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March 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.

Bearish Stocks Report

Mar 28, 2013

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The stocks report was very bearish.  Grains and oilseeds closed sharply lower with May corn closing lock-limit down.

The short story is that the USDA released their March 1st stocks report and there were 400 million more corn bushels in the count than what the market had been expecting.  To make matters worse for the bulls, there were an extra 41 million bushels of soybeans and an extra 60 million bushels of wheat from the market expectations as well.  These are substantial increases from expected levels which have created a lot of controversy over the count.  The fact is whatever people may say about the numbers, they are still what the market has to trade off of.  May corn was synthetically trading 60 cents lower at the close which means Sunday night we may see corn open 20 cents lower near $6.75.  Don’t forget, trading limits increase to 60 cents a bushel.

May Corn SyntheticsMay Corn Synthetics

Acres were in line with expectations for corn at 97.28 million.  Soybean acres were less than expected at 77.12 million and wheat acres were slightly higher than expected at 56.44 million.  These numbers were a little bit lower than we would have guessed and think there is room for an increase before the July report.  Take Illinois for example, their total corn and soybean acreage was down 250,000 acres from 2012, a little low by our estimates.

The next obstacle to overcome is the low volume Easter Sunday night session.  Markets will be closed for Good Friday and reopen Sunday night with expanded corn limits.  That type of a low liquidity environment may be a recipe for extra large price swings.  We will have more to report on Monday morning I am sure.  For now we still like our current levels for hedge recommendations, please feel free to sign up to receive our letter full time using the signup link below, including hedge recommendations. Have a great Easter holiday!

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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.

Turn-Around Tuesday

Mar 26, 2013

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It was a true turn-around-Tuesday with corn closing lower while soybeans and wheat closed higher.  The market is awaiting Thursday’s reports.

Kansas City wheat held the best support Tuesday closing up 9 ½ cents.  Yesterday’s crop ratings were 29% good-excellent for Kansas wheat, 19% in Texas, and 26% in Oklahoma.  The "managed money" is net short Chicago wheat but holds a relatively even net position in KC wheat. Still this could be a result of short covering ahead of the report.  Either way we don’t expect anything substantial to happen before Thursday.

The CME announced that they are raising the margin requirement on corn futures.  The requirement is now $2700 initial/spec and $2000 maintenance/hedge which is up from $2000/$1500 respectively.  This change will be effective Wednesday.

The average guess for corn stocks is 5.013, 0.935 for soybeans, and 1.177 for wheat.  Corn acres are expected to be 97.252 million while soybean acres are estimated to be 78.40 million.  We don’t foresee any major surprises from these levels except maybe some additional soybean acres (0.5-1.0 million).  Corn volatility has been steadily creeping higher but far less than I would have expected prior to this report.  The short-dated new crop options are a decent way to get hedged without spending too much in time premium. The markets will be closed for Good Friday but night trade will resume at its normal time on Easter Sunday.

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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.

Corn Still Benefitting From Fund Purchasing

Mar 25, 2013

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It was another choppy trading session with corn higher while beans and wheat closed lower.  Funds continue to buy corn while the strong dollar held other dollar-denominated markets in check.

All eyes are still focused on Thursday’s USDA reports.  The average guess for corn stocks is 4.995, 0.948 for soybeans, and 1.165 for wheat.  Corn acres are expected to be 97.3 million while soybean acres are estimated to be 78.4 million.  We don’t foresee any major surprises from these levels except maybe some additional soybean acres (0.5-1.0 million). 

Fund purchasing still seems to be the driving factor for corn.  December corn settled above its 50 day moving average for the first time since December 10th!  This could pave the way for a move back to the $5.85 - $5.95 range.

December 2013 CornDecember 2013 Corn

Cold weather headlines continue to tout wheat damage but wheat has been one of the weakest products on the board.  I think this is just more evidence that the market is floating on position changes from the large traders and hedge funds.  Our fundamental outlook has not changed.  For now we will just have to wait on the report and try not to get sidetracked from the choppy market action in-between.

