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May 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 Afternoon Grain Commentary 5/31/12

May 31, 2012

Grains finished the last day of the month on the lows.  For the day July corn was down 4 ¼ cents, July soybeans down 33 ¼ cents, and July wheat down 10 cents.  For the month July corn was down $1.05, July soybeans down $1.63, and July wheat down only 4 cents.  That means July wheat gained $1.01 on July corn for the month!

Chart: July Corn - July WheatCorn Chart

The massive swing in price between wheat and corn came days after the USDA reported a very large increase in world wheat feeding that eventually led them to reduce overall world wheat carryout.  On top of that we had the "managed money" funds coming into May 8th with a net short position of 46,187 Chicago wheat contracts.  As of May 22nd they had turned their ultra-short wheat position to a net long position of 7,026 contracts!  This massive move by the funds is obviously a large part of the support in wheat on top of the shift in world supply on the May 12th Supply and Demand report.

New crop soybeans fell sharply on favorable rains moving their way through the Midwest.  The price made it all the way down to the 200 day moving average before finding support.

Chart: November Soybeans (Grey Line is 200 day moving average)Soybean Chart

Corn and beans had another day of heavy bear-spreading as the Rogers fund concluded its roll moving out of the front month grain contracts.  Crude oil also fell to new lows for the move putting added downside pressure on grains.

Tomorrow we will have export sales at 7:30 am.  The estimates are as follows:

Corn:                          450,000 – 650,000 MTs

Soybeans:                   450,000 – 700,000 MTs

Wheat:                       350,000 – 500,000 MTs

 

Crop progress shows the corn rating at 73% which is down 4% from last week.  Corn also came in at 92% emerged compared to the 5 year average of 69%.  Soybeans are now 89% planted and 61% emerged which is well ahead of schedule.  Wheat dropped another 4% in the good – excellent categories and is at 9% harvested.

For now we want to continue to watch the weather forecast for any changes.  If you would like a free trial of the EHedger research please click on the link below.  To discuss opening a futures/options account please contact EHedger at 866-433-4371.  Thanks have a great weekend!

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 5/29/12

May 29, 2012

July corn and wheat fell sharply while soybeans finished slightly higher.  July wheat closed 23 ¼ cents lower at $6.56 ¾ while July corn closed 16 cents lower at $5.62 ½.  July soybeans settled 4 ¾ cents higher at $13.86 ¾.

The majority of this weakness came during the day session after the dollar made its way to positive territory.  We also had CIF basis declining slightly for corn and increasing for soybeans as the day went on. Weather is expected to cool off with additional rain later this week and the market is welcoming the relief.

At the end of the day front month corn settled at a new low level we haven’t seen since December of 2010!

CHART – FRONT MONTH CORN (WEEKLY SCALE)

Corn Chart

Last week the market was shocked by how high the ratings were for corn.  This has weighed on the market ever since as the high that Monday was $5.49 ½ (December) and now we are back down to $5.17 ½.  Today’s crop progress shows the corn rating at 73% which is down 4% from last week.  Corn also came in at 92% emerged compared to the 5 year average of 69%.  The rating drop and percent emerged were both in-line with expectations and aren’t very definitive for trade direction tonight. Soybeans are now 89% planted and 61% emerged which is well ahead of schedule.  Wheat dropped another 4% in the good – excellent categories and is at 9% harvested.

For now we want to continue to watch the weather forecast for any changes.  If you would like a free trial of the EHedger research please click on the link below.  To discuss opening a futures/options account please contact EHedger at 866-433-4371.  Thanks 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 5/25/12

May 25, 2012

The volatility continues in grains with the largest weekly corn break since coming off the highs in June 2011.  The July corn contract dropped 57 cents from last Friday and is now at $5.78 ½.  For the week July soybeans dropped 23 cents to close at $13.82 and July wheat down 15 ¼ cents and settled at $6.80.

This week was filled volatility.   The poor corn sales on Thursday put extra downside pressure in the July contract.  Wednesday’s ethanol production was stronger for the 4th week in a row but we had another uptick in stocks as well.  The fact that wheat, corn, and soybeans all fell could have been partly due to a rising US Dollar.  The Dollar Index gained 1.111 points week-over-week and is at the highest level since September 2010!

Chart: US Dollar Index

US Dollar Index

Overall a rising dollar can put negative pressure on dollar denominated products like commodities. Crude oil was down again this week for the 4th week in a row on a break from $106.43 as the high in May!

With the negative influence in outside markets we also had massive fund liquidation.  From Wednesday May 16th through Tuesday May 22nd, the "managed money" liquidated 57,834 of their shorts in Chicago wheat!!!  For anyone who didn’t see what July wheat did during this time frame, I have included a chart below where I have highlighted those 5 trading days. 

Chart: July Wheat (this is what buying back 57,834 shorts looks like)

July Wheat

The "managed money" also did a number of positions squaring in corn, liquidating 40,005 shorts and 14,650 longs.  Take a look at what July corn did in this same time frame.

Chart: July Corn

July Corn

For soybeans they liquidated some longs and added some shorts to make a net change of -15,781 for that week.  Even with a net drop in long contracts they are still holding onto 202,307 net long soybean contracts!!  That is over a billion bushels.

The last thing I wanted to mention is weather.  I have received a lot of emails about concerns over hot and dry weather.  The latest midday report I have received still shows large rain even coming into the Midwest at the middle of next week.  With the long weekend they may have been putting some extra premium in this market just in case we see any major changes to this forecast.  Monday night’s trade will depend highly on the forecast and outside markets as 3 day weekends can see some large moves. We will just have to see what the forecast gives us. Have a great Memorial Day weekend!  We will be back in the office on Tuesday morning. Click on the link below for a free 2 week trial of EHedger!

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 5/23/12

May 23, 2012

The soybean long liquidation continues with November soybeans finishing 24 ½ cents lower at $12.57 ¾.  July wheat closed 20 cents lower at $6.65 ½ and December corn closed up a penny at $5.23.

This is a continuation of yesterday for soybeans and now we are down below the 200 day moving average in the November contract for the first time since February 23rd.  The strong dollar and weak equities also made it difficult for grains to hold support as it was generally a "risk-off" trading session.

Chart: November Soybeans (red – 50 day, blue – 100 day, grey – 200 day)

Nov Soybeans

The weather is expected to be warm and dry over the weekend across the Midwest but favorable rains are expected next week.  Crush margins in China are currently negative and is contributing to the soybean weakness.  The export demand came in all at once and it has now slowed.  With an already massive long position held by the funds there wasn’t much new information to "feed the bulls".  We are below many of the short term major moving averages in July soybeans and the next one to look for is the 100 day at $13.42 ¾ and the 200 day at $13.07 ½.

Chart: July Soybeans (red – 50 day, blue – 100 day, grey – 200 day)

July Soybeans

July corn rallied back above $6 today which may have been partly from spread liquidation where traders were selling out of long beans and buying back short corn.  We did see Ethanol production uptick again for the 4th week in a row but we also saw stocks go up as well.  For now we expect continued resistance in new crop corn on any rallies.

Tomorrow morning we will have the Weekly Export Sales Report.  Industry guesses are as follows:

Corn                                   900,000 – 2,000,000 MTs

Soybeans                            700,000 – 1,100,000 MTs

Wheat                                400,000 – 800,000 MTs

Source: Dow Jones

After the grains closed at 2 pm, we had a sharp rally in the equities and a slight break in the dollar.  This should be generally supportive for the grains when they re-open at 5pm CST. If you would like a free trial of the EHedger research please click on the link below.  To discuss opening a futures/options account please contact EHedger at 866-433-4371.  Thanks 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 5/18/12

May 18, 2012

Sharp moves today in grains with a selloff in beans and a huge rally in wheat.  July corn closed 10 ½ cents higher at $6.35 ½, July soybeans 33 cents lower at $14.05, and July wheat 37 ½ cents higher at $6.95 ¼! 

The same story continues in the wheat today: funds shortcovering along with dryness concerns in Russia.  July wheat managed to surpass the 200 day moving average (see chart) today which is the first time since September 1st.

Chart: July Wheat 

The corn was also stronger following the wheat market.  The corn vs wheat feed story has been going on for the past year and the last USDA Supply and Demand report shows the significant switch over to feed grade wheat in the world demand numbers.  Wheat hasn’t been this high to corn in the front month contracts since this time last year!

Chart: Corn – Wheat

 

The soybean spreads have had some very large swings in the past couple of days.  On Monday the July – November spread was trading as low as +73 ¾ cents, yesterday it hit a high of +$1.34.  Now we are back down to $1.17.  These are major moves for the old crop – new crop markets and the choppiness is expected to continue.  We know that the funds have been loaded up with net long soybean positions.  Today’s COT report shows the managed money reducing their net long position by 12,239 soybean contracts (as of Tuesday).  This still leaves them net long 218,088 contracts!

For now we want to remain with our current EHedger recommendations.  The last thing I wanted to mention is the change to the CME grain trading hours. I know they have changed the hours 3 times over but now it looks like we have something set in stone.  They will open on Sunday night at 5pm and trade electronically until 2pm (a 21 hour trading day).  Here is the email I received from the CME group this afternoon:


To receive a free trial of the EHedger research including hedge recommendations, please sign up using the link below.  Thanks and 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 5/17/12

May 17, 2012

Grains continued their rally higher on further bull spreading and dry weather concerns in Russia.  July wheat led the way finishing 19 cents higher at $6.57 ¾.   July soybeans finished 16 cents higher at $14.38 and July corn 5 cents higher at $6.25.

The grains held support today despite the selloff in the outside markets like the Dow and Crude oil.  We had the strongest rally in Chicago wheat as the Russian weather bureau forecaster is calling for a "considerable size area" under fire weather warning through the 19th.  One day after the latest FOMC minutes we are finding treasuries and gold sharply higher.  The fact that the Fed is hinting towards another possible round of Quantitative easing could bring support into commodities as the market tries to own "hard assets" as an inflation hedge.

With stronger ethanol numbers yesterday and stronger CIF basis today, corn was able to continue it’s "bullspreading" pattern to finish the July – Dec corn spread at + 96 ¾ which is the highest level it has been since report day (May 9th).  July – November soybean spreads were so strong they actually made new spread contract highs at +$1.34!  This is despite the fact that both corn and soybean export sales were below the estimates this morning.  Soybeans did have a sale announcement of 480,000 MTs of old crop to China which contributed to this strength.

As I said yesterday, Chicago wheat was the one contract the funds were heavily short in (beside Nat Gas) and as soon as they have to short cover it can mean additional strength.  Open interest dropped by almost 10,000 contracts from yesterday’s trade so all signs are pointing to fund liquidation of short wheat positions.

Chart: December Corn  

December Corn

To receive a free trial of the EHedger research including hedge recommendations, please sign up using the link below.  Thanks and 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 5/16/12

May 16, 2012

Grains finished sharply higher with the front month contracts leading the way again.  July wheat was the strongest finishing 30 ¼ cents higher at $6.38 ¾, July corn 22 ¾ cents higher at $6.20, and July soybeans 9 cents higher at $14.22. 

Short covering in the wheat market helped spur the July Chicago wheat contract to rally up and settle directly on its 50 day moving average.

Chart: July Chicago Wheat (red line is the 50 day moving average)

July Wheat

Dry weather in Russia is the main headline behind today’s rally.  Last week’s report showed a large decrease in world wheat ending carryout from larger feed demand.  The last COT report shows the funds still net short 46,187 contracts of SRW wheat using futures and options.  With such a large spec short in wheat this leads me to believe that these were exiting positions, but we will have to see what open interest did.

Corn was also sharply higher today which was in large part due to the wheat rally.  The discount wheat has held to corn for the past year has forced some international demand away from US corn.  Obviously if wheat gets to a large premium to corn again, we could see demand for US corn go up.  Corn also had slightly "bullish" ethanol numbers as well as some export business reported by the USDA.  The EIA ethanol numbers at the 9:30 am open showed higher production and lower stocks.  This is the third week in a row that we have seen an increase in ethanol production and haven’t seen production this high since March 2nd.  The USDA export sale announcement was a little deceiving this morning showing a sale of 900,000 MTs of US Corn to China between old crop and new crop.  It was actually only 240,000 MTs of new crop that was sold and the rest of it was just previous demand that was switching from "unknown destinations" over to China.

Soybeans had a large selloff overnight only to come back to positive territory during the day session on heavy bull-spreading again.  The July–November soybean spread is back to +$1.19 ¾ on today’s settlement which is not far from its $1.33 high from April 27th. 

Chart: July – November Soybean Spread 

Soybean Spread

With corn planting well ahead of schedule and a massive amount of corn acres, there is not a whole lot that can be viewed as "bullish" for new crop corn right now.  The USDA increased demand by over a billion bushels on the last Supply and Demand report and they still have carryout expected to be over 1.7 billion.  This leaves the market with plenty of leeway on national average yield.  For the corn market to rally from here it would most likely have to be a large impact weather event.  Obviously today it was also helped out by a sharp move higher in the old crop.  The next target to sell Dec corn is at the 50 day moving average of $5.41 ¾ if it can get there.

Chart: December Corn  

Dec Corn

To receive a free trial of the EHedger research including hedge recommendations, please sign up using the link below.  Thanks and 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 5/14/2012

May 14, 2012

Soybeans have continued their downward selloff from last week closing 19 cents lower in July and 26 ½ cents lower in November on heavy volume.  November soybeans are back below $13 which we haven’t seen a November soybean close below that level since March 12th.  July corn held support finishing 2 cents higher at $5.83, and July wheat 1 ¼ cent higher at $5.98 ¼.

Over the past couple of months we have pointed out just how large of a long position the "managed money" has been growing/holding in soybeans.  At this point it is pretty clear that we are seeing liquidation in these markets especially in soybeans which is driving them lower.  On Friday we got the latest glimpse of their actual positions and saw that they reduced their net longs by 23,561 contracts but are still holding a net 275,328 long contracts using futures and options!  This is still a massive long position that adds quite a bit of downside potential.  For November soybeans, the next major moving averages where we may find support are at the 100 day which is at $12.83 and the 200 day at $12.67 ¼ (see chart). 

Chart: November Soybeans 

December corn was able to hold support today despite sharply lower outside markets and lower soybeans.  This could be another product of spread-liquidation as buying soybeans and selling corn has been a large trade since the beginning of the year.  We briefly traded below the psychological $5.00 level on Friday but had less than a 10 cent range today.

Chart: December Corn   

After the day session closed the USDA released their Weekly Crop Progress worksheet as scheduled.  Corn is now projected to be 87% planted and 56% emerged!  This is well above the 5 year average pace for this time at 66% planted and 28% emerged.  The same goes for soybeans with a national planting pace of 46% (average 24%) and 16% emerged (average 5%).  Winter wheat crop condition did drop by 3% in the good-excellent categories but is still at 60%.

To receive a free trial of the EHedger research including hedge recommendations, please sign up using the link below.  Thanks and 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 5/11/12

May 11, 2012

Grains had a heavy selloff which can mainly be explained by liquidation.  Old crop July soybeans were sharply lower on the close settling at $14.06 (down 49 ¼ cents)!   November soybeans closed 37 ¾ cents lower at $13.21 ¼.  July corn closed 6 ½ cents lower at $5.81 and December closed 2 cents lower at $5.05 ¼.  December corn traded with a 4 in front of it for the first time since December 17th 2010!  July wheat dropped 4 ¼ cents to close at $5.97.

Liquidation seems to be the most obvious answer.  We had a bullish soybean report yesterday and yet July soybeans finished 72 ¼ cents lower on the week!  The key reversal from May 2nd has held and we settled below the 50 day moving average today (see chart).   

Chart: July Soybeans

July Soybeans

July corn closed 39 ¼ cents lower for the week as CIF basis is starting to come off its highs and we had a "bearish" USDA Supply and Demand report yesterday for old crop corn.  It looks as though all the grains are liquidating which could be the funds pulling out of the market.  This is especially a concern for soybeans given the amount of net longs the "managed money" is currently holding.  As of Tuesday they lowered their net long position by 23,561 contracts but are still holding a net 275,328 long contracts using futures and options! JP Morgan has lost $2 Billion in credit derivatives trading is adding to the fears that the funds may be in trouble.  JPM CEO Jamie Dimon even said the losses "could get worse" when talking about the recent error by JP Moran’s proprietary trading.  If this goes to a "risk off" situation we could easily see another washout in this mega long position the "funds" are currently holding and result in another sharp drop in price.

Monday we have crush, export inspections, and crop progress.  This summer is just getting started and we would not be surprised to see further choppiness next week.  If you would like to go over your positions again, please give us a call.  Have a great weekend!

USDA Report Comments:

The USDA report caught the market a little off guard after raising old crop corn carryout on the May report.  The average estimate for the 2011-12’ corn carryout was expected to be 749 million bu with a high guess of 801 from the analysts.  Instead the USDA raised the carryout to 851 million after lowering "Feed and Residual" demand by 50 million. 

The May Supply and Demand report is the first monthly report where we get to see the USDA’s new crop estimates (2012).  The USDA is estimating that the total ending corn carrout for the 2012-13’ marketing year to be 1.881 billion bu while the average analyst was calling for 1.714 billion (9.7% higher than the average guess).  Now there are a few that disagree with the USDA’s average corn yield of 166.  The USDA accounts for these numbers with the following statement:

Planted acres reported in the March 30, 2012, "Prospective Plantings."  For corn, harvested acres projected based on historical abandonment and derived demand for silage.  Projected corn yield based on the simple linear trend of the national average yield for 1990-2010 adjusted for 2012 planting progress.

Source: http://www.usda.gov/oce/commodity/wasde/latest.pdf

So basically the USDA accounted for the unseasonable planting pace.  Even if they dropped that a bushel to get to trendline yield we are still looking at a massive carryout for next year.  The real question to ask is: are we really going to use 1.125 billion bushels more than we did last year at these prices?  In our opinion this demand may come in if/after the price drops.  This of course is barring any weather concerns that could hinder production this summer.

On Thursday the Soybeans received a "bullish" reaction from the report but we were quickly overshadowed any enthusiasm with today’s liquidation trade.  The big surprise on the report was the new crop carryout estimate at 145 million bu (estimated 170).  To get this the USDA is using a 43.9 average yield and increasing exports by almost 200 million.  We have started off the new crop year with exceptionally high export sales.  We can add another 1.360 million MTS of new crop sales to the books after Thursday’s favorable export sales report.

The "bearish" corn and "bullish" soybean report has pushed the corn/soybean ratio to a new high of 2.68 to 1 and has backed off to 2.62 to 1 today.  The market has done all it can to encourage more soybean acres but we won’t get a definitive answer to exactly how many until the June acreage report.

November Soybeans to December Corn Price Ratio:

Nov Soybeans to Dec Corn

Total wheat production was slightly higher than the average analyst guess.  Old crop carryout was slightly lower than the average guess.  World carryout was reduced sharply after the USDA estimated a sharp increase in foreign feed usage.  The total "domestic feed" demand category went from 137.89 MMTs in April’s report to 147.64 MMTs in May’s report.  This brought ending world wheat carryout down to 197.03 MMTs (the estimate was 205.4).  Feed wheat has been a hot topic as it has traded at a discount to US corn for much of the year.  World corn ending stocks jumped to 127.56 MMTs (average guess 122) after corn feed usage dropped by 3.75 MMTs in large part from the switch to feed wheat around the world.  This large increase in feed wheat wasn’t expected due to the sharp difference in carryout from estimates. Since Thursday’s report the wheat has stayed supported against corn which could also be a sign of liquidation as the funds were "net short" wheat.

Going forward I expect new crop corn to continue finding resistance on rallies as long as weather remains favorable.  We like remaining with the current EHedger recommendations but we always encourage you to double check your positions in AMMO.  I have included a snapshot of today’s report in the table below.  To receive a free trial of the EHedger research including hedge recommendations, as well as a free trial of our farm management software AMMO, please sign up using the link below..  Have a great weekend!

www.ammoag.com/signup

USDA Estimates:

 

USDA U.S. Wheat Production
  Thursday 2012-13 Estimate Average Range 2011 Production  
All Wheat 2.245 2.196 2.054-2.282 1.999  
All Winter Wheat 1.694 1.634 1.499-1.707 1.494  
Hard Red Winter 1.032 0.99 0.880-1.068 0.780  
Soft Red Winter 0.428 0.413 0.307-0.454 0.458  
White Winter 0.233 0.231 0.214-0.267 0.256  
           
USDA U.S. Grain, Cotton Carryout
  Thursday 2012-13 Estimate 2012-13 Analyst Estimate Thursday 2011-12 Estimate 2011-12 Analyst Estimate April 2011-12 USDA
Soybeans 0.145 0.170 0.210 0.221 0.250
Corn 1.881 1.704 0.851 0.758 0.801
Wheat 0.735 0.805 0.768 0.781 0.793
Soyoil 2.225 n/a 2.565 n/a 2.290
Soymeal 300,000 n/a 300,000 n/a 300,000
Cotton 4.90 n/a 3.40 3.40 3.40
Rice 27.0 n/a 34.0 n/a 39.0
           
USDA World Carryover      
  Thursday 2011-12 Estimate April 2011-12 Estimate      
Wheat 197.0 206.3      
Corn 127.6 122.7      
Soybeans 53.2 55.5      
Soymeal 7.50 6.89      
           
USDA World Grain Production      
  Thursday 2011-12 Estimate April 2011-12 Estimate      
China Corn 191.8 191.8      
South Africa Corn 11.5 11.5      
Argentina Corn 21.5 21.5      
Brazil Corn 67.0 62.0      
Australia Wheat 29.5 29.5      
Argentina Wheat 14.5 14.5      
EU 27 Wheat 137.4 137.5      
Canada Wheat 25.3 25.3      
China Wheat 117.9 117.9      
Russia Wheat 56.2 56.2      
Ukraine Wheat 22.1 22.0      
Brazil Soybeans 65.0 66.0      
Argentina Soybeans 42.5 45.0      
China Soybeans 13.5 13.5      

 

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 5/10/12

May 10, 2012

 

The USDA report caught the market a little off guard after raising old crop corn carryout this morning.  The average estimate for the 2011-12’ corn carryout was expected to be 749 million bu with a high guess of 801 from the analysts.  Instead the USDA raised the carryout to 851 million after lowering "Feed and Residual" demand by 50 million.  Old crop corn was the downside leader today with July corn finishing 19 ¾ cents lower at $5.87 ½.  December corn dropped 9 ½ cents at a new low settle of $5.07 ¼. 

The May Supply and Demand report is the first monthly report where we get to see the USDA’s new crop estimates (2012).  The USDA is estimating that the total ending corn carrout for the 2012-13’ marketing year to be 1.881 billion bu while the average analyst was calling for 1.714 billion (9.7% higher than the average guess).  Now there are a few that disagree with the USDA’s average corn yield of 166.  The USDA accounts for these numbers with the following statement:

Planted acres reported in the March 30, 2012, "Prospective Plantings."  For corn, harvested acres projected based on historical abandonment and derived demand for silage.  Projected corn yield based on the simple linear trend of the national average yield for 1990-2010 adjusted for 2012 planting progress.

Source: http://www.usda.gov/oce/commodity/wasde/latest.pdf

So basically the USDA accounted for the unseasonable planting pace.  Even if they dropped that a bushel to get to trendline yield we are still looking at a massive carryout for next year.  The real question to ask is: are we really going to use 1.125 billion bushels more than we did last year at these prices?  In our opinion this demand may come in if/after the price drops.  This of course is barring any weather concerns that could hinder production this summer.

Soybeans received a "bullish" reaction from today’s report with a drop in old crop carryout to 210 million bu (estimated 220).  The bigger surprise was the new crop carryout estimate at 145 million bu (estimated 170).  To get this the USDA is using a 43.9 average yield and increasing exports by almost 200 million.  We have started off the new crop year with exceptionally high export sales.  We can add another 1.360 million MTS of new crop sales to the books after today’s favorable export sales report.

The "bearish" corn and "bullish" soybean report has pushed the corn/soybean ratio to a new high of 2.68 to 1 (see chart).  The market has done all it can to encourage more soybean acres but we won’t get a definitive answer to exactly how many until the June acreage report.

November Soybeans to December Corn Price Ratio:

Nov Soybeans to Dec Corn

Total wheat production was slightly higher than the average analyst guess.  Old crop carryout was slightly lower than the average guess.  World carryout was reduced sharply after the USDA estimated a sharp increase in foreign feed usage.  The total "domestic feed" demand category went from 137.89 MMTs in April’s report to 147.64 MMTs in May’s report.  This brought ending world wheat carryout down to 197.03 MMTs (the estimate was 205.4).  Feed wheat has been a hot topic as it has traded at a discount to US corn for much of the year.  World corn ending stocks jumped to 127.56 MMTs (average guess 122) after corn feed usage dropped by 3.75 MMTs in large part from the switch to feed wheat around the world.  This large increase in feed wheat wasn’t expected due to the sharp difference in carryout from estimates. Wheat stayed supported throughout the session as it "untied" itself to corn.

Going forward I expect new crop corn to continue finding resistance on rallies as long as weather remains favorable.  We like remaining with the current EHedger recommendations but we always encourage you to double check your positions in AMMO.  I have included a snapshot of today’s report in the table below.  To receive a free trial of the EHedger research including hedge recommendations, as well as a free trial of our farm management software AMMO, please sign up using the link below. Have a great Friday!

www.ammoag.com/signup

 

USDA Estimates:

 

 

USDA U.S. Grain, Cotton Carryout
  Thursday 2012-13 Estimate 2012-13 Analyst Estimate Thursday 2011-12 Estimate 2011-12 Analyst Estimate April 2011-12 USDA
Soybeans 0.145 0.170 0.210 0.221 0.250
Corn 1.881 1.704 0.851 0.758 0.801
Wheat 0.735 0.805 0.768 0.781 0.793
Soyoil 2.225 n/a 2.565 n/a 2.290
Soymeal 300,000 n/a 300,000 n/a 300,000
Cotton 4.90 n/a 3.40 3.40 3.40
Rice 27.0 n/a 34.0 n/a 39.0
           
  USDA World Carryover    
    Thursday 2011-12 Estimate April 2011-12 Estimate    
  Wheat 197.0 206.3    
  Corn 127.6 122.7    
  Soybeans 53.2 55.5    
  Soymeal 7.50 6.89    

 

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 5/9/12

May 09, 2012

Grains sold off today ahead of the USDA report tomorrow morning.  July corn lead the way closing 15 ¾ cents lower at $6.07 ¼.  July soybeans closed 8 cents lower at $14.30 ¼, and July wheat 15 cents lower at $6.00.

The day session started with a massive selloff in July soybeans.  The July contract traded down to a low of $14.13 ¼ (down 27 cents) within the first minute of trading!  Outside markets were extremely weak at the time and the technical selloff was enough to get more liquidation.  The bean market quickly bounced back and corn turned out to be the weakest product of the day.  December corn tied the low of the year at $5.15 (for the 3rd time now).  This was the first time in 8 days that we did not have a morning sale announcement by the USDA.

Soybeans are getting what looks to be fund liquidation ahead of a major USDA report as well as on technical sell signals.  I have pointed out in the last couple of reports the key reversal in July soybeans as well as the close below the trendline support in November soybeans.  Any major surprises on the report can obviously change the course of the trend again, but for now it still looks technically negative.  I have included the report estimates in the table below.  This will be the first USDA estimate for "new crop" supply and demand.  This will also be the last major USDA report we will be able to see while the market is still closed as the new 22-hour trading schedule will begin on Monday, May 21st.  The difference in opinions seems rather large on this report so we could see some major swings tomorrow.  For now we like staying with the current EHedger recommendations.  To receive a free trial of the EHedger research including hedge recommendations, please sign up using the link below. Have a great week!

Chart: July Soybeans

July Beans

Chart: November Soybeans

Nov Beans

USDA Estimates:

USDA 2011/12 U.S. Grain and Soybean Ending Stocks
  Average of analysts' estimates Range of analysts' estimates USDA April 2011/12 end-stocks estimates
Wheat 0.778 0.756-0.800 0.793
Corn 0.749 0.660-0.801 0.801
Soybeans 0.214 0.165-0.250 0.250
       
USDA 2011/12 Global Grain and Soybean Ending Stocks
  Average of analysts' estimates Range of analysts' estimates USDA April 2011/12 end-stocks estimates
Wheat 205.402 204.000-206.300 206.270
Corn 122.036 119.800-130.000 122.710
Soybeans 53.304 50.550-55.000 55.520
       
USDA 2012/13 U.S. Grain and Soybean Ending Stocks
  Average of analysts' estimates Range of analysts' estimates  
Wheat 0.782 0.609-0.916  
Corn 1.714 1.209-2.072  
Soybeans 0.164 0.087-0.250  

 

 

 

 

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 5/7/2012

May 07, 2012

Grains started the week mixed with wheat finishing higher while soybeans stayed lower throughout the trading session.  July soybeans closed 12 ½ cents lower at $14.65 ¾, July corn ¼ cent lower at $6.20, and July wheat 2 ½ cents higher at $6.12.

Outside markets were a major factor causing the early weakness in grains. Crude oil continued its selloff from last week as Sunday’s overnight low was over $10 lower than Thursday’s opening price!  The French and Greek election results over the weekend also put a negative spin on our markets as the Euro Currency fell and the US Dollar rallied.  The USDA announced another sale of US old crop Soybeans to "unknown destinations" this morning but it didn’t seem to give the market much support.  This dismal trade could also have been attributed to poor soybean export inspections this morning. 

Export inspections for soybeans were 9.992 mln bu when they were expected to be 16.0.  Corn inspections were 29.324 mln bu (expected 29.5), and wheat export inspections were 24.072 (expected 21.5).

Crop progress will not likely be viewed as bullish either with plantings still way ahead of schedule.  Corn is now 71% planted which compares to the 5-year average at this time of 47% planted. Corn is 32% emerged (13% on average).  Soybeans are 24% planted compared to 11% on average.  Winter wheat is 63% good to excellent and 63% headed (wheat is typically 34% headed at this time of year.) With the wheat crop so far ahead of schedule we could easily see a large amount of double crop soybean acres this year as timing and price make it possible.  The point is we could see many of these "non-traditional" double-crop acres plant soybeans as weather hasn’t been as restrictive.

A few technical reasons to be "bearish" soybeans:  The July soybean key reversal is still holding true and the November soybeans have settled below their trendline for the first time since the rally began back in December.

Chart: July Soybeans

Chart: November Soybeans

For now we like staying with the current EHedger recommendations.  To receive a free trial of the EHedger research including hedge recommendations, please sign up using the link below. 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 5/4/2012

May 04, 2012

Old crop corn and soybean contracts finished higher on heavy bullspreading.  July corn closed 5 ¾ cents higher at $6.20 ¼, July soybeans 4 ¾ cents higher at $14.78 ¼, and July wheat down 6 cents at $6.09 ½.

Before the day session even began we had some unfavorable economic data that sent the outside markets into a downward spiral.  Crude oil traded as much as $5 lower on the day and the Dow Jones futures over 180 points lower.  This helped prompt a selloff in the grains.  May corn stayed supported during this break and ended up leading the other contracts off their lows.  At one point May corn was trading 49 cents over July!  The CIF corn basis jumped sharply today and was a major part of this corn rally.  July corn got to an even $1 premium to December during the trading session and July – Nov soybeans traded back to $1.13 ½ premium.  Even with the strength in the old crop today, it didn’t stop December corn from making new lows for the year at $5.15.  The favorable weather has kept sell pressure on the new crop corn even as export sales pick up.  This morning the USDA announced another 240,000 MTs of new crop corn to Mexico and 116,000 to South Korea.  They also announced 120,000 MTs of new crop soybeans to "unknown".

Informa increased their total acreage estimates for corn and soybeans combined.  They estimated soybean acreage at 75.8 million and corn at 96.12 million.  These numbers would typically be viewed as "bearish" but the market didn’t seem to be too affected by them.  The trade seems set on keeping old crop contracts supported to new crop contracts.  Looking at the "fund" activity on the weekly COT report we can see the "managed money" reducing their net long corn position (again) and increasing their net long soybean position (again).  Wheat continues to get sell pressure on expectations of strong production in the US but the "managed money" did reduce their net short positions.

Lastly I just wanted re-mention the changes that the CME will be making to the grain trading hours.  They will be expanding the CBOT electronic trading hours to 5pm-4pm (Sunday to Monday) and 6pm-4pm (Monday to Friday).  This will take effect May 21st, 2012.

We will continue to watch export sales for direction as well as any changes to the forecast.  For now we like staying with the current EHedger recommendations.  To receive a free trial of the EHedger research including hedge recommendations, please sign up using the link below. Have a great weekend!!

 

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 5/2/12

May 02, 2012

The grains had a sharp selloff today as wheat led the way lower.  July wheat dropped 28 ½ cents today to close at $6.14 ½.  Strong yield potential is expected after reports were flowing in today of favorable yield tests on the KC wheat tour.  Corn followed wheat down closing 17 ½ cents lower at $6.11 ½.  July soybeans started out strong reaching the $15.12 ½ for a high but came all the way down to settle at $14.85.  This settlement in July happens to be a technical key reversal, which could spur more downside momentum for soybeans (see chart).

Chart: July Soybeans

July Soybeans

Tomorrow morning we will have the export sales out at 7:30 am.  The ranges of analyst estimates are as follows:

Corn                                    3,000,000 – 4,000,000 MTs

Soybeans                            1,000,000 – 1,500,000 MTs

Wheat                                 600,000 – 850,000 MTs

Soymeal                               200,000 – 400,000 MTs

Soyoil                                  5,000 – 15,000 MTs

Source: Reuters

We will have the actual results in the morning letter.

December corn is about 8 cents away from making new lows for 2012 (see chart).  As long as weather continues to look favorable across the Midwest we could see this downward trend continue. Making sure you have enough downside coverage is always important but with such a strong start to the growing year it never hurts to double check your position in AMMO.

Chart: December Corn

Dec Corn

Last I wanted to mention the upcoming changes to the grain trading hours.  The CME announced that they would be expanding the trading timeframe for CBOT grains to allow 22 hours per day (6pm to 4pm).  This will take effect on May 14th and will have a drastic impact on trading as it will basically be a 24 hour market.  The time when this change will be most noticed is on report days when grains are still trading at 7:30 am when the USDA typically releases its major crop reports.  For now we like staying with the current EHedger recommendations.  To receive a free trial of the EHedger research including hedge recommendations, please sign up using the link below. Thanks and have a great week!

Chart: November Soybeans

Nov Soybeans

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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