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March 2012 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 Grain Commentary 3/29/2012

Mar 29, 2012

Grains finished sharply lower ahead of the report with double digit losses for corn, beans, and wheat. 

The first thing that set the market on edge was the overly dismal weekly corn sales of only 130,000 MTs (old crop) and 27,000 MTs (new crop).  We did see a USDA sale announcement 120,000 MTs of US corn to China for 11/12 and then another 120,000 MTs of new crop to "unknown" for 12/13.  These sales obviously didn’t seem to do much for the bulls though as we saw trader liquidation ahead of tomorrow’s reports. This is now the lowest level we have seen December 12 corn futures since March of last year.

Even with today’s washout the soybeans still gained on corn (relatively speaking).  The corn-soybean ratio is at the high for the move just as we are heading into this report.  If you look at the chart below, you will see we are now trading at 2.49 to 1, suggesting the incentive for soybean planting for many areas.  Obviously this late in the year we aren’t likely to see a massive switch but 1-2 million acres is certainly possible.

Chart – November 2012 Soybeans Divided by December 2012 Corn

 Corn Chart

The market is pricing in the potential to see higher corn stocks and high corn acres.  I have pointed out in recent grain letters that the last three quarterly stocks reports have resulted in "limit-down" moves in corn.  How many acres has the market accounted for and how many stocks?  I have included the average estimates in the chart below.  Anything above 95.5 million corn acres and 76 million bean acres looks negative to me, especially with this recent downward momentum we have seen.  Overall I believe we could ultimately see a combined acreage of 172 million between corn and soybeans.

ESTIMATES FOR USDA REPORTS:

 USDA Chart

Tomorrow’s report is still anyone’s guess as to what the USDA actually releases.  If we get a bearish report, we can start to look for re-ownership strategies on a large break.  If we get a bullish report, we still have plenty of room to sell at higher levels.  If you would like to see the current EHedger recommendations, please sign up for a free trial of our research using the link below.  Thanks and good luck on tomorrow’s report.

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Best Regards,

EHedger

866-433-4371

www.EHedger.com

 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

Ehedger Grain Commentary 3/28/2012

Mar 28, 2012

Grains finished lower again extending yesterday’s losses.  May corn finished 10 ½ cents lower at $6.20 ¼, May soybeans 2 ¼ cents lower at $13.67 ½, and May wheat down 9 cents at $6.30 ¾.

December corn traded down to $5.35 ¾, making a new low in 2012 and is only ¾ of a cent above the low in November.  The average trade guess suggests corn will gain 2-3 million acres from last year.  The market seems to be scrambling to get short corn ahead of the report which may be a lot of producer hedging to catch up on sales.  The corn-to-soybean ratio made new highs again today suggesting areas that haven’t decided to plant soybeans yet could still switch over.  Obviously we aren’t talking about a massive amount of acres but we still have a chance to see 1-2 million switch back over before we are all said and done.

Personally I think the market is setting itself up for disappointment on these reports.  They are under the impression that either soybeans or corn will get the extra acres that are expected this year.  We’re of the opinion that we could see 172 million acres between corn and soybeans combined.  This compares to the market where we are seeing a lot of 168-169 million acre guesses.  Ultimately this could be a very bearish scenario for the market.

The other potentially "bearish" surprise could come from quarterly stocks.  The last report in January ended up in a "limit down" move in corn as the stocks came in well above estimates.  How many quarterly stocks reports in a row have we seen negative reactions for corn?  Dates and correlated price movements for front month corn in the three most recent Quarterly Stocks Reports:

January 12th, 2012 - Down 40 cents (limit down)

September 30th, 2011 - Down 40 cents (limit down)

June 30th, 2011 - Down 69 cents (July contract in delivery at the time)

 

Lastly we have to keep in mind that these planting intentions are from March 1st.  We have had a lot of price movement since which could still end up affecting acres in the end.  But between the available acres we believe corn and beans will be the most likely crops to gain ground where possible.  Ultimately we want to make sure as producers you have enough downside coverage in both of these markets.  I have included the average trade guesses for the report below.  Tomorrow morning we will be watching the weekly export sales for direct, they will be in the EHedger Morning Grain Commentary. Please sign-up by clicking the link below to try EHedger’s grain marketing software AMMO.  Have a great rest of the week!

Chart – December Corn (Red – 50 day, Blue – 100 day, Grey – 200 day moving average)

ESTIMATES FOR USDA REPORTS:

 

www.ehedger.com/signup

Best Regards,

EHedger

866-433-4371

www.EHedger.com

 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 3-27-2012

Mar 27, 2012

Grains finished lower with the largest drop in May wheat.  May corn finished 7 cents lower at $6.30 ¾, May soybeans 9 ¾ cents, and May wheat down 19 ¾ cents.

Yesterday wheat gained heavily on corn, today they reversed those gains.  December corn also finished lower and is now at the lowest settlement level since January 18th.   Heavy "bear-spreading" occurred for corn, wheat, and soybeans suggesting a day of liquidation ahead of the report.  We could also be seeing a lot of hedge pressure leading into Friday as the consensus remains that we will see a high corn acreage number.