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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.

Fresh Investment Flow Helps Corn This Week

Mar 22, 2013

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Corn and soybeans closed lower while wheat held support.  For the week May corn finished 9 ¼ cents higher, soybeans 14 ½ cents higher, and wheat 6 ¾ cents higher.  USDA report will be on Thursday the 28th, no change to our current market outlook.

We wrapped up the volatile week with neutral Informa estimates and a slightly bullish Cattle on Feed report (for cattle not corn).  Informa is projecting corn acres at 97.8 million, soybeans at 78.5 million, wheat at 56.1 million, and cotton at 10.4 million.  The combined corn and soybean acre estimate is 2.3 million acres more than the current USDA estimate which we believe is in-line with where it should be.

Cattle-on-Feed was released at 2:00pm today and showed far less placed than expected.  The market was expecting 91% and the report showed 86%.  Typically this situation would be negative for corn price but over the last 3 weeks it has been more about large players getting a position in place before the report than it has been about demand changes.  Corn open interest has jumped substantially in the last 7 trading days.  The COT report shows that the "managed money" has increased their net long position by 57,864 contracts of corn and that’s only through Tuesday! All the while we have seen a lot of feed demand switch to wheat and dismal corn exports.  We were just in a long term negative trend for corn and if we don’t see a supportive corn stocks number to keep the rally going I would be worried about further setbacks.

The average stocks estimate for corn is 4.995 compared to 6.023 last year, wheat 1.165 compared to 1.119 last year, and soybeans 0.948 compared to 1.374 last year.

No major changes to our market opinion which is wide-rangebound moves in old crop corn and soybeans and a long-term negative bias for new crop pricing based on overcompensated uncertainty risk premium.

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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 3/21/13

Mar 21, 2013

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Soybeans bounced sharply off their recent lows while corn and soybeans remained flat-lower. Soybeans were oversold relative to corn and soybeans and had a large technical rebound. Weekly Export Sales were poor for corn, soybeans, and wheat but the oil and meal sales were on the high end of expectations.

Only a week away from one of the most important report days of the year and we continue to see massive position changes.  Corn open interest has risen substantially over the past 7 days with another 14,197 contracts added yesterday.  The funds have been moving money back into corn which has helped corn reach levels it hasn’t been to in over 45 days.

May 2013 Corn

May 2013 Corn

Informa will release their acreage estimates tomorrow morning so look for those numbers to influence market action.  No major changes to our market opinion which is wide-rangebound moves in old crop corn and soybeans and a long-term negative bias for new crop pricing based on overcompensated uncertainty risk premium.

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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 3/20/13

Mar 20, 2013

 

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The funds continue to load up on corn again which is driving the May contract higher.  Corn open interest was up 23,052 contracts this morning!  Wheat and soybeans also closed higher.     

The funds are still clearly supporting the corn market but we did see a favorable ethanol report today with declining inventory and increased production.   The market is still waiting for the highly anticipated March 28th reports for direction.  Tomorrow we have the weekly sales data at 7:30am.  Estimates are as follows:

 

Corn:                                  300,000 – 600,000

Soybeans:                           600,000 – 800,000

Wheat:                               800,000 – 1,100,000

Source: Dow Jones Poll

 

Next target for May corn at $7.47 ½

May 2013 CornMay 2013 Corn

 

Next target for December corn at $5.69 ¾ (that’s the 50 day moving average)

December 2013 CornDecember 2013 Corn

 

We want to remain hedged but still allow for plenty of upside should any weather problems arise.  Please contact us with any questions or to review your current marketing plan in our proprietary farm management marketing software - AgYield.

 

 

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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 3/19/13

Mar 19, 2013

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May corn continued to climb on fresh fund purchasing Tuesday.  Corn and wheat are still trading in tandem while soybeans trend lower on continued technical action and South American soybean cancellation rumors.

