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March 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.

EHedger Closing Grain Commentary 03/30/2010

Mar 30, 2010



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Soybeans closed higher today led by the old crop soybeans and old crop meal once again. We have also seen large spreading between soybean oil and soybean meal.  Most of this is likely unwinding of a very popular trade (long soybean oil and short meal) that was enacted after the EPA decision to raise the amount of biodiesel that is to be blended through 2010.  Also, meal prices have been rallying in Europe and China announced that it would take measures to curb soybean oil imports as their domestic market is saturated. Continued strikes in Argentina are also leading some to believe that we will continue to sell soybeans until supplies free up in the Southern Hemisphere.  This has caused the funds to buy over 30,000 contracts last week and this trend continues.  Port workers at three ports are on strike and have blocked access to grains export terminals, demanding their wages are doubled.  The private ports companies have offered 25 percent wage increases this year and 15 percent next year. Going on strike this time of year has become a regular practice, so we will have to see if things get cleared up in Argentina or not.  We will see what the report says tomorrow, but this bullish combination of events is giving the U.S. producer a great chance to price and/or protect the remaining ’09 supplies.

Corn closed lower.  Futures made fresh lows for the year today.   Old crop supplies continue to plague the corn market and temper any rallies.  The weather continues to stay favorable and this is also weighing on prices.  The report will also be very important for the corn market.  A bearish report could easily push prices back towards contract lows ($3.50 December futures) ahead of planting.  A bullish surprise could easily help prices rally back towards the high-end of the recent range ($4.15 Dec. futures).  Either way, expect a volatile trading session on Wednesday.

The wheat market closed higher after posting a “key reversal”.  Funds continue to build on their already record short positions.  Winter wheat acres are already down 6 million and could decrease further.  HRW wheat looks to be in good shape and SRW looks to be in mixed condition.  Global supplies continue to undercut U.S. prices and weigh on export demand.  Until these large global supplies are cleaned up, it could be difficult to stage any sort of wheat rally.  Producers of SRW should be storing their grain and selling forward futures prices.  The changes to the wheat contract at the CBOT have made storing wheat a very profitable business.  This could cause futures prices to continue to fall and cash wheat prices to hold steady after harvest.  There are various strategies that can be used to help lock in some good wheat prices. Different classes of wheat require different strategies in our opinion. Please call if you have any questions.

Get More From EHedger. Our commentaries are just one part of our whole risk management service. Click here 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. 


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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.

E Hedger Grain Commentary 3/26/10

Mar 26, 2010
Market Settlement Change Low High 
May corn 356 1/4 1 1/4 355 358
May wheat 464 3/4 -1 3/4 464 468.75
May beans 952    9 1/2 941.75 955
May soymeal 270.90 5.00 265.7 271.5
May soyoil 38.95 0.25 38.65 39.08
Apr live cattle 94.025 -0.725 93.80 95.20
Apr lean hogs 69.675 -0.45 69.33 70.25
 
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Corn and soybeans closed higher, while wheat closed lower on the day. For the week May corn closed 18 cents lower (5-month lows), May wheat closed 19 cents lower (contract lows), May soybeans closed 10 cents lower, and Nov soybeans closed 24 cents lower. Most of today’s action had to do with light short covering after yesterday’s big break and ahead of the weekend. The negative fundamentals continue to outweigh the positive factors at this time. Weather outlooks for spring planting have improved this week. Farmers still face plenty of challenges, but the doom and gloom weather outlooks are disappearing. Plus increased acreage for corn and soybeans at a time when demand is slowing has led to liquidation and lower markets for the week.
 
Trade estimates for acreage on USDA report next Wednesday
 
                  Corn      Soybean    All Wheat     Winter Wheat
Average      89.2       78.46           53.38              37.31
Highest       91         80.22            55                   37.90
Lowest        87         76.5             81.90              36.44
USDA 2009  86.5      77.5             59.133           43.311
 
Average trade guesses for March 1 stocks of corn 7.496 vs 6.954 last Mar 1, soybeans 1.208 vs 1.302, wheat 1.366 vs 1.040. This friendly outlook for ending stocks in soybeans led to bull spreading. Meanwhile, the ending stocks figure for wheat is simply too large for any strength.
 
Given current price levels, producers that are adequately hedged should look at buying cheap May calls. The idea is to have upside protection in place against short futures or sold bushels. This is a cheap cost (this week’s price loss alone) ahead of a very important grain report. After the report we will consider the implications and look at potential re-positioning. As always, please call us with 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.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.

E Hedger Grain Commentary 3/24/10

Mar 24, 2010
Market Settlement Change Low High 
May corn 365    2 1/4 359 366.5
May wheat 476    - 3/4 472 478.75
May beans 960    -8    953.25 967.75
May soymeal 270.90 -1.00 267.5 272.5
May soyoil 39.08 -0.46 39.08 39.53
Apr live cattle 95.725 0.025 94.80 95.85
Apr lean hogs 71.125 -0.80 71.05 71.85
 
 
Grain markets traded mixed on the day. For the session corn closed slightly higher, wheat near unchanged, and soybeans 8 cents lower. As expected May corn and wheat tested the contract lows; both contracts traded exactly to those prices. The low for the year in May corn is $3.59 with the low close at $3.62. Trades below these levels may trigger stops and bring forward additional selling. The contract low was set at $3.25 last September. The same goes for Chicago May wheat, which has a contract low of $4.72. Otherwise, the outside markets weighed heavily on commodities. Crude oil was $1.50 lower, but the focus was on the sharply higher dollar that traded to its highest level since May of 2009. The US dollar was trading 1000 points higher above $82. 
 
The soybean sell off looks to be the result of prices consolidating after strong gains compared to corn and outlooks of growing spring soybean acreage. Meanwhile, corn closed higher on late short covering. This week corn vs. beans has reflected the “acreage battle” we have seen over the past couple years, but the difference this year is that there are plenty of available acres for both. Continue to expect a choppy, volatile trade. Weather appears to have taken a backseat for now as the market positions for the acreage report. As always, please call us with 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.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.

E Hedger Grain Commentary 3/18/10

Mar 18, 2010
Market Settlement Change Low High 
May corn 376    2    369 376.5
May wheat 489 1/4 -6 3/4 484.5 494.75
May beans 959 1/2  1/2 947.25 962.5
May soymeal 269.90 2.50 263.9 271.2
May soyoil 39.25 -0.58 39.03 39.76

 

 

Corn and soybeans closed slightly higher, while wheat finished lower.  It was a somewhat volatile trade considering that the overnight markets were all lower.  Outside markets carried the negative bias into today with crude oil trading lower and the US dollar sharply higher (above $80).  Export sales this morning were not exciting.  Corn slightly positive; old crop beans lower than expected; wheat/oil/meal was neutral.

 

 

Soymeal/soyoil spreads were active again today.  Soyoil selling was linked to the sharply lower palmoil prices and concern about the US biodiesel blend credit.  The credit was not included in the recently passed jobs bill.  The news we have now is that the credit is supposed to be included in the second Jobs bill, but that may not be passed until late April or May and it is meeting some opposition in Congress.

 

The chart below is of December 2010 corn.  Price action leading up to the March 31st planting report will be interesting since the price appears to be at some key trendlines. 

 


 

With the March Acreage report just around the corner, we want to be adequately hedged.  Please ask us about our official recommendations or login to our website to view them.  Also, last week was the first installment of a new video weekly series (http://www.agreportsnetwork.com/cms/education).  As always, call us with 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.

E Hedger Grain Commentary 3/11/10

Mar 11, 2010
Market Settlement Change Low High 
May corn 365 1/4 - 1/4 361.5 368
May wheat 478 3/4 -2 3/4 475.5 483.25
May beans 930 1/2 -27 1/2 929 962.75
May soymeal 252.60 -6.60 251.2 260.7
May soyoil 40.11 -0.91 40.05 41.02
Apr live cattle 93.825 -0.05 93.55 94.13
Apr lean hogs 71.875 -0.67 71.53 72.75
 
Corn and wheat closed mixed to lower, while soybeans sharply lower. The trade was carrying a negative bias into today from the USDA report and weak outside markets. Yet, it was today’s export sales that really rattled the soy complex. Exports were weak for corn and wheat this morning. Corn sales were 338,600 MT for 09/10 which is down 56 percent from the previous week. Beans sales had a negative 115,000 MT for 09/10 delivery due to cancellations. Soyoil also saw negative sales with a 9,400 MT reduction. China cancelled 192,000 MT and was the reason for the negative sales. This encouraged long liquidation the entire day. Soyoil and soymeal were also sharply lower with soymeal futures making new lows since March 2009. Today’s action will only encourage further selling if the market were to see any rallies.     
 
Below are the report figures:

Production                  USDA              Average       Jan. USDA
Corn                13.131             13.081             13.151
Yield                164.9               164.5               165.2
Soybean           3.359               3.35                 3.361
Yield                  44                    43.8                 44
Ending Stocks           USDA              Average        Feb USDA
            Corn                 1.799               1.713               1.719
            Soybean           0.190               0.195               0.210
            Wheat               1.001               0.971               0.981
 
The corn report figures are bearish numbers. Ending stocks increased 80 mil bu thanks to a 100 mil bu reduction in exports. Production was lowered 20 mil bu, but this was not reduced as much as many bulls were hoping. Not only was the US stocks increased, but so was world stocks. With available spring acres and supplies appearing to be sufficient for now it looks like corn will continue its downtrend until it reaches a price that encourages greater demand. 
 
The USDA put the US 09/10 soybean ending stocks at 190 mil bu vs. 210 mil bu on the February report. This was slightly below estimates. The reduction was from a 10 mil bu increase in US crush along with a 20 mil bu increase in exports. Both are record figures. While the US old crop supply looks friendly on paper, we need to be aware that world stocks rose to a record of 60.7 mmt vs. 59.73 (February) and 42.02 last year. The Brazil 2010 crop was raised to 67.0. The large South American production, spring acres, and pressure in corn and wheat will limit soybean rallies with the potential for selling to increase after this spring. The report showed a big increase of 410 mil lbs in soyoil ending stocks. Meanwhile the ending stocks for soymeal were left unchanged. Exports were increased, while domestic usage was reduced. Increased DDGs look to offset the meal demand.
 
