Sep 2, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


March 2010 Archive for Outlook Today

RSS By: Bob Utterback, Farm Journal

Bob Utterback has more than 26 years of experience and offers producers a disciplined approach to marketing.

The Prospective Planting Report and What it Implies!

Mar 31, 2010
The trade has been talking about today’s acreage and stocks report for weeks. It appears the trade did a very good job of anticipating the acreage numbers but underestimated the stocks numbers for corn and beans. 
 
The immediate reaction to the prospective 88.79 million acres for corn and the 78.09 million acres for beans was: Where are all the acres at?  The overall trade reaction is that corn and bean acres, if weather permits, are going to grow. With the big stock numbers, the upside potential of the markets have now become very limited.
 
Essentially, the only way I think December corn can get back above $4 and November beans back above $9.50 will be a rather significant weather event dovetailed with solid demand growth.
 
Today’s sharp break should start finding support in the May corn contract around $3.42, but the deferred December corn could still correct to the $3.70 level. The real concern for me is the bean complex. For the last several weeks it’s been the strongest commodity in the ag complex. It was obvious, with the weakness in the old crop, that some trapped longs wanted to liquidate before the end of the month. November beans closed right at technical support.

In my opinion, a gap lower opening tomorrow should be very negative for November beans. A close below $9.05 would suggest lower price action even though the market has sold off sharply over the last week. The problem now is a close below $9 opens up the potential for a move to $8.75 which must hold. Since spring and summer weather scares are still in front of us, I have to believe there will be one more series of weather induced rallies but it’s going to be very difficult now for the market to get back above $9.25.
 
Overall, I believe the market will most likely be very range bound. Upside rallies will fail to meet producers expectations and, if we don’t watch out, there will be plenty of unpriced corn and bean this fall.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2010.
 

Uptrend Prior to Prospective Plantings Report!

Mar 30, 2010
Monday started out with a strong focus on the dollar, oil markets and their bullish impact on the commodities. This week we will have a Prospective Plantings report dominating the market price action from Wednesday into the end of the week. The final variable that is going to have a lot impact on the market is the spring planting weather patterns. Up to now has been more about fear than reality. As we move into April, we will start moving into a period when action must be done. With last fall slow harvest a lot has to be done before the crops planted. Producers are already very frustrated with the current low prices and inability to get into the fields. My greatest concern, producers still have their sights set on a retest of the January highs at $4.50 rather than focus on the opportunities which suggest a retest of December corn to the $4 to $4.15 level represents solid selling.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2010.
 

I’m a Supply Bear!

Mar 22, 2010
This week should be dominated by two primary factors—time and anticipation.

Another week has passed and little field work has been done. Rain and snow continue to fall and producers are starting to get concerned. Granted, it’s still early, but every producer knows that a lot of fall field work did not get done and time is going to be very precious this spring.

The other factor that should have some bearing on the markets is the impact of several advisory services publishing spring guesses with regard to the March prospective plantings report due at the end of the month. The numbers are from a low of 88.4 million acres to a high of 90.1 million acres. I think we will see larger planted acreage figures “IF” farmers get the opportunity to plant. It has to be noted that demand is going to grow as we move through 2010. The increase in ethanol demand and potential increase in exports to China have the potential to drive usage up to the 13.2 billion bushel to 13.3 billion bushel level.


IMPLICATIONS: I’m a supply bear, but still very concerned about this spring and summer weather potential merging with prospects of growing demand. This all implies that producers who follow our selling strategies and recommendations in April need to be defensive in upside risk exposure in June and July. I suggest focusing on developing a limited cash flow exposure position if $4.15 to $4.25 December corn is seen in April or May. Once we get closer to the late July to early August time period, roll the long put position into a short futures or cash position once we are comfortable with the yield prospects.

Again, I suggest being a strong spring seller, but with a close eye on upside risk exposure. The markets could be very volatile, which many times is a producer’s biggest frustration.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2010.

Grains Move Higher!

Mar 17, 2010
It now appears the old crop corn supply is being trumped by concern about delayed spring planting. I believe today’s rather strong price bounce is a confirmation that the winter lows are in.