Personally I think the market is setting itself up for disappointment on these reports.  They are under the impression that either soybeans or corn will get the extra acres that are expected this year.  We’re of the opinion that we could see 172 million acres between corn and soybeans combined.  This compares to the market which we are seeing a lot of 168-169 million acre guesses.  Ultimately this could be a very bearish scenario for the market.

The other potentially "bearish" surprise could come from quarterly stocks.  The last report in January ended up in a "limit down" move in corn as the stocks came in well above estimates.  How many quarterly stocks reports in a row have we seen negative reactions for corn?  Dates and correlated price movements for front month corn in the three most recent Quarterly Stocks Reports:

January 12th, 2012 - Down 40 cents (limit down)

September 30th, 2011 - Down 40 cents (limit down)

June 30th, 2011 - Down 69 cents (July contract in delivery at the time)

 

Lastly we have to keep in mind that these planting intentions are from March 1st.  We have had a lot of price movement since which could still end up affecting acres in the end.  But between the available acres we believe corn and beans will be the most likely crops to gain ground where possible.  Ultimately we want to make sure as producers you have enough downside coverage in both of these markets. Please sign-up by clicking the link below to try EHedger’s grain marketing software AMMO.  Have a great week!

Chart – December Corn (Red – 50 day, Blue – 100 day, Grey – 200 day moving average)

Corn 3.27.12

Chart – November 2012 Soybeans Divided by December 2012 Corn

Beans 3.27.12

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Best Regards,

EHedger

866-433-4371

www.EHedger.com

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 3-23-2012

Mar 23, 2012

Grains traded higher for most of the day with soybeans finishing sharply higher. May corn closed 2 cents higher at $6.46 ½, May soybeans up 16 ¼ cents at $13.65 ¾, and May wheat up 8 cents at $6.54 ¼.  

Soybeans and corn were stronger coming in from the overnight trading hours after statements made by the Argentine Government helped spur another round of buying.  They estimated the Argentine corn crop at 21.2 MMTs and the soybean crop at 44 MMTs.  This compares to the last USDA estimate of 22 MMTs of corn production and 46.50 of soybeans.

We are one week away from the March Planting Intentions Report which will likely provide the market with a baseline direction going into the spring/summer time period.  At the same time, we have the quarterly stocks data released on the same day.  Since the last major stocks report in January, we have rallied soybeans sharply over the price of corn (relatively speaking).  At this point the "new crop" corn/bean ratio is back above 2.36 to 1 level which supports planting soybeans in many areas again. 

We know that the "managed money" has been buying soybeans as their net long positions have increased sharply since the beginning of the year.  Even on today’s Commitment of Traders report we can see that they added yet another 25,123 soybean contracts bringing it to a total net long position of 1.006 billion bushels using futures and options.  For corn they are net long 1.308 billion bushels.  The question is- will they take this position into the report or lighten the load over the next 4 trading days before Friday?

Like any other report of importance, the presence of a large position in either direction can make for large market moves in either direction.  Making sure you have your ideal hedge positions in order before Friday is important so please contact your EHedger broker if you have any questions about your strategy.  I have included a chart to show the corn-bean ratio spread.  You can see how the price of November beans has heavily gained to the price of December corn ever since the end of last year.  Interestingly, on January 3rd the managed money was holding only 165.1 million bushels in net long soybeans and 962.5 million in net long corn.  As a ratio of where they are stacking their positions, at the time they were long 5.829 corn contracts to every 1 contract long soybeans.  Now they are long only 1.3 contracts of corn to every 1 contract they are long soybeans.  So obviously on a relative scale, the managed money thinks there is more upside for soybeans.  Have a great weekend and please feel free to sign up for a free trial of our research by clicking the link below.

Chart – November 2012 Soybeans Divided by December 2012 Corn

Best Regards,

EHedger

866-433-4371

www.EHedger.com

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

EHedger Afternoon Grain Commentary 3-21-2012

Mar 21, 2012

Grains closed the day mixed with large intra-commodity spread swings.  May corn finished 5 ½ cents lower at $6.42, May soybeans up 10 cents at $13.55, and May wheat down 6 ¼ cents at $6.36 ¼.   

The market is back to selling corn and buying soybeans.  The new crop corn-soybean spread reached a level we haven’t seen for over a year today at 2.37 to 1.  I have included a chart below to show how far soybeans have come back against the price of corn.  Soybeans are trying to do all they can to hold or even gain acres this year.  Ultimately weather has been extremely mild and will likely encourage early or on-time planting for corn especially.  Last year we had 10.551 million acres in prevent plant and we also have roughly 1.5 million acres coming out of CRP.  We think corn could easily get 95 million acres and soybeans over 75 million.  If we have a somewhat normal growing season this will certainly help us replenish stocks for next year, will the prices be able to hold?