Corn open interest is still rising substantially and is a clear sign that money is entering that market.  Total open corn contracts of corn were up another 9,329, which totals 44,134 since Wednesday of last week! It is pretty clear from the intra-commodity swings that they have been buying corn and selling soybeans.  The "managed money" has held a fairly massive long position in soybeans for a while now.  With harvest ongoing in South America US soybeans may have a hard time finding support without more demand based stories.

 

Next target for May corn at $7.47 ½

 

May 2013 CornMay 2013 Corn

 

Next target for December corn at $5.69 ¾ (that’s the 50 day moving average)

 

December 2013 CornDecember 2013 Corn

 

We want to remain hedged but still allow for plenty of upside should any weather problems arise.  Please contact us with any questions or to review your current marketing plan in our proprietary farm management marketing software, AgYield.

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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 3/15/13

Mar 15, 2013

 

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A bearish NOPA Crush report caused another price break for old crop soybeans.  Corn and wheat settled relatively unchanged.  No change to the current market outlook, appears old crop pricing will remain range-bound for now.

May soybeans settled 9 ½ cents lower at $14.26 while November soybeans finished 1 ¼ cents higher.  The heavy bear-spreading was a direct result of the NOPA crush which came in 5 million bushels less than the average guess.  Feb crush was at 136.3 million and oil stocks were 2.79 bln lbs.  For the fact that the "managed money" is holding sizable net long soybean/soymeal positions and very sizable net short soyoil positions, it made sense were we closed today –sharply lower soybeans, lower meal, and sharply higher soyoil.  We have seen this same action in wheat, they are massively short and the short covering rally has helped support a small rebound.

 

Corn and wheat are still trading near par which in my eyes will continue to support wheat demand for feed.  Interestingly wheat open interest went down on short covering yesterday while corn had a 23,000+ contract spike, mostly going into the May and July contracts.  We have seen it before when money starts flowing in it can support certain markets regardless of what we believe in opposing fundamentals.  While the wheat feeding story may ultimately result in a higher corn carryout on September first, we want to watch fund position changes.  For now we do expect it to hold its 2013 range with first upside resistance just above where we are now at the 100 and 200 day moving averages of $7.21 ½ and $7.23.

 

May 2013 Corn

May 2013 Corn

 

Our long term outlook remains bearish for new crop pricing and we want to use these "dead cat bounces" to make those additional hedges where necessary.  December corn basically settled on its trendline resistance.

 

December 2013 CornDecember 2013 Corn

 

We want to remain hedged but still allow for plenty of upside should any weather problems arise.  Please contact us with any questions or to review your current marketing plan in our proprietary farm management marketing software - AgYield. Have a happy St. Patrick’s Day!

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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 3/14/13

Mar 14, 2013

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May wheat is now back to a premium of 8 ¼ cents to May corn.  Large amounts of wheat contracted for feed have helped this spread even out again.  Weekly export sales totaled 888,500 MTs for 2012 wheat!  Also the pendulum is swinging the other direction as the massive short position held by the "managed money" is being liquidated.  Basically the short covering has been a big part of the rally as buy stops were triggered today.  The corn-wheat price ratio should continue to move back in favor of wheat even if this latest move is from position liquidation (my opinion). Wheat has its own tight balance sheet and there are a few extra considerations for higher corn carryout now that less corn will be fed by comparable grain replacement as well higher imports.  We could see a situation similar to last year where carryout estimates increase as we approach September 1st.  Again, let’s get through March 28th when we can see the quarterly stocks report and gauge were we are. There are a lot of people that will argue the "corn just isn’t out there". The recent demand changes were made because of the "known" supply tightness and unbelievably strong corn basis. The recent WASDE estimates will likely have to change to account for the extra rationing.

