corn up one measly cent. Again, key support remains in tact, but today's failure to get back above moving averages is not a vote of confidence. I am still holding my November Corn 750 calls to protect my short position, but it is looking more and more like I will not need them after all.
Soybeans looked good this morning as news of to cargos sold to unknown woke the bulls up with a smile. The attempt at a rally after partially closing the gap left over the July 4th holiday looked strong for a moment when we were up 23 cents but faded into the close leaving beans up only one and a quarter of a cent for the day. I am not sure how to look at this any way other then disappointing.
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Upside might still be limited for the time being. Corn and soybeans could certainly find more producer selling on rallies as the harvest is still a factor and prices are good. And, there is a side of the trade that thinks that the USDA is now 3-6 bushels short on corn yield. Informa in particular is using a 127 yield, while the USDA is at 122. By the way, good job informa for pegging the USDA soybean yield at 37.8, dead on. There is a good chance that when we see the final USDA harvest numbers in November that the corn yield ends up quite a bit higher. If that November report is as bearish as I think it could be, and El Nino holds up in SA our post-harvest bounce could be very disappointing.
New highs might have to wait until the end of the growing season when the bins are running dry. Even then it may be dependant upon a bad South American crop and new weather concerns for our growing season. That is too many what ifs for me. I am looking at this failed USDA rally as a red flag to get some good pricing as best as I can in the next few weeks. Give me a call or shoot me an email if you would like to know what my strategy is. Thanks for reading.
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With high volatility in a market, option strategies may be a good tool for hedgers and specs alike.
December Corn Daily chart:
November Soybeans Daily chart:
All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have new crop corn above $7.00 and new crop soybeans above $15.00. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent.
Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs.
Ted Seifried (312) 277-0113 or firstname.lastname@example.org
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