The recent bullish mentality seems more related to old crop stocks as well as the potential for more demand out of China.  Currently, we don’t see near term export pace raising enough for the US carryout to drop significantly on the next WASDE report.  We did see a minor uptick in crush on the last crush report.  If anything the market has done all it can to ensure that soybeans will gain/hold enough acres in the US to help cover any shortfalls that the South American crop had after this year’s weather related problems.  Until then, World stocks-usage rates have not gone down significantly as we don’t even have a definite South American production number just yet.  With soybean volatility still running at a relatively low level, hedging using the old crop options may not be a bad idea.

Tomorrow’s export sales expectations are as follows:

Corn:                                     700,000 – 1,000,000 MTs

Soybeans:                              900,000 – 1,300,000 MTs

Wheat:                                   350,000 –    650,000 MTs

We expect March to continue to be a volatile month as traders gear up for the Planting Intentions report and Quarterly stocks data.  If you have any questions or would like to open an EHedger account, please contact a broker today by calling 866-433-4371.  Thanks and have a great week!!!

Chart: November Soybeans/December Corn Ratio

EHedger Afternoon Grain Commentary 3-20-2012

Mar 20, 2012

Grains finished lower for the second day in a row on more profit taking and sharply lower crude oil.  May corn finished 16 cents lower at $6.47 ½, May soybeans down 21 ½ cents at $13.45, and May wheat down 9 ¾ cents at $6.42 ½.

Yesterday it was wheat leading the way lower, today it was soybeans.  Crude oil was also down over $2.50 per barrel today after the Libyan government announced that they would be increasing crude production in April.  China also lowered their expected automobile sales growth based on higher fuel costs and a slowing economy.

We know that the "managed money" has dramatically increased their net long positions since the beginning of January, especially in the soybean complex.  With only 10 days left before one of the most important reports of the year, this latest move lower may be a sign of profit taking.  Generally analysts seem to agree that we can see more corn and bean acres on this report.  The bullish mentality seems more related to old crop stocks as well as the potential for more demand out of China.  Currently, we don’t see near term export pace raising enough for the US carryout to drop significantly on the next WASDE report.  We did see a minor uptick in crush on the last crush report.  If anything the market has done all it can to ensure that soybeans will gain/hold enough acres in the US to help cover any shortfalls that the South American crop had after this year’s weather related problems.  Until then, World stocks-usage rates have not gone down significantly as we don’t even have a definite South American production number just yet.  With soybean volatility still running at a relatively low level, hedging using the old crop options may not be a bad idea.

May corn traded down to its 50 day moving average and found support there (see chart).  Looking at a chart of November soybeans, we have come a long way up leaving the moving averages well below current levels.  We have to keep this in mind when considering where we will find support on breaks.  Prices in South America have also come down recently.

Chart: May Corn (red, blue, grey lines = 50, 100, and 200 day moving averages)


Chart: November Soybeans (red, blue, grey lines = 50, 100, and 200 day moving averages)


We expect March to continue to be a volatile month as traders gear up for the Planting Intentions report and Quarterly stocks data.  If you have any questions or would like to open an EHedger account, please contact a broker today by calling 866-433-4371.  Thanks and have a great week!!!

EHedger Afternoon Grain Commentary 3-19-2012

Mar 19, 2012

Grains finished weak with front month wheat leading the way lower.  May corn settled 9 ½ cents lower at $6.63 ½, May soybeans down 7 ½ cents at $13.66 ½, and May wheat down 19 ¾ cents at $6.52 ¼.    

The fact that Russia announced that they do not see the need to limit grain exports this year put some downside pressure on US wheat prices today.  They went on to say that they may see Russian grain exports each a record 27 MMTs this year.  This combined with lower than expected export inspections this morning kept downside pressure on the market right through the day session close.

I talked on Friday about the July – November soybean spread which is just coming to its long term trendline resistance and held that level today (see chart).  We don’t see near term export pace raising enough for the US carryout to drop significantly on the next WASDE report as many analysts are calling for.  We did see a minor uptick in crush on the last crush report.  If anything the market has done all it can to ensure that soybeans will gain/hold enough acres in the US to help cover any shortfalls that the South American crop had after this year’s weather related problems.  Until then, World stocks-usage rates have not gone down significantly as we don’t even have a definite South American production number just yet.  With soybean volatility still running at a relatively low level, hedging using the old crop options may not be a bad idea.

We expect March to continue to be a volatile month as traders gear up for the Planting Intentions report and Quarterly stocks data.  We like staying with the current EHedger recommendations.  If you have any questions, please contact your broker.  Thanks and have a great week!!!

Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 3-16-2012

Mar 16, 2012

Grains finished stronger with wheat leading the way again.  May corn finished 4 cents higher at $6.73, May soybeans finished 5 cents higher at $13.74, and May wheat finished 7 ¼ cents higher at $6.72.

Short term supply concerns are still the main driving factor behind the recent price jumps.  Old crop soybeans have had the largest rally as the market is concerned with South American soy production.  Yesterday’s strong export sales report helped keep the rally going.  Now that we have the South American crop coming on board, we can expect them to pick up much of this upcoming world demand.  We can see this supply concern in the July-November soybean spread as it has been moving higher since November and closed at +52 ½ cents today.  That level actually happens to be right at a long term trendline (see chart) which could provide some resistance here.

Corn has also been gaining support and is now above the 200 day moving average for the first time since November.  Commitment of Traders data shows the "managed money" didn’t have much of a position change over the past week and they remain with a net long position of 245,327 contracts. For soybeans, the "managed money" increased their net long by another 19,716 contracts!  This makes their net long position 176,091 contracts, a net increase of 143,071 (715.355 million bu) soybeans since the beginning of the year.  Obviously they have placed a massive bet on expectations of a short supply and so far it has been working for them.  At the beginning of the year, we felt the same way, soybeans were underpriced to corn, especially in the new crop when the corn/bean spread was 2.05 to 1.  Now two and a half months later we are already back to a 2.31 to 1 which will help soybeans hold/gain many of those available acres.  My point is that this rally may be getting a little overdone to the upside.  For old-crop soybeans, we are still running behind pace (comparatively for this time of year) to get to the USDA’s projected export sales estimate.  Unless we do a lot more export business than expected this summer, we don’t think that the current USDA’s expected US soybean carryout is too high.

If you need to hedge old crop soybeans, the option volatility is still quite low (relatively speaking) which means buying option protection may not be a bad idea.

For new crop corn we are back above the 100 day moving average.  This has been a very strong resistance level indicator for the past couple of months.  The next target for the market may be up at the 200 day moving average at $5.95 (see chart).

We expect March to be a volatile month as traders gear up for the Planting Intentions report and Quarterly stocks data.  If you have any questions, please contact an EHedger broker today, or sign up for a free trial using the link below.  Happy St. Patrick’s Day!!!

Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 3-15-2012

Mar 15, 2012

Grains closed strong with corn wheat and beans all settling near the highs of the day.  May corn closed 10 ¼ cents higher at $6.69, May soybeans closed 18 ¾ cents higher at $13.69, and May wheat closed 21 cents higher at $6.64 ¾.

Export sales were above expectations for soybeans, decent for corn, and below expectations for wheat.  We did have sale announcements for 60,000 MTS of US SRW to Egypt before the market opened this morning which also helped in the wheat strength.  Ultimately wheat stops were triggered and was a large reason for such an abrupt rally on the open.

Weekly Export Sales (Estimates vs Actual):

                                                Estimated Range                            Actual

Corn:                                  600,000 – 850,000 MTs                   836,400 MTs

Soybeans:                           650,000 – 900,000 MTs                  1,393,700 MTs

Wheat:                               400,000 – 600,000 MTs                   360,300 MTs

As we approach the March 30th USDA reports, the market continues to have wide and volatile swings.  There has been heavy money flow into "bullspreading" as short term supply concerns are the biggest factor.  We are getting to that time of year where our export sales should start to slow down for beans as South America takes over for much of that world demand.  Today’s weekly sales report shows old crop bean sales of 22.4 million bu was much more than they were expecting and was a major reason beans stayed strong all day.  If you need to hedge old crop soybeans, the option volatility is still quite low (relatively speaking) which means buying option protection may not be a bad idea.

For new crop corn we are back above the 100 day moving average.  This has been a very strong resistance level indicator for the past couple of months.  The next target for the market may be up at the 200 day moving average at $5.95.

We expect March to be a volatile month as traders gear up for the Planting Intentions report and Quarterly stocks data.  If you have any questions, please contact an EHedger broker today, or sign up for a free trial using the link below.  Thanks and have a great rest of the week!!!

Chart 3.15.12

www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 3-14-2012

Mar 14, 2012

After trading sharply higher for much of the day grains finished rather weak.  May corn finished 3 ¼ cents lower at $6.58 ¾, May soybeans up 1 ½ at $13.50 ¼ and May wheat down 5 ¼ cents at $6.43 ¾.

March grain contracts went off the board today at noon, but not without some massive spread movements first.  March – May corn spreads moved in a range from +2 ½ cents to +17 cents.  March – May wheat spreads had a range of -15 cents to +5 cents!  We will see if there were any deliveries tomorrow.

February NOPA crush came in a little higher than expected this morning which was slightly favorable for soybeans.  Old crop beans held the most support throughout the day even making new highs for the move.  At this point the 50 day moving average is almost a whole dollar below current levels for May soybeans!  Soybean volatility is still running quite low and long options may be a good way to hedge this market.

For corn the Weekly Ethanol data was out today and showed a slight decline in ethanol stocks as well as production.  They have been building ethanol stocks to record levels and this is the first week-to-week decline in stocks since December (though not a significant decline by any means).

Weekly Export Sales will be released tomorrow morning.  Expectations are as follows:

Corn:                                  600,000 – 850,000 MTs

Soybeans:                           650,000 – 900,000 MTs

Wheat:                               400,000 – 600,000 MTs

We will have the actual export sales in the morning letter.

We expect March to be a volatile month as traders gear up for the Planting Intentions report and Quarterly stocks data.  We like staying with the current EHedger recommendations.  If you have any questions, please contact your broker.  Thanks and have a great rest of the week!!!

www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 3-13-2012

Mar 13, 2012

Grains finished mixed with soybeans finishing sharply higher.  May soybeans closed 14 ¼ cents higher at $13.48 ¾.  March corn, which is in the delivery period, closed 17 ¼ cents higher at $6.71 ½.  May corn finished 2 ½ cents higher at $6.62. May wheat finished 2 ¼ cents lower at $6.49.