 

Our long term outlook remains bearish for new crop pricing and we want to use these "dead cat bounces" to make those additional hedges where necessary.  December corn is very close to its downtrend resistance.

 

December 2013 CornDecember 2013 Corn

 

The corn-to-soybean ratio has traded lower for 5 trading sessions in a row.  This spread is back to 2.25 to 1, which is adequately priced in our opinion. It will be an important barometer to watch for the next 30 days.

 

Chart: 2013 Soybeans / 2013 Corn2013 Soybeans/2013 Corn

 

We want to remain hedged but still allow for plenty of upside should any weather problems arise.  Please contact us with any questions or to review your current marketing plan in our proprietary farm management marketing software - AgYield.

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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 3/13/13

Mar 13, 2013

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Old crop wheat gained on corn and soybeans Wednesday in what appears to be a liquidation day.  Looking at the Commitment of Traders report from last Friday, the managed money is net short 46,286 contracts of Chicago Wheat, net long 62,864 contracts of Corn, and net long 128,286 contracts of Soybeans.  Naturally the heavy bearspreading of soybeans and corn in combination with the bullspreading of wheat can be associated with fund liquidation knowing where they currently stand position wise.

 

Spring CIF basis levels have been falling for corn and soybeans and the prospect of China holding out for Brazilian beans has left many bulls leery to hold/add to positions.  NOPA will release their domestic crush estimates on Friday which the market is looking for about 140 – 143 million bushels.  Weekly Export Sales will be released Thursday at 7:30 am.  Estimates are as follows:

 

Corn                   200,000 – 500,000 MTs

Soybeans            700,000 – 1,000,000 MTs

Wheat                 200,000 – 500,000 MTs

 

Wednesday’s headlines did not provide a whole lot of fresh information for grain direction.  We did see the announcement of 114,300 MTs of old crop Sorghum to "unkown".  Obviously end users are looking for alternatives to corn.  Also the Weekly EIA report showed ethanol production down 8000 bbl to 797,000 bbl per day.  The ethanol stocks were also lower by 0.7 mln bbl.  There were rumors floating that Brazil would be eliminating a tax credit for soyoil which would potentially be negative for price action.

 

The corn-to-soybean ratio is still correcting from its massive rally this winter when soybeans gained sharply to corn.  The new crop spread is back to 2.27 to 1, just below the 20 day moving average.  This spread will be important to watch for the next 30 days.

 

Chart: 2013 Soybeans / 2013 Corn2013 Soybeans / 2013 Corn

 

Our long term outlook remains negative for the new crops.  We want to remain hedged but still allow for plenty of upside should any weather problems arise.  Please contact us with any questions or to review your current marketing plan in our proprietary farm management marketing software - AgYield.

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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 3/11/13

Mar 11, 2013

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Front month corn and soybeans closed higher to start the week following Friday’s WASDE report and more concerns over South American logistical problems.

May corn closed up 7 ¾ cents at $7.11 ¼ which is the highest it has settled in over a month.  The next resistance levels come at $7.1925 and $7.2250 which is the 200 and 100 day moving averages (respectively).

May Corn

May Corn

May soybean’s settlement is also near the top end of the range at $14.79 ½.  The next resistance point is at $14.97.

May Soybeans

May Soybean Chart

Fundamentally not much changed over the weekend.  The USDA reported slightly higher export inspections for corn and wheat on this morning’s report but soybeans were under estimates.  Nearby CIF basis was a few cents higher for soybeans and near unchanged for corn.  We are focusing on wheat feeding and protection for new crop pricing. How much wheat is being fed that could ultimately help corn carryout? May wheat is 11 ¼ cents under May corn and the incentive is certainly there.  We are also long term bearish new crop prices and want to sustainably protect our downside price-risk as we get past the acreage report and spring planting.  We still have the large South American production that may hold our old crop prices range-bound.