The issue now is how much of short covering rally and speculative buying bounce will we see? In regards to today’s market action, I have to say that more than 5 to 8 days up is about as long as one should expect before absolute new buying support has to come into the market. In regards to July corn we are 13 days off the Feb. 26 high, but only two days up from the low. I suggest the rally in July corn should now find it difficult to exceed $3.95.
 
To move corn above $3.95 I think we will have to see continued weather delay all the way through most of April with limited field work for most of the corn producing Midwest. While we are concerned, we have faith in the American farmers that, if given even a small window of planting opportunity, a lot of this crop will be planted suprisingly fast.
 
Strategy: We have recommended feed buyers get their feed needs bought through July. If corn is in good condition, we suggest holding off on pricing until late May to early June. It should be pointed out that our real focus, however, is on getting producers motivated to get a floor under 100% of their expected inventory when they can lock up a 150% to 200% return over all fixed and variable costs [in relation to USDA data]. We also suggest for corn that this must start at $4.15 and be done by $4.35. In our opinion waiting for a retest of the January highs at $4.50 is very foolish. If the market were to hit that level, we would suggest using the strength to sell expected 2011 inventory.
 
We are still impressed that the soybean market is holding together in light of the big South America crop. There are rumors that many South American producers are following the U.S. farmers’ strategy of holding off on selling inventory at harvest in favor of higher prices. If this is true, and we are not sure South American producers can store like U.S. farmers, all it does is possibly distress the market more as we move into late August. 
 
Strategy: We recommend feed buyers only buy enough meal to get to the July time period. We are still concerned that a major downward price risk exists in soybeans as we move into the August to October time period. Therefore, aggressive buying of meal is slated for that time period. We believe producers needing to make “catch-up” 2010 sales should use some form of put protection in the Nov contract if it gets close to $9.50.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2010.
 
 

Producer Talk From the Road

Mar 15, 2010
Last week was my last road trip for a while. I’ve appreciated all the comments I’ve received from producers about how they enjoy the "U.S. Farm Report", Farm Journal and UMS daily electronic comments. Thanks for all your kind words and encouragement. UMS is committed to helping you do the very best possible to assist you in marketing grain and livestock.
Some of the concerns regarding the markets that I have been picking up include the following:
  1. Producers still have a lot of old crop corn to price and move. Many say this crop is not going to store very well. As for old crop beans, it appears we are [overall] in good shape.
  2. A lot of producers intend to dump bad corn before planting. This should cause basis to get very nasty during the next 45 days. While there will be some pressure on flat price, I fear most of the weakness will be in cash prices with basis and basic discounts.
  3. I did not really hear any discussion about a big acreage shift. The biggest concern is so much field work has to be done and things are still really wet in the Midwest. While I believe most producers would like to plant corn, Mother Nature is really going to determine how many acres will get planted.
  4. I was on a program with Mike McClellan with Mobile Weather Team located in Illinois. He seems to have a solid handle on weather. His summary comment was, the biggest problem will be getting the crops out on time. If it gets planted, overall a better growing condition year will be seen this year. Before his presentation I would have argued an average 161 bu. per acre crop yield. I now have to suggest 166 bu. to maybe even 168 bu. per acre.
  5. Finally, in regard to acres, I’m guessing most producers will plant corn, if possible; but they are preparing for beans as well. Since crop insurance is at $9.23, it’s going to encourage interest in beans.
Summary: It appears the old crop has a lot of problems; it’s going to be difficult keeping prices very range bound. We may get a slight price rally into April/May because of delayed plantings, but with the weather outlooks I’m hearing potential for another big crop this year is increasing. I have to say right now that December 2010 corn is going to have a really difficult time getting back to $4.15.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2010.
 

Is it Time to Sell Corn?

Mar 09, 2010
Such an easy question; but as always so difficult to answer. Some advisors may suggest they have a proven system to predict market price action; I don’t. My game plan is to focus on the profit margin the market is offering. When it reaches your target, you should sell it and then defend if a technical reversal signal is experienced.
 
I’m currently working with my brokerage clients to try to develop at least a 10-year history of costs and revenue to come up with a net gain per acre. My review of USDA historical data suggests even though we are well off the $4.50 winter highs in December corn we are still above the $120/acre above all cost. While this is a long way from the $200/acre offered last December, it is still the fourth highest return on investment since 1973! An even more chilling statistic is, since 1999 the market in terms of trading days, has spent about as much time above $200/acre as it spent below -$100 per acre. On top of that since late 2007, we have not had a really negative return in corn. I belief the corn market is a pure competition economy, which over the long-term (I would say 5 years) will even out and eventually net returns in agriculture very close to the breakeven level.
 
