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March 2009 Archive for EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

Weekly Grain Wrap-Up 3/27/09

Mar 27, 2009
WEEKLY GRAIN WRAP-UP

SETTLEMENTS 3/27
             
May 09 Corn
387
- 3 3/4
July 09 Corn
397 1/2
- 3 3/4
May 09 Beans
917
- 27
July 09 Beans
915 1/4
- 25 1/4
May 09 Wheat
507 1/4
- 7 1/4
July 09 Wheat
520
- 7
May 09 Meal
283.8
- 7
May 09 Oil
32.42
- 1.18
 
 
 
 
 
Corn closed 4-cents lower on the day and 10-cents lower on the week. Corn made the highs for the week on Monday’s open and prices have been grinding lower ever since. Corn has had a nice rally in anticipation of losing acres to soybeans, a possible increase in the blending mandate by the EPA and fears of a wet spring. The recent 60-cent rally in corn prices accomplished several things. First of all, this rally drove margins deeper into the red for all sectors. Secondly, it turned the “funds” from having net short positions to having net long positions heading right into a major report. It also gave many farmers throughout the country to sell $4.00 cash corn for both the ’08-09 crop and the ’09-10 crop. There have been millions of bushels waiting to be sold at the $4 mark for months now and many farmers (not all unfortunately) finally had the opportunity. The report next Tuesday will set the stage as we head forward. There is a wide range of estimates for corn acres. Estimates range from 5 million less to 3 million more acres than a year ago. Most in the industry are expecting a 2-3 million acre decline with very few expecting acres to be unchanged or higher. I do not know what the acres will be, but corn prices have gained significant ground on soybeans since January and fertilizer prices have also come down significantly. My guess is that corn bought SOME acres back from soybeans during this time frame. The question is: how many corn acres were we losing before? In my opinion, if acres are unchanged from a year ago the market would perceive this as very bearish. A big number to look at will be total acres. If total corn and soybean acres are 165 million (our estimate) or greater, it seems likely that we will continue to build stocks for corn, soybean and wheat. Obviously we will know more on Tuesday, so it is foolish to get too involved with estimates at this time. As a producer, I would not go into the report with a lot of unsold /unprotected bushels.
 
Soybeans closed 27-cents lower on the day and 35-cents lower on the week. As with the corn, the soybean market made its highs for the week on Monday and its lows on Friday. After many traders had positioned themselves for a bearish report two weeks ago, the market rallied very sharply and made most of these traders “cover” their positions before the report. The “funds” are now long just as the Argentine farmers are coming off of their strike, China is considering the release of 500,000- 1 million MT from their strategic reserves for domestic use, and we have the potential to increase U.S. soybean plantings by 5 million+ acres on Tuesday. 

                For soybeans, the biggest fundamental right now is 2009 acres. Everyone is expecting soybean acres to be up on the year, including myself. Some are expecting a small increase and some a very large increase. Because soybeans are so much cheaper to plant, we should definitely see an increase in the fringe areas of the belt especially were we lost wheat and cotton acres. In the heart of the belt, we should see mixed results. Because highly productive land has been consistently producing 200+ bushel corn on average over the past several years, these areas will probably stay with corn. On the other hand, part of the reason that we have seen corn acres increase over the past few years has been ethanol demand. Large ethanol plants have been going up all across the Midwest over the past 3 years and this gave many farmers confidence to plant extra corn as they knew there would be plenty of demand for their corn. With the ethanol industry now struggling and many plants not running at all, some of this optimism has been lost. With inputs still high relatively (although nearly half of last fall), many farmers could opt to move closer to a 50/50 rotation this year. Either way, it still seems likely that soybean acres will increase on the year. If they increase by 5 million or more, we could be looking at a carryover near 500 million by the end of the ’09-10 marketing year.
 
The wheat market closed 7-cents lower on the day and 43-cents lower on the week. After a sharp run-up in prices on fears of a “drought” in the Plains, forecasts changed and heavy rains fell throughout the Plains. To me, the best potential of a rally in the wheat market would be for Hard Red Spring wheat. Spring wheat looks to lose acres to soybeans and the stocks are much more snug then either HRW or SRW. HRW and SRW stocks are very ample and will need to become competitive in the world market and/or need to stay closely tied to corn prices to find feed demand. With a 600+ carryout still forecast for 2009, it will be hard to stage much of a rally without a serious weather problem.


 
 
 
 
 
 
Go to www.EHedger.com for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.

Grains End Mixed

Mar 18, 2009
SETTLEMENTS 3/18
             
May 09 Corn
390 ½
- 1
July 09 Corn
400 ¾
- 1
May 09 Beans
913
+ 2
July 09 Beans
910 ½
+ 3
May 09 Wheat
552 ½
+ 8 ¼
July 09 Wheat
564 ¾
+ 8
May 09 Meal
286.0
- 2.4
May 09 Oil
31.31
+ 0.45
 
 
The Bottom Line
1.Heavy farmer selling in corn market as cash levels reach $4 mark in many areas
2.Reports indicate Argentina may lower export taxes on Soybeans, Corn and Wheat; Commercials heavy sellers of Old crop/ New crop soybean spreads today
3.Aventine Renewable Energy Inc. (AVR) said Monday it may be forced to file for Chapter 11 bankruptcy
4.Grains still watching outside markets; awaiting the Planting Intentions Report on March 31.
 
All three grains closed mixed. Corn closed lower, wheat closed higher and soybeans closed higher, led by the new crop. A report out today claiming that the Argentine government may be lowering taxes on soybeans to 27% from 35% on some farmers and may also eliminate the export tax completely for corn and wheat weighed on nearby soybean prices. This has been a huge issue as most of you know, and if the government would lower the taxes on soybeans this could quickly free up supplies. The Argentine farmers are holding on to a record amount of soybeans from both this year and last year. Commercials were also major sellers of the old crop/ new crop spread today, which adds credibility to the story. An additional story reported that no agreements had yet been reached between the two, so your guess is as good as mine. Heavy U.S. farmer selling over the past two days helped tamper corn prices. The $4/bushel mark was hit in several areas for the first time in months and this triggered heavy selling. The strength in the outside markets and the largely anticipated Planting Intentions Report at the end of the month is providing us with an incredible selling opportunity in my opinion. Firming outside markets and uncertainty about the acreage report helped trigger short covering in our markets, and this buying has turned from short covering to new buying. The "funds" could certainly run these markets further if they want to throw enough money at us, and I would use this rally to catch up on sales before the report.
For those of you who are behind on 2009 sales, I would get caught up if December corn futures continue to rally $4.20-$4.50 and if November soybean futures continue to rally from $8.50-$9.00. If the market gives you the opportunity to sell $4.50 corn again and $9.00 soybeans again, you should take advantage and at least put in a floor before the March 31st report. Anything can happen this spring/summer and maybe we will have a sharp rally, but there are a lot of reasons why corn, soybeans and wheat can break sharply from these levels. The calls we bought last week will keep our upside open from these levels. We will look to cover our short put position if we continue to rally before the report. Give us a call if you have any questions, or click here to see all of our current recommendations. www.ehedger.com/sign-up/
 
 
Go to www.EHedger.com for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
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