MARCH USDA REPORT COMMENTS

The Supply and Demand report didn’t provide any monumental changes.  Although corn carryout was left untouched at 632 million bushels it was still slightly less than the average analyst estimate of 650 million which helped support the front month contracts.  They reduced corn exports by 75 million bushels, raised imports by 25 million bushels and raised feed use by 100 million.  Wheat carryout was higher than expected at 716 million after the USDA lowered export demand by 25 million.  Soybean carryout was left unchanged in the US at 125 million bushels.

The USDA made minimal changes to their South American projections as well.  They have Argentine soybean production at 51.5 (down 1.5) and Argentine corn production at 26.5 (down 0.5).  Brazilian bean production was estimated at 83.5 (unchanged) and their corn production was 72.5 (unchanged).  The main divergence from market expectations was that the USDA was more conservative on lowering Argentine production than the private estimates continue to roll in at.

The bottom line is this report wasn’t a major game-changer for grains but we do have some major reports on the horizon that might be. On Thursday, March 28th we will have the Quarterly Stocks Report as well as the Planting Intensions report.  The corn-to-soybean ratio has been slowly trending higher since the beginning of the year which could mean soybeans get more acres than early estimates were calling for.  On Friday and Monday new crop corn outpaced new crop soybeans which made sense since the price-ratio has rallied sharply since the beginning of December and was probably "due" for a market correction.

Corn-Soybean Ratio 2013

Corn-Soybean Ratio 2013

Please contact us with any questions or to review your current marketing plan in our proprietary farm management marketing software - AgYield.

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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 3/8/13

Mar 08, 2013

 

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March corn closed sharply higher Friday after the USDA report left corn carryout unchanged from the Feb report.  March beans closed slightly lower and March wheat slightly higher.

The Supply and Demand report didn’t provide any monumental changes.  Although corn carryout was left untouched at 632 million bushels it was still slightly less than the average analyst estimate of 650 million which helped support the front month contracts.  They reduced corn exports by 75 million bushels, raised imports by 25 million bushels and raised feed use by 100 million.  Wheat carryout was higher than expected at 716 million after the USDA lowered export demand by 25 million.  Soybean carryout was left unchanged in the US at 125 million bushels.

The USDA made minimal changes to their South American projections as well.  They have Argentine soybean production at 51.5 (down 1.5) and Argentine corn production at 26.5 (down 0.5).  Brazilian bean production was estimated at 83.5 (unchanged) and their corn production was 72.5 (unchanged).  The main divergence from market expectations was that the USDA was more conservative on lowering Argentine production than the private estimates continue to roll in at.

The bottom line is this report wasn’t a major game-changer for grains but we do have some major reports on the horizon that might be. On Thursday, March 28th we will have the Quarterly Stocks Report as well as the Planting Intensions report.  The corn-to-soybean ratio has been slowly trending higher since the beginning of the year which could mean soybeans get more acres than early estimates were calling for.  Today we had a major shift back in favor of corn planting with December corn closing 5 ¼ cents higher and November soybeans 9 ½ cents lower.

Corn-Soybean Ratio 2013Corn-Soybean Ratio 2013

We bumped up our hedge recommendations yesterday with the Short-Dated New Crop options for corn and soybeans.  We are still long term bearish (new crop) due to the large South American crop expected as well as the potential for large 2013 US acreage.  Please contact us with any questions or to review your current marketing plan in our proprietary farm management marketing software - AgYield.

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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 3/6/13

Mar 06, 2013

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Grains closed sharply lower on Wednesday with old crop wheat leading the way.  The stronger US dollar and a better US forecast continue to weigh on wheat futures.  There was also talk that Ukraine may lift their wheat ban soon which would be another bearish factor for US prices.

 

Although the old crop corn market is still tight it is trading at a premium to Chicago wheat which puts it in direct competition for feeding.  This may continue to tie corn to the price of wheat for the near future.

