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January 2010 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.

E Hedger Closing Grain Commentary 1/25/10

Jan 25, 2010
Market Settlement Change Low High 
March corn 367 3/4 3    365.25 369.25
March wheat 498 1/4 - 1/4 496.25 504
March soybeans 940 1/2 -11    935.25 956
March soymeal 283.00 -3.40 282 287.8
March soyoil 36.50 -0.21 36.23 36.99
Feb live cattle 86.2 -0.425 85.90 86.80
Feb lean hogs 68.375 -1.47 68.30 69.575
 
Soybeans and wheat closed lower and corn closed higher on the day. The soybean market remained weak throughout the day. An improved outlook for Argentina has many increasing their production outlooks there. If South America does finish the growing season in good condition, we should record production in both Argentina and Brazil. There are also some 5 million additional acres that could be put towards corn and soybean production in the U.S. next spring. This outlook has many traders rolling out of long positions and looking to build short ones. Also, input prices have come down significantly in the past 6 months and this is encouraging producers to lock in corn and soybeans prices for 2010. This combination of factors will have producers and traders looking for rallies to sell as we head into the spring. 
Soybean prices have the most downside risk in my opinion. Good South American production and a surge in available U.S. acres next spring could push ending stocks to multi-year highs next year. Strong Chinese demand and the worst Argentine drought in 100 years have kept soybean prices strong for the past 12-months. Chinese demand remains strong and the U.S. remains the only global provider of those soybeans for now. However, Brazil has already started their harvest and by March South America will be taking a significant amount of business from the U.S. Although we will likely continue to sell some soybeans well into the summer, it could feel as if our demand has been completely shut-off. With normal growing conditions here in the U.S., we could see our carryout increase to over 400 million bushels for the ’10-11 crop year. 
Corn too has a lot of downside risk. A better than anticipated U.S. crop and the expectation for millions of additional acres in the U.S. next spring should continue to weigh on prices. Input prices have come down significantly for corn this year. With 2010 cash corn prices around $3.80 in many high producing areas, we should see corn acres increase substantially. Some analysts are estimating a 3-4 million acre increase currently. It is too early to know at this time, but at current prices I would tend to agree with this estimate. A big factor will obviously be the planting weather. Many areas were unable to get all of the fall work done. This will put increased stress on this spring. A dry spring could lead to a lot of additional acres and a wet spring could shift the majority of additional acres towards soybeans. Demand looks to be improving for corn especially in the ethanol sector. This is true both in the U.S. and in South America. A strong sugar market could start to ration sugar ethanol demand there. If corn prices continue to decline, we could see more corn going towards ethanol. This won’t happen for some time (if it ever does), but it does have some potential. For now, look for corn prices to weaken as we head into the spring. 
Even with U.S. wheat acres at 97-year lows, the wheat outlook remains bearish. With the old crop carryover approaching 1 billion bushels, it will take more than a 6 million acre decrease in wheat acres to turn this market higher. Global supplies remain huge and U.S. wheat demand remains weak. Without a crop problem this spring, wheat prices should remain tempered and closely linked to corn prices. However, with such a dramatic decrease in acres this year the weather this spring will be closely monitored. SRW acres are down the most of all classes. If we did see poor growing conditions this spring in these areas, we could see some interesting things happen in this class of wheat. For years now, basis levels have been nothing short of pathetic. This should change in 2010. The CFTC has made some important changes to the SRW contract that should help create convergence between the futures and cash prices. This combined with a sharp reduction in acres could make SRW basis levels actually become strong in the next 12-months! I am not going to make any promises though!

 
 
Get More From EHedger. Our commentaries are just one part of our whole risk management service. Please go to http://www.ehedger.com/getmore.htmlfor a free two-week trial of our full member website that gives you access to all our hedge and marketing recommendations, educational tools, market snapshots and much more. Also learn about our acclaimed AMMO Program that helps producers optimize their marketing strategies using the premier tools and insights in the industry.  
Get Organized. Get Ahead. Get EHedger 
 
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.

EHedger Closing Grain Commentary 1/21

Jan 21, 2010
Market Settlement Change Low High 
March corn 372    4    364 372
March wheat 499 1/2 2    493 500.5
March soybeans 954    4    948.5 959.5
March soymeal 287.50 1.30 286.4 290.8
March soyoil 37.00 0.43 36.65 37.24
Feb live cattle 86.85 -0.6 86.45 87.15
Feb lean hogs 70.800 0.35 70.00 71.15

      
Corn, soybeans and wheat all closed higher on the day. All three markets traded on both side of unchanged throughout the day. The outside markets were very volatile today and this kept the grains choppy. The stock market was sharply lower once again on fears of increased bank regulations. President Obama also outlined a plan to cut down on proprietary trading at firms that have received government backing over the past 18 months. This has some concerned that commodities could be at risk if these banks have to get out of their positions. However, most index fund positions are held by customers and not by the banks themselves and this should not be a problem. Talks Brazil importing U.S. ethanol helped corn prices rally late in the day. Sugar prices are at 28-year highs and there is currently a small window of opportunity for this to happen. The question is whether or not this does happen. There is a new crop of sugar that will be harvested soon and this will likely make it uneconomical to import U.S. ethanol after the new supplies hit the Brazilian crushers. However, sugar does have some very strong fundamentals and it takes a long time to increase acres so this could be the development of a new trend over the next couple of years. 
 All three markets are on very large breaks and are due for some kind of rally. I would look for a rally near $4.25 in the corn and $9.75 in the soybeans to get caught up on sales if you need to. I am not very sure that the market will be able to reach these levels without a weather scare in South America. The market is liquidating and most players are caught on the wrong side of the market. Until this situation changes, any large rally will likely be short-lived. However, the market continues to surprise me and we continue to see larger than expected moves. The weather in Argentina looks dry for the next 10 days before the next meaningful rain event. We will likely see this forecast change for the worst sometime in the next week. This “weather scare” could give the market a boost, so I would make sure to have some orders in above the market if need be. 


 
Get More From EHedger. Our commentaries are just one part of our whole risk management service. Please go to http://www.ehedger.com/getmore.htmlfor a free two-week trial of our full member website that gives you access to all our hedge and marketing recommendations, educational tools, market snapshots and much more. Also learn about our acclaimed AMMO Program that helps producers optimize their marketing strategies using the premier tools and insights in the industry.  
Get Organized. Get Ahead. Get EHedger 
 
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.

EHedger Closing Grain Commentary 1.19.10

Jan 19, 2010
Market Settlement Change Low High 
March corn 369 1/4 -2 1/4 367.75 375.25
March wheat 500 1/2 -9 1/2 496.5 515.25
March soybeans 963 1/2 -10 1/2 962.75 984
March soymeal 290.90 -0.80 289.6 294.2
March soyoil 37.15 -0.38 37.11 37.98
Feb live cattle 87.9 0.55 87.40 87.95
Feb lean hogs 70.750 0.78 70.05 70.95
 
Corn, soybeans and wheat all closed lower on the day. All three markets traded higher overnight, but were unable to stay higher on the day for too long. Weekend rains were better than anticipated for Argentina and the outlook looks drier for Brazil. This should help many of the drier areas of Argentina for now and help harvest progress in some of the wetter areas of Brazil. This weighed on soybean prices for the majority of the day. We will still have to get cooperation from Mother Nature to finish up the growing season in South America. However, after the bearish USDA report last week, it will take a weather scare to move the markets higher from here. Stocks look to build for corn, soybeans and wheat through 2010 (at this time!) both in the U.S. and globally. Without a weather problem in South America, prices will remain under pressure. The sharp reduction in wheat acres will make the wheat balance sheet “less bearish” and will make the 2010 corn and soybean balance sheets look very bearish at these levels. With the report now out of the way, we will look for rallies in corn and soybeans to make additional sales. Any rally towards $4.25 in corn and $9.75 in soybeans should be used as a selling opportunity as we head into the spring. There are a lot of “new longs” in our markets and without a weather problem we should see a lot of selling pressure on the markets. We will also see a lot of corn for sale on the farm for the remainder of the month as producers free up some money and move some lower quality grain. We are on a very large break, so we could easily see a large rally at any time. Make sure you have your orders placed, as I do not expect these rallies to last for long. Good luck and as always give us a call if you have any questions.
 
 
Get More From EHedger.
 
Our commentaries are just one part of our whole risk management service. Please go to http://www.ehedger.com/getmore.html for a free two-week trial of our full member website that gives you access to all our hedge and marketing recommendations, educational tools, market snapshots and much more.
Also learn about our acclaimed AMMO Program that helps producers optimize their marketing strategies using the premier tools and insights in the industry.
 
Get Organized. Get Ahead. Get EHedger
 
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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