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August 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.

Corn Breaks Resistance

Aug 15, 2013

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It was another strong day at the CBOT with December corn closing 17 cents higher at $4.72 ¼, November beans up 26 ½ at $12.65 ½, and December wheat up 6 ¾ cents at $6.49 ½.   The strength continues amid the dryness concerns in the Midwest, strong export sales, and a friendly FSA acreage report this morning.

Early this morning the FSA released their August acreage report.  They have total preventive plant corn acres reported at 3.411 million and 1.618 million for soybeans.  Total prevent plant is pegged at 7.710 million.  They also had total corn acres of only 88.771 million.  This is obviously well below the current USDA estimate of 97.4 million acres.  Looking back to last year, the August FSA total corn acreage was 92.950 million and the total reported acreage on the WASDE ended up being 97.2 million.  Clearly there is a margin of error on this report compared to the WASDE it is just unclear how much of a margin we should attribute to this when trying to predict final corn acreage.  Either way the market responded favorably to these numbers and we can’t discount that.

While the FSA numbers were supportive so were the extremely strong export sales this morning.  Corn sales were reported -59,100 for old but 836,100 MTs for new.  This was above the highest guess by over 200,000 MTs.  Soybean sales were reported at 1.893 million, almost double what they were expecting!  With the stronger demand reported, a slightly bullish FSA acreage report, and a drier forecast, prices have been able to break out of their liquidation phase.  December corn is now above its recent trendline resistance.

December Corn

 December Corn

Before we start convincing ourselves that the lows are in, let’s take another look at the August WASDE corn yield estimate again.  We briefly discussed it in our post WASDE letter on Monday.  NASS is using the 5-year ear weight average to derive their expected yield.  In this 5 year period, we have had the 2 lowest ear-weights out of the last 9 years.  If we were to remove just the lowest and the highest ear-weight years (2004 and 2012), and take the average of those years in between, the calculation would result in a reported ear-weight increase of 4.4% from what they are using now, or more importantly a yield of about 161.2 bushels per acre.  The point is they could be very far off from the final yield unless for some reason weather turns and we finish the year poor.

We are advising our customers to stay well hedged but allow for some upside by using a combination of cash sales and options.  For a free trial of our market letter and breakdown of hedge recommendations please email info@ehedger.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.
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.


USDA Report Bullish

Aug 12, 2013

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Corn and soybeans rallied sharply Monday after a bullish USDA report.  The monthly WASDE report surprised the market by lowering the corn and soybean yield estimates as well as reducing total soybean acres.  December corn settled 10 ¾ cents higher at $4.64 while November soybeans climbed 43 cents to finish at $12.25 ¼.  Wheat was 1 ½ cents higher at $6.35 for the September Chicago contract.

The market had been waiting for the USDA to raise their corn yield estimate to 157.72 but the USDA obviously isn’t as optimistic with an estimate of 154.4.  Their US and World ending corn carryouts were both below the average analyst guess which added to the strength.  Soybeans had a similar surprise with an average yield of only 42.6 and a 500,000 acre reduction from their July estimates.

The USDA is projecting a 2013 soybean carryout of only 7% of total use while corn is 14.5%.  This may be why we continue to see soybean prices rally faster than corn on a relative scale.  It is important to note that the managed money has a very large spec short position in corn.  Will the USDA’s yield estimate cause them to reduce their position? If they decide to liquidate their shorts it could provide some underlying support for corn over the next 2 weeks.  We were at new lows for the move this morning and then outpaced Friday’s highs.  This key reversal may also be a reason for the market to find a short covering rally.  Still the fact that corn and soybean ratings are both holding steady at 64% may keep the funds content with their shorts and ride out the harvest to see what we end up with.  Our opinion about yield has not changed from this report.  We still see significant downside risk even at a 1.8 billion bushel corn carryout, especially this spring if South American weather looks normal.  We recommend staying well hedged between your cash sales, brokerage account, and insurance.  You can look at inexpensive December corn calls as a way to protect previous sales.  Please call an EHedger risk manager if you would like to discuss a more detailed plan for your operation.  Have a great week!

December Corn

USDA 2013/14 US Corn & Soybean Crop Production

 

Aug USDA

Average

Range of Estimates

Corn

154.4

157.721

154.0 - 161.2

Soybeans

42.6

43.472

42.0 - 44.4

 

 

 

 

USDA 13/14 Ending Stocks

 

 

 

USDA 13/14

Average

 

Corn

1.837

1.971

 

Soybeans

0.220

0.263

 

Wheat

0.551

0.573

 

 

 

 

 

USDA 13/14 World Carryover

 

 

USDA 13/14

Average

 

Corn

150.17

151.090

 

Soybeans

72.27

73.591

 

Wheat

172.99

171.838

 

 
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.


Downtrend Continues

Aug 05, 2013

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Grain and oilseed markets were mixed with more bearspreading.  December corn closed 3 ¼ cents lower at $4.60 ½, November soybeans 1 ¾ cents higher at $11.83 ¼, and September wheat 15 ¼ cents lower at $6.45 ¼.

The market continues to drag lower on beneficial rains and a general lack of anything bullish for the market to cling to.  Informa released their yield expectations this morning and lowered their corn number to 158.6 (from 160) and bean yield to 42.7 (from 43.9).  This was slightly favorable for soybeans.  The crop progress report showed a 1% gain in corn and soybean ratings.  They are both rated at 64% good-excellent which is about where the market had them pegged so we don’t expect any market surprises on tonight’s reopen.

It’s hard not to sound like a broken record with this kind of market activity but really the fundamentals have not changed much in the past 2-3 weeks.  Favorable weather continues to drag the market down as yield expectations grow.  Ethanol profitability is coming back into play but that doesn’t mean that demand will come back strong enough to make a big difference on corn carryout.  We are already pegging ethanol usage at 4.8 billion bushels.  Even if we top 5.0 billion we could still see a 2+ billion bushel corn carryout.

This is a chart that has obviously caught a lot of people off guard and could continue to do so into harvest.  We are recommending our customers to stay well hedged through this time frame.  Please call EHedger for a second opinion of your marketing strategy using the AgYield software.

December Corn

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 Makes New Lows

Aug 01, 2013

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CBOT markets had another leg down today which means December corn is trading at new lows for the move.  November soybeans closed 13 ¾ cents lower at $11.92 ½, September wheat 6 ¼ cents lower at $6.58, and December corn 12 cents lower at $4.67.

The weekly sales report showed over a million bushels of new crop corn booked for export.  Even with the stronger than expected sales corn made new lows.  The weakness may have been exacerbated as stop loss orders were triggered.  Soybeans broke below $12.00 again but were not able to make new lows for 2013.  The next target is $12.86 ¼ which is the April 2013 low.  Look for stop orders below this level (see chart below).

November Soybeans

After the market closed FC Stone released their first yield estimates for corn and soybeans for the 2013 marketing year.  They have corn yield pegged at 157.0 and total corn production at 13.993 billion bushels.  They have soybean yield at 43.0 and total production at 3.309 billion.  Overall we would say this is more bearish for soybeans than corn.

We are now trading well below the major moving averages which could translate to some short covering support along the way down.  The two week forecast looks mostly favorable for crop development but at some point we may need a wider coverage of rain to secure the next leg down.  If you need to catch up on sales or would like a second opinion of your current marketing plan, please contact EHedger for a complimentary trial of the AgYield.com software.  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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