Corn supply concerns continue to keep money flowing into the front month contracts.  May corn made the day session highs within the first few minutes of trading before trading near unchanged for the rest of the session.  There were more reports of high volume call buying in May corn calls.  On Friday we talked about the rumors of China buying a significant amount of US corn.  This morning we received confirmation from the USDA that 240,000 MTs of old crop corn.  If this is of course the sale to China that everyone has been talking about this is still under the 600,000 – 800,000 MTs that was rumored.

I still think much of the strength we have been seeing lately may be due to the fact that producers are holding on to their grain.  With as much on-farm storage as there is, commercials have had to provide extra incentive to get the bushels.  Basis levels are still strong, and they are paying the market to sell now rather than wait until July.

For new crop corn, the market seems to be expecting a large increase in acres.  Last year we had 10.5 million acres in "prevent plant".  We also have another 1.5 million acres coming out of CRP.  With the price incentives to plant corn and soybeans, we believe those markets will benefit the most from extra acres.  Once we get past the March 30th Planting Intentions Report, the market will have a much clearer picture on what to expect.  If we do get the additional acres planted and corn has 94-95 million acres and soybeans 75 million or more, this will give us plenty of leeway to try to build stocks from current "tight" carryout levels.  Conversely, if we get to the end of the month and quarterly stocks are not as low as many are predicting, we may see a significant market correction again, just as we did on the last stocks report in January.

The latest USDA report shows that they are expecting large cuts to soybean production in South America but they did not reduce their corn production estimates in those areas this time around.  We know that the "managed money" has already changed to a sizeable net long position in soybeans over the past two months.  Now that Brazil is estimated to be 49% harvested, the market should start getting a solid idea of what the production actually is.  In the next couple of weeks leading into the report, the market may continue to give opportunities to get caught up on sales.  Weather has been very mild so far and if planters start rolling early this year it may keep prices resisted.   We still like the current hedge recommendations, if you have any questions please contact your EHedger broker.  Have a great week!!!

www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 3-12-2012

Mar 12, 2012

Grains finished mixed with corn and wheat closing strong and beans finishing lower.  March corn, which is in the delivery period, closed 17 ¼ cents higher at $6.71 ½.  May corn finished 14 ½ cents higher at $6.59 ½ and is now at a 5 ½ cent premium to July corn. May beans finished 3 ¼ cents lower at $13.34 ½.  May wheat finished 8 ¼ cents higher at $6.51 ¼. 

Corn supply concerns continue to keep money flowing into the front month contracts.  May corn made the day session highs within the first half hour of trading.  There were reports of high volume call buying in May corn calls.  On Friday we talked about the rumors of China buying a significant amount of US corn.  We have not received confirmation of these by the USDA and if we don’t by tomorrow they may be suspect.  We had this same thing happen last year with multiple rumors flying of China buying corn which never came to reality.  I think much of this strength may be due to the fact that producers are holding on to their grain.  With as much on-farm storage as there is, commercials have had to provide extra incentive to get the bushels.  Basis levels are still strong, and they are paying the market to sell now rather than wait until July.

For new crop corn, the market seems to be expecting a large increase in acres.  Last year we had 10.5 million acres in "prevent plant".  We also have another 1.5 million acres coming out of CRP.  With the price incentives to plant corn and soybeans, we believe those markets will benefit the most from extra acres.  Once we get past the March 30th Planting Intentions Report, the market will have a much clearer picture on what to expect.  If we do get the additional acres planted and corn has 94-95 million acres and soybeans 75 million or more, this will give us plenty of leeway to try to build stocks from current "tight" carryout levels.  Conversely, if we get to the end of the month and quarterly stocks are not as low as many are predicting, we may see a significant market correction again, just as we did on the last stocks report in January.

The latest USDA report shows that they are expecting large cuts to soybean production in South America but they did not reduce their corn production estimates in those areas this time around.  We know that the "managed money" has already changed to a sizeable net long position in soybeans over the past two months.  Now that Brazil is estimated to be 46% harvested, the market should start getting a solid idea of what the production actually is.  In the next couple of weeks leading into the report, the market may continue to give opportunities to get caught up on sales.  Weather has been very mild so far and if planters start rolling early this year it may keep prices resisted.   We still like the current hedge recommendations, if you have any questions please contact your EHedger broker.  Have a great week!!!

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Best Regards,

EHedger

866-433-4371

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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

Post-report comments 3-09-2012

Mar 09, 2012

It was a choppy, two sided trade today at the Chicago Board of Trade which led to some large intra-commodity swings.  Corn was the upside leader finishing 9 ½ cents higher in the may contract.  At one point it was trading as much as + 16 ½ cents higher during the day session.  May soybeans settled ¾ of a cent lower at $13.37 ¾, which is almost 20 cents from its day session high.  May wheat finished 8 ¼ cents higher at $6.43.

