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Outlook: Beans Are Flying High

September 28, 2013
By: Bob Utterback, Farm Journal Columnist
 
 
BobUtterback Oct2011

It’s harvest time! I sense many producers are simply filling the bins, locking the doors and hoping something will change to help prices recover. While this strategy might work for a short time, farmers often paint themselves into a corner waiting on the weather. How many times have any of us been successful in doing that?

Corn 12 3 45678910


Sales Index Key

Excellent sales opportunity    10
Excellent buying opportunity    1


Lead-month futures and harvest lows should be in, or very close. Summer’s hot, dry conditions have hurt corn yields, but not as much as soybeans.

Since a modest carry exists and basis is wide, there is merit for storing, but obvious risk. As farmers hold large supplies in the bin unpriced, end users know the inventory is out there and see limited reason to aggress­­ively forward purchase.

I’m worried producers will get too attached to their 2013 crop and store it well into the summer—a significant risk to flat price and basis after early July if crop conditions suggest much above the 158-bu. level.

Don’t expect much out of the market until May or June. Sell calls when it pays for storage. Lock in the carry incentive by selling deferred contracts and buying nearby contracts. As to flat price, sell in June and base the price on planted acres and crop conditions.

Beans 12345678 9 10

Hot, dry conditions have hit soybean yields hard. This will only intensify the near-term upside price potential of lead-month soybean futures and encour­age more soybean acres in South America and the U.S. While old crop soybeans could stay strong until a large South Amer­i­can crop is confirmed, Novem­ber 2014 soybeans will be at risk. Don’t get trapped by inaction when the lead-month futures prices are much higher than deferred contacts. This is what I expect for 2014.

Hold soybeans well into late December or early January. Adjust when to sell based on how the South American crop is developing.

Wheat 1234 5 678910

The wheat market should have some seasonal lift, but it will depend on the level of planted acres this fall and winter weather. I expect more of a choppy sideways to slight market firmness in old crop but a limited recovery in the July 2014 crop, unless some type of weather event occurs.

Livestock 123456 7 8910

Historically low cattle numbers are keeping inventory down, but higher weights are keeping beef production in line with demand. But domestic and international demand is not growing as fast as supply. Until grazing conditions in the West improve, there will be little excitement about retaining heifers.

The hog complex has the ability to increase production much faster than cattle—and the trade knows it. A flat corn market in early 2014 might encour­age some modest expansion, but uncer­tainty about the global economy will keep expansion in check until summer. If we see $3 lead-month cash corn, it will not be long before we see $60 or lower in lead-month cash hogs. Now is the time to start preparing for a major multiple-year high.

More than 30 years of commodity insight helps Bob Utterback guide farmers through a disciplined approach to marketing.

E-mail: butterback@farmjournal.com
Website: farmjournal.com/outlook

This material has been prepared by a sales or trading employee or agent of Utterback Marketing
Services, Inc., and is, or is in the nature of a solicitation. This material is not a research report prepared by Utterback Marketing Services Inc. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Distribution in some jurisdictions might be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction without registration, the market commentary in this communication should not be considered a solicitation. The risk of loss in trading futures and/or options is substantial, and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Utterback Marketing Services Inc. believes are reliable. We do not guarantee that such information is accurate or complete, and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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FEATURED IN: Farm Journal - October 2013

 
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