My concern is we have all fallen in love with the 2008 and 2009 profits offered by the intersection of growing ethanol demand, growing China demand, growing interest of outside money and reasonably tight stocks. One has to ask himself the following question: Was the 2008 and 2009 price event an exception or the general expectation for the future? While I expect ethanol and China demand to be big positives for the future, they are no longer big surprises. The market knows about them and the bigger demand has been factored into the market. On the other hand, the high prices of 2008 to now, coupled with lower input costs, should stimulate producers to increase production. The question then becomes, even with long-term demand growth, can supply on a global basis over take with good weather and improving technology? This is a question we will debate on a yearly basis. All I can say is my gut tells me that agriculture has been making way too much money recently and over time it will be taken away with more supply relative to demand.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2010.
 

The Grain Markets Rally!

Mar 03, 2010
Today’s rally has helped lift everyone’s spirits. You can almost hear the bulls panting waiting for a bullish report next week so they can jump into the corn and soybean markets and lift them to the heavens. Their argument is: "let’s face facts, it’s March and there is snow on the ground, planters will want to move in less than three weeks, and nothing is going to get planted on time."
 
My objective is to get producers to sell their crop; I hope the market can catch this bullish attitude and indeed push prices back to the pre-January report highs. If this would happen, based on USDA cost data, U.S. producers should be offered a profit level that has only been exceed by the 2008 and 2009 price events that I believe were an exception rather than the rule.
 
Conclusion: Let’s now hope that we get a bullish report next week and everyone gets bullish about spring weather. It will give producers a great chance to make “catch-up” sales at levels that we all know present an excellent selling price for expected 2010 corn and soybean inventory.
 
Contracts being monitored for input cost control: The 10-year T-Notes remain firm in the March contract right under 119. I still suggest this is the last strong drive up for all interest rate instruments. Focus on being a scale-up seller from this point forward. The big problem I see now is what happens when the March contract goes off the board. There is already an exceptional difference between the lead month and deferred contracts.  
 
May natural gas has stabilized at a price decline that started back in December. While this may be the low, I am in no real hurry to suggest buying before the seasonal low time period in the summer months.  Again, remember buying natural gas is used to offset future nitrogen cost exposure. The objective right now is $4 or lower, if possible.

BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2010.

Everyone is Expecting Inflation!

Mar 01, 2010
While it is cold and snow is still on the ground, spring is just around the corner.  I know for many of you it cannot come soon enough!
Last week talk about the growing concerns of a potential delayed spring planting started to surface. While one can talk, I really believe it’s still too early to get excited. I think the real action this week will be traders starting to get in position for the March supply and demand report. Will there be a major revision in the January production numbers?

The second variable everyone will be talking about is the outside markets. Essentially, it appears things are going to get really rough in Washington as the battle lines are drawn on the health care debate. On my travels the last few months, I’ve met few people who like the directions things are going. A general theme is everyone is expecting inflation, a reduction of standard of living and higher taxes; not what you call a bullish attitude about the future. I believe this negative tone will continue to plague the markets for most of 2010 and well into 2011, which leads to the real problem: if consumers are worried about the future, are they going to continue to spend at a very slow pace? Granted, consumers will increase savings, but overall debt has become a four-letter word to many.
While the outside markets, ethanol and the opening up of China caused the 2008 and 2009 price event for agriculture, I have to say I don’t think the fundamentals are in place as far as we can see into the future for a resumption of these exceptional prices. All we have now is weather. Granted it’s a powerful variable, but it has to be bad and normally this hurts farmers more than helps, in that, a drop in yield drop is usually worse than a flat price rally potential.
The overall game plan is to take advantage of rallies into April/May to sell the 2010 crops and a rally in June/July to sell 2011 if we see the weather event.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2010.
 
Log In or Sign Up to comment

COMMENTS

Hot Links & Cool Tools

    •  
    •  
    •  
    •  
    •  
    •  

facebook twitter youtube View More>>
 
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions