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November 2013 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.

Soy Sales to China Support Market

Nov 22, 2013

Overnight grain markets were slightly higher for corn, higher for soybeans, and higher for wheat.

This morning the USDA announced the private sale of 115,000MT of soybeans to China for the 2013-2014 marketing year.

Today is the last trading day for December grain options. Please contact your broker to re-position any strategies involving these contracts.

There will be a cattle on feed report this afternoon at 2pm CST. On feed as of November 1st is estimated to be 94.2%, placed in October is estimated to be 110%, and marketed in October is estimated to be 101.5%.

This week’s ethanol data showed production was down 23,000 barrels per day to 904,000 barrels. Ethanol stocks were down 70,000 barrels to 15.08 million barrels.

Last Friday the EPA released a proposed cut in the ethanol mandate for all bio fuels to 15.2 billion gallons. This is 16% less than what was agreed to in 2007. The EPA also proposed cutting the blending of advanced bio fuels to 2-2.5 billion gallons which is below the 3.75 billion gallons under the same 2007 law.

The USDA reported weekly egg sets were up 2% from the same week a year ago while broiler placements came in up 3% from last year.

It was announced this week that due to budget cuts there will no longer be cattle on feed reports starting in July 2014.

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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.


 

Sub $4 Corn Next Week?

Nov 18, 2013

Corn prices fell to new lows for the move on Monday from ongoing supply pressure and stop hunting.  We talked last week about the large amount of put option open interest still out there in the December contract.  As the futures get below some of the key strike levels, the option writers tend to "cover" those puts by selling futures.  This process is self-fulfilling and can lead to further weakness.  To see a full list of the December option open interest from $4.00 - $4.50, see the table below.

Option Open Interest                                          

Meanwhile harvest is wrapping up quickly as we are now 91% complete for corn and 95% for soybeans.  Winter wheat is 89% emerged and the conditions are solid at 63% good-excellent.  On Friday the EPA proposed its 2014 bio-fuels mandate.  The move would lower the ethanol mandate to near 13.0 billion gallons in 2014, well below what the original mandate called for and approximately 800 million gallons less than in 2013.  This proposal was leaked during the government shutdown last month and should have already been priced into the market.  However, the recent weakness is noticeable and the EPA’s announcement could have had a negative psychological effect on an already fragile market.  A while back we talked about the contract low of $3.98 ¼ being a heavy target for December corn before contract expiration.  This is still a target and we are well within range of that with less than 2 weeks until First Notice Day.

December 2013

 December 2013 Corn

For more information about EHedger and our services, please sign up for a trial.  Have a great week!

EHedger  |  866.433.4371
 
Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders. Click Here to subscribe to EHedger's Grain Commentary that comes out twice daily.
 

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.


 

Beans Strong on Short-Covering

Nov 07, 2013

It was a relatively quiet trading session for corn and wheat ahead of Friday’s WASDE report.  Soybeans however found the first meaningful day of support in two weeks, probably from short covering ahead of the report release.

Even though soybeans were sharply higher, soybean oil was sharply lower.  This was a direct result of the proposed FDA banning of all Trans Fat in processed foods today.  This could potentially impact up to 16% of the domestic oil consumption.  Of course meal found support from this very same news as export demand has remained strong and this puts could put extra stress on crush profitability.

Weekly export sales were released this morning and are as follows:

EXPORT SALE ESTIMATES:

                                            Estimated Range                                  Actual

Corn                                   1.0 – 1.3 million MT                         1.718 million MT

Soybeans                            0.8 – 1.1 million MT                         1.018 million MT

Wheat                                350k – 500k MT                                0.416 million MT

 

Corn sales were well above expectations but the market still couldn’t respond positively.  In our opinion this is because even if the final export demand increases by 200-300 million bushels, it still leaves us with a hefty carryout.  On the September WASDE report, the USDA was estimating corn exports at 1.225 billion bushels.  The total export sales to date accumulate to 71.5% of that estimate which is above the 5 year average of 46.4%.  The USDA will likely raise that estimate slightly just to "keep pace" with the extra supply.  The pace of soybean sales is even more dramatic.  They have already contracted 89.2% of the current USDA estimate for 2013, this compares to the 5 year average at 59.6%.  Either China will end up slowing down dramatically as they did last year or our exports will come in higher.  

USDA REPORT ESTIMATES:

The report estimates have been flowing in and as an average they are well below Informa’s estimates.  In fact they are not much higher than what the USDA was estimating in September, even though field data and crop ratings have improved dramatically.  In our opinion the analyst guesses are too low which increases the chance of seeing a bearish market reaction.

The average corn yield estimate is 158.933 and final production of 14.003 billion.  The September report was 155.3 and final production of 13.843 billion.  These yield and production estimates indicate a corn acreage loss of just over one million.  We have to remember that the November report is historically very accurate.  Whatever the report says will have a big impact on price, especially between now and January when the next stocks report is released.

Soybean estimates are also running below Informa’s on average.  The poll has final soybean yield at 42.407 with a final production of 3.221 billion.  This also indicates an acreage loss this time for 445,000.

Between the corn and soybean estimates, there are a lot of moving parts to achieve these "relatively" low final production estimates stated above.  The weekly USDA Crop Progress reports have already showed a significant increase in crop ratings during this same timeframe.  We are bearish corn for two reasons, abundant supply and curbed demand from three years of high prices.  We think demand is overstated for corn already and will have trouble achieving the higher feed without sustaining lower levels over a period of time.  Soybeans prices will still depend heavily on South American production, but the high acres and good start down there have already resulted in a drop in Chicago prices.

The number one goal is to protect farm profitability before the report.  We use the AgYield software for looking at this for each individual farmer.  Try the software today at agyield.com.  Have a great weekend!

EHedger  |  866.433.4371
 
Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders. Click Here to subscribe to EHedger's Grain Commentary that comes out twice daily.
 

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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