The USDA report this morning was somewhat of a surprise to the market in a few ways. For one the US carryout numbers were NOT lowered like the market was expecting except for a small decrease in the US wheat.  The world soybean numbers were however lowered due to more production cuts in Argentina and Brazil.  With a drop in world soybean, corn, and wheat carryouts this initially could have been viewed as slightly bullish but the reaction in the OTC market said otherwise.  At about a half an hour into the trading session the corn market started to make its way higher.  The rumors were that China had bought a significant amount of corn.  By the time Informa’s estimates were released we had already made the highs. 

Informa’s estimates were a surprise in themselves with a whopping 95.5 million corn acres estimated for 2012/2013!  This is beyond most of the estimates we have seen so far for corn plantings and would certainly be a concern for the bulls.  For soybeans they are still estimating 75.1 million acres which was also an increase.

Today’s Commitment of Traders report shows the "managed money" increasing their net long positions in corn by 30,449 contracts and are now long 246,137 contracts.  This is a net increase of 53,637 contracts from January 3rd.  For soybeans, the "managed money" increased their net long soybean position by 38,689 contracts bringing it to a net total of 156,366!  This is a net long increase of 123,346 contracts (616.73 million bushels and/or 20% of the total 2011 US production) of soybeans in only 2 months! In this same timeframe, we have rallied May soybeans $1.20.

So where do we go from here? Now that we have passed the first March USDA report, we still have the stocks data as well as the Planting Intentions report, which could arguably be the most important report of the year.  If we get the massive amount of expected acres planted we could have quite a bit of downward pressure going into the summer markets.  Ultimately much of the price will obviously depend on the weather, but knowing that we have a lot of leeway with acres is going to be a major factor for the market.  Even with the decline in world wheat carryout estimates on today’s report we still have a significant amount of feed wheat in the world to help carry us through to the next growing season.  This is ultimately going to help keep the price of corn in check in our opinion.  As for beans, for the US carryout to dwindle from current levels for the 11/12 crop will be difficult without seeing a large increase in demand in the short term.  I would expect those rallies to taper off at some point just as we found resistance on today’s rally. Please call an EHedger broker today at 1-866-433-4371 if you would like to get set up with a free trial of our research.  Thanks and have a great weekend!!!

 

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Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

EHedger Afternoon Grain Commentary 3-8-2012

Mar 09, 2012

Grains finished mixed with May corn down 3 ¼ cents, May beans up 11 ¾ cents, and May wheat down 4 ½ cents.

The USDA Supply and Demand report will be released tomorrow morning at 7:30 am.  The market has been pricing in a large reduction to South American corn and soybean production.  Tomorrow’s report will confirm if the USDA is seeing the same problems.  We also have to take into account that the export sales have been running behind pace from the current USDA estimates which may result in the USDA lowering their expected export demand for soybeans. 

 

So who is buying beans?  If you look at the Commitment of Traders data, we see that the "managed money" was net long about 33,020 contracts of soybeans on January 3rd.  Currently they are sitting with a net long position of 117,678 contracts which is an 84,658 net contract increase in less than 2 months!  We don’t see the old crop bean supply as a big problem at this time and think that the market will have to see a major increase in demand to get old crop supply down to the carryout levels that many people are suggesting.  For downside protection, bean volatility is very low (relatively speaking) and buying May soybean puts could turn out to be a good play.

 

May wheat dropped back below the price of May corn and is one more fundamental attribute that could force more downside pressure on old crop corn. March corn is still trading at a premium to May corn and May-Dec corn spreads are still way overpriced in my opinion.  We look for the USDA to shed some more light on the supply situation. I would guess that the most likely place for surprises on the USDA Supply and Demand report will be in old crop soybean carryout for US and World.   Currently the market is estimating old crop soybean carryout at 257 million and old crop corn carryout at 784 million.  To see the rest of the market estimates, please see the chart below. If you would like to sign up for a free trial of the EHedger research, please give us a call today at 866-433-4371, or simply sign up at www.ehedger.com/signup   Have a great weekend!

 

USDA Report Average Analyst Estimates:

 

Chart 3.8.12

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Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 3-7-2012

Mar 07, 2012

It was a weak day at the Chicago Board of Trade with wheat and corn leading the way lower.  May corn finished down 15 ¼ cents at $6.38 ¾, May beans down 8 ½ cents at $13.26 ¾, and May wheat down 18 ½ cents at $6.39 ¼.

The market seems to be in a corrective pattern as we head into the report on Friday.  We had ethanol data released this morning which showed a slight uptick in production but another increase to the already record ethanol stocks as well.  Old crop soybeans have rallied $1.23 so far this year while corn is down 2 ¾ cents!  Corn was way overpriced to beans but after the market action these past couple of months we are finally back to normal levels especially in the new crop corn-bean ratios.  We see this as a good opportunity for selling soybeans again.  The fact that most of this rally in the beans has been attributed to major South American production cut estimates before we get the confirmation may pave the way for surprises in the next couple of USDA reports.  We also want to reiterate that we are running well behind schedule for the soybean export sales pace that the USDA has set.

 

So who is buying beans?  If you look at the Commitment of Traders data, we see that the "managed money" was net long about 33,020 contracts of soybeans on January 3rd.  Currently they are sitting with a net long position of 117,678 contracts which is an 84,658 net contract increase in less than 2 months!  We don’t see the old crop bean supply as a big problem at this time and think that the market will have to see a major increase in demand to get old crop supply down to the carryout levels that many people are suggesting.

 

May wheat dropped back below the price of May corn during the day session.  This is one more fundamental attribute that could force more downside pressure on old crop corn as feeding wheat comes back to making financial sense again. March corn is still trading at a premium to May corn and May-Dec corn spreads are still way overpriced in my opinion.  We look for the USDA to shed some more light on the supply situation. I would guess that the most likely place for surprises on the USDA Supply and Demand report will be in old crop soybean carryout for US and World.   Currently the market is estimating old crop soybean carryout at 260 million and old crop corn carryout at 785 million.  Please contact EHedger if you would like a trial of our marketing services. You can also sign up by clicking on the link below.  Enjoy the rest of the week!

 

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Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 3-6-2012

Mar 06, 2012

Grains were mixed today with soybeans finishing strong while corn and wheat were both lower.  May corn settled 6 ¾ cents lower at $6.54, May beans up 10 ¼ cents at $13.35 ¼, and May wheat down 14 ¼ cents at $6.57 ¾.

Initially we found weakness across the board to start the day as the outside markets were sharply lower.  The concern that investors will fail to reach a decision on the Greek bailout before Thursday’s deadline was the headline for the largest decline in the stock market for 2012 so far.  This helped move energies, gold, grains, and other commodities lower while the US Dollar pushed higher.  The soybean market found support mid-morning though and eventually traded back to yesterday’s highs on heavy bullspreading.

 

Yesterday corn was strong while soybeans were weak and today we have switched roles.  Even with this change we have more and more bull spreading going on.  The market seems to be building a position ahead of the upcoming Supply and Demand report.  The May – Dec corn spread settled at +90 ½ cents today and the May – Nov soybean spread settled at +42 cents.   The market is obviously concerned over supply shortages for this year and next.  This is all at the same time that we are seeing increases in the weekly ethanol stocks, decreases in weekly ethanol production, and lower on feed numbers.  We will have the weekly ethanol data out tomorrow to see if this trend is continuing.  For beans we have been running behind pace on USDA export expectations.  Many areas are pointing towards higher carryouts than expected for corn and beans but the market doesn’t seem to agree with those assumptions… at least for now.  These market swings can present great opportunities to get caught up on sales if needed.

 

Chart: May12 – Dec12 Corn Spread

 

Chart 3.6.12

 

Chart: Nov12 – Nov13 Soybean Spread

 

Chart 2 3.6.12

 

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EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

Monday's Grain Market Recap 3-5-12

Mar 05, 2012

Grains were mixed today with corn finishing strong while beans and wheat were both lower.  May corn settled 5 ¾ cents higher at $6.60 ¾, May beans down 8 cents at $13.25, and May wheat down 2 ½ cents at $6.72.

New money seems to be coming into the corn market as they continue to "bullspread".  May-Dec corn spreads are now trading +89.5 cents.  This spread was trading at a high of $1.2375 last August and a low of 43.75 cents in December.  There were rumors of more export business that had the market excited today but it was more or less the same story: heavy money flow into bullspreading.  Even the Nov 2012 – Nov 2013 soybeans spread gained 3 ½ cents today to settle at a new spread high of +78.5 cents.  The market is obviously concerned over supply shortages for this year and next.  This is all at the same time that we are seeing increases in the weekly ethanol stocks, decreases in weekly ethanol production, and lower on feed numbers.  For beans we have been running behind pace on USDA export expectations.  Many areas are pointing towards higher carryouts than expected for corn/beans but the market doesn’t seem to agree with those assumptions… at least for now.  These market swings can present great opportunities to get caught up on sales if needed.

 

Chart: May – Dec Corn Spread


 

Chart: Nov12 – Nov13 Soybean Spread

 

I talked on Friday about some technical targets for corn and soybeans. May corn finished on the trendline resistance after trading above it for some time today.  May soybeans managed to close lower after touching the 61.8% retracement level.  This was the first day in 10 trading sessions that beans closed lower.  Beans have been gaining on corn for the past month and we may be seeing a corrective move today.

 

Chart: May Soybeans

 

 

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EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

EHedger Afternoon Grain Commentary 3-2-2012

Mar 02, 2012

Soybeans were again the upside leader finishing higher for the 10th trading day in a row.   May soybean finished 10 ½ cents higher at $13.33, May corn 1 cent higher at $6.55, and May wheat 10 ½ cents higher at $6.74 ½.

The USDA announced more private sales of soybeans this morning with 120,000 MTs of old crop and 165,000 MTs of new crop (both to unknown destinations).  This combined with somewhat "bullish" Informa estimates this morning may have been enough for the market to hold support.  Looking at a chart of May soybeans, it looks like we settled directly on the 61.8% retracement level which is a major technical target for exit orders (see chart).  This may keep some technical sell pressure on the market, especially after trading higher for the past 10 days in a row.

 

Chart: May Soybeans

Beans

Informa is pegging soybean production at 47.5 MMTs for Argentina and 68.0 MMTs for Brazil. These numbers are overall 4.5 MMTs lower than the Feb USDA estimate.  As I said yesterday, there are other analysts calling for even further cuts than this.  If they write down the crop too much, they may be set up for disappointment if the actual USDA estimates come in better than expectations.  From what we have been seeing, rains have been timely and favorable for many of these areas to close out their growing season and such a significant drop in production seems unlikely.

 

May corn is still holding resistance below the trendline which started back in November (see chart).  December corn is having a very similar pattern keeping it resisted.

 

Chart: May Corn

May Corn

Chart: December Corn

December Corn

Acreage:

The Spring Federal crop insurance prices are set at $5.68 for corn and $12.55 for soybeans.  Now that these prices are set we want to make sure we have adequate downside coverage between your crop insurance, cash sales, and futures/options positions.  The month of March will be extremely important with the Supply and Demand report on the 9th, but more importantly the Planting Intentions report which is on the 30th.

 

November soybeans have gained quite a bit back on corn (relatively speaking).  Even with this move we believe corn acres will still be in that high range near 94 million acres.  We see soybeans gaining about a million acres bringing our estimate to 76 million.  We expect the market to add back in up to 9 million acres in the US and 6 million acres in Canada that didn’t get planted last year due to weather issues.  Cotton and spring wheat prices are likely to get "outbid" on additional acres by corn and beans due to the price advantages in the market this year.  The USDA is forecasting a 1.623 billion bushel carryout for corn and 209 million for soybeans.  These estimates are AFTER increasing demand sharply from last year.  We certainly think demand may increase, but it will be AFTER the prices drop. In our opinion we are trading at very good prices compared to where we could be next fall if we get a normal growing season.  Corn getting back to $4.50 and beans under $10 isn’t so hard to believe with the potential production of this year.  Also, the ethanol report again showed an increase in stocks and a decrease in production which isn’t a great trend outlook from a demand perspective.  We also have to remember that this is all at the same time that the specs are loaded up with net long positions. 

 

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EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 3-1-2012

Mar 01, 2012

Soybeans were the upside leader today with New crop finishing 5 ¼ cents higher at $12.94 ¼.  December corn finished 1 ¾ cents lower at $5.66 ¾ and July wheat finishing 4 ½ cents lower at 6.76.

Soybean strength is still fueled by the concern of production cuts in South America.  It will be interesting to see if the USDA reduces their production estimates on the March 9th Supply and Demand report and if so by how much.  The Feb USDA soybean production estimate for Argentina was 48.0 MMTs and 72.0 MMTs for Brazil.  This is an overall 4.5 MMT decrease from the Jan report.  Some of the numbers we have been hearing have been calling for another 6-8 MMT decrease in production which may be enough to set the market up for disappointment on report day.  From what we have been seeing rains have been timely and favorable for many of these areas to close out their growing season and such a significant drop in production seems unlikely.  We will have to wait and see how they come in.

 

May corn is still holding resistance below the trendline which started back in November (see chart).  December corn is having a very similar pattern keeping it resisted.

 

Chart: May Corn

May Corn

Chart: December Corn

Dec Corn

The Weekly Export Sales Report was out this morning.  Here are the results:

                                                Estimated Range                              Actual

Corn                                     650,000 – 850,000 MTs                   716,000 MTs

Wheat                                  500,000 – 700,000 MTs                   509,100 MTs

Soybeans                              400,000 – 800,000 MTs                   976,400 MTs

Source: Reuter’s Poll

 

The Spring Federal crop insurance prices are set at $5.68 for corn and $12.55 for soybeans.  Now that these prices are set we want to make sure we have adequate downside coverage between your crop insurance, cash sales, and futures/options positions.  The month of March will be extremely important with the Supply and Demand report on the 9th, but more importantly the Planting Intentions report which is on the 30th.

 

November soybeans have gained quite a bit back on corn (relatively speaking).  Even with this move we believe corn acres will still be in that high range near 94 million acres.  We see soybeans gaining about a million acres bringing our estimate to 76 million.  We expect the market to add back in up to 9 million acres in the US and 6 million acres in Canada that didn’t get planted last year due to weather issues.  Cotton and spring wheat prices are likely to get "outbid" on additional acres by corn and beans due to the price advantages in the market this year.  The USDA is forecasting a 1.623 billion bushel carryout for corn and 209 million for soybeans.  These estimates are AFTER increasing demand sharply from last year.  We certainly think demand may increase, but it will be AFTER the prices drop. In our opinion we are trading at very good prices compared to where we could be next fall if we get a normal growing season.  Corn getting back to $4.50 and beans under $10 isn’t so hard to believe with the potential production of this year.  Also, the ethanol report again showed an increase in stocks and a decrease in production which isn’t a great trend outlook from a demand perspective.  We also have to remember that this is all at the same time that the specs are loaded up with net long positions. 

 

For a free trial of the AMMO software and the EHedger research, please click on the signup link below.

 

www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

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