The demand side for wheat continues to be poor. The ending stocks and stocks to usage ratio remain high figures. Exports have been weak due to US wheat not being competitive on the world market. It is important to note that winter wheat acreage is down sharply, but first we need to work through current supplies.
 
Overall, the bearish fundamentals in place since January still remain major factors in the grain market. Please call us with any questions about the report.
 


 
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.

E Hedger Closing Grain Commentary 3/8/10

Mar 08, 2010
Market Settlement Change Low High 
May corn 375    - 1/2 372.75 378.5
May wheat 495    1 1/2 492.75 498.75
May beans 948    5 1/4 938.75 952.75
May soymeal 258.70 1.00 257.3 260.9
May soyoil 40.28 0.23 39.82 40.56
Apr live cattle 94.2 1.25 93.00 94.43
Apr lean hogs 72.800 -0.30 72.75 73.425
 
Soybeans and wheat closed modestly higher, while corn closed unchanged to ½ cent lower in the May contract. Tomorrow we do not expect any major market reactions ahead of this week’s USDA report. We are likely to see increased farmer selling in the days/weeks after Wednesday regardless of price action. Whether we see a bullish, bearish, or neutral corn figure bushels need to be moved as temperatures heat up and bin quality becomes a larger concern.


Below are analyst estimates for Wednesday’s supply/demand report.

Production               Average         Jan. USDA     2008
Corn              13.081           13.151          12.101
Yield              164.5             165.2             153.9
Soybean         3.35              3.361             2.967
Yield               43.8                44                 39.7


Ending Stocks   Average         Feb USDA     2008-2009
     Corn               1.713              1.719              1.673
     Soybean         0.195              0.210              0.138
     Wheat             0.971              0.981              0.657


Normally, this report is not as important as the end of the month prospective plantings and quarterly stocks report, but we are all aware of the resurvey. Estimates are for a tighter soybean supplies due to an increase in exports and crush. However, larger South American production will continue to weigh on soybean rallies, especially as their harvest progresses. The corn market has the most anticipated numbers on the report, production and exports. The optimism comes from thoughts of decreased supplies due to late harvested corn and low test weights. However, we do know that exports need to remain very firm in order to reach the current USDA projections. 


There does not appear to be any major changes to the wheat figures. The demand side for wheat continues to be poor. The ending stocks and stocks to usage ratio will remain high figures. Exports have been weak due to US wheat not being competitive on the world market. It is important to note that winter wheat acreage is down sharply, but first we need to work through current supplies.


Overall fundamentals have not changed significantly since January and this broad outlook needs to remain fresh in producers that have significant amounts of unsold grain. Meanwhile, the market appears to continue with its choppy action until the report. Please call us 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.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.

E Hedger Closing Grain Commentary 3/2/10

Mar 02, 2010
Market Settlement Change Low High 
March corn 370 1/2 - 1/4 365.25 373.5
March wheat 492    - 3/4 487 497.25
March beans 954 1/4 1 3/4 948.5 959.5
March soymeal 270.50 -0.50 269 273.1
March soyoil 39.81 0.31 39.42 39.94
Apr live cattle 92.775 1.05 91.73 92.88
Apr lean hogs 72.450 -0.50 71.95 73.425
 
Corn, soybeans, and wheat put in a mixed performance and closed near unchanged. Buying supported the overnight market on ideas that yesterday’s losses in corn and wheat were overdone. Yet, prices quickly resumed their downtrend for the week and did not trade back to unchanged and higher until buying into the close. Crude oil traded sharply higher, while the dollar traded higher early, but lower at midday. These outside influences along with fund movement will continue to play a major role leading up to the next USDA report on March 10th. So far this week soybeans have seen the most support thanks to the tight ending stocks and buying in soyoil. It is believed that the biodiesel credit will try and be added to the new Jobs bill. Without the credit crushing margins are poor. Meanwhile, soymeal has not seen the strength as increased DDG feeding is taking its share from meal. This should be an ongoing theme into 2010 as ethanol production increases. 

It appears that last week's rally came with additional farming selling as river basis broke sharply at the end of the week. A need to move additional corn from the bins will keep a lid on corn prices. We continue to recommend that you are caught up on new crop sales. Speculation about the potential for a friendly March 10th report has provided the market with a solid rally. We caution that some may be too optimistic about this report. The optimism comes from thoughts of decreased supplies due to late harvested corn. However, we do know that exports are well behind current USDA projections to discourage friendly thoughts. Yet, if you are concerned about corn posting further rallies it may be a good idea to buy April ….

Using the February average of the closing new crop futures prices the CRC, RA, and GRIP insurance policies are now set. 
The average price for corn in February was $3.98 ½ and the soybean price was $9.22 ¾. This price guarantee is just one of the factors that producers will have to consider when deciding acreage and insurance coverage levels. We encourage you to contact your insurance representative and please call us 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.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.
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