 

Soybeans held the most support today even though they settled off the highs.  The strong export sales and concerns over logistical problems in Brazil are still the main sources of strength.  We are getting to a very tight point in our balance sheets and further sales could be exponentially supportive.  Interior basis levels are very strong for US Soybeans with on farm storage estimates running low.  This is a direct result of the strong inverse-carry incentive the markets have been giving producers to sell beans throughout the year. South American production is coming online and our soy exports sales should drop off shortly.

 

The decline in new crop pricing has been highly influenced by weather and time. A more favorable forecast in the US is reducing the uncertainty. As time goes on we will have the large South American production to compete with which has also caused some liquidation by the "long-only" money.  We still favor selling new crop corn and soybeans on rallies.

 

The CME Group announced that they would reduce grain trading hours pending CFTC's approval. The new hours will be:

Sunday to Friday, electronic trading from 7:00 p.m. to 7:45 a.m. CT

Monday to Friday, break in electronic trading from 7:45 a.m. to 8:30 a.m. CT

Monday to Friday, floor and CME Globex trading from 8:30 a.m. to 1:15 p.m.

 

For now we remain with our current outlook which is range-bound for old crop corn and soybeans and a bearish long term trend for new crop.  Please contact us with any questions or to review your current marketing plan through farm marketing management software - AgYield.

 

EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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 3/1/13

Mar 01, 2013

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Grains and oilseeds closed mixed Friday on medium volume. May soybeans closed 8 ¾ cents lower at $14.43 ½, May corn 5 cents higher at $7.08 ½, and May wheat up 6 cents at $7.20 ½.

Soybeans were unable to carry yesterday’s strength especially with weaker outside markets this morning from the Sequester fears.  Equities were able to rebound before the day’s close but energy prices stayed weak.

Informa released their South American production estimates at 10:30 but came in as expected.  The USDA announced the sale of another couple of cargoes of new crop soybeans to China this morning.  Otherwise there weren’t any major headlines to affect pricing today.

Next week we have the March WASDE report on Friday the 8th.  The planting intentions report will be on March 28th, which is one day earlier than normal due to Good Friday.  This year’s crop insurance prices are very similar to last year with the corn at $5.65 and soybeans at $12.87.  That puts the soybean-corn ratio at 2.2779 for 2013 compared to 2.2095 last year.  Now that we have guaranteed revenue known for US producers it may put downside pressure on new crop prices as we get through planting barring any weather problems.

Old crop products are in a very tight supply situation and may be the sole reason for prices to stay supported near-term.  China has been a very aggressive buyer of US soybeans and with logistical concerns out of Brazil the situation could easily produce a lot of price volatility in the coming months.  At this point in the year we already have contracted 1.2713 billion and have shipped 1.101 billion!  That means we need to sell at a pace of only 2.6 million bushels per week (70,761.6 MTs) to meet the objective set.  To put it in perspective, look at last year.  From this week in 2012 until September 1st 2012 we sold another 362.8 million bushels of soybeans!  Obviously we can’t afford to do that this year or we would run out of soybeans.  With the soybean volatility index running at only 20.63, it looks relatively cheap for buying options for upside potential against sales.  Note how far below the 200 day moving average the index is as well as from last summer!

Soybean Volatility Index

Soybean Volatility Index

Wheat is back to a large discount to March corn. With wheat comparatively cheap we have to assume that wheat feeding will increase substantially in the US again.  Just take last year for example.  Wheat was trading in-and-out of a discount to corn which helped propel wheat feeding by 213% from the year before!  For the 2012/2013 marketing year we ended up feeding 350 million bushels of wheat. Since wheat has its own tight balance sheet and we are once again competitive on the world market, we may see wheat supported as long as old crop corn doesn’t slip lower again.

For now we are staying with our current sale recommendations but with the insurance guarantee it may change how much downside coverage you need.  If you would like to get the EHedger grain letter full time, please sign up using the link at the top of the page. 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.

EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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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