Jul 10, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


June 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.

USDA Surprise!

Jun 30, 2010
Well USDA surprised us all today. With corn acres down 918,000 from March estimates instead of up and bean acres up more than 768,000 acre, the market was caught being too bearish going into the report. The corn market was up limit while the bean market was slightly lower.  After the initial shock is over, it will be up to the corn market to prove it can move higher as the bean market trends lower. 
December 2010 corn stopped at $3.74 but has potential to move back to the $4 level if any weather problems develop. Subsequently, the market is driving out the bears at exactly the wrong time. Seasonally, the odds are very high we will sell off rather quickly once this bullish news is factored into the market.
Looking forward, the primary two drivers for corn and beans will be the weather (how hot and dry does it get) and what happens in the outside markets. Regardless of our supply situation if demand starts to slip because of concern about global economic health, downside price risk still exists.
So while as a bear I’ve been kicked in the you-know-what area, it’s not changed my resolve.  Cash weakness will develop in corn and beans as we move into fall. This rally is one to be used to move upriced cash inventory rather than viewed as a buying window for a major upside price move.
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.
 

Corn Continues Trend Down in Anticipation of Acreage Report

Jun 29, 2010
The December corn market has now lost 41 cents in the last six days. This is finally getting producers’ attention. There still is a lot of old crop corn to move and producers know that the time is quickly closing for a summer bounce.

Tomorrow we will get a final acreage estimate. My expectation is very much in line with most in the trade. Some growth in both corn and beans but more than likely no more than 1 million acres total increase. When you take into consideration the amount of rain damaged areas, the overall productive crop acres is not going to exceed much above the initial March estimates. The problem is, with corn yield on good acres averaging above 163 bu./acre and beans above 41 bu./acre, we will have enough supply?

So, it really comes down to demand growth. How aggressive will China continue to buy? When will the EPA increase ethanol blends? Will livestock production stay constant? Essentially, none of these demand issues can be resolved short term.  Subsequently, the seasonal pattern of weakness into July as the corn crop completes population is still expected. My expectation is it should be difficult getting December 2010 corn below $3.20 but the basis will widen which will overall cause cash values to move well below $3 at harvest.
In summary, the window is quickly closing for any cash sales. If you can, you need to be making plans now to store all corn harvested this fall all the way into the Spring of 2011. If you have old crop corn, the trend is lower so bite the bullet and get it moved and then look to reown in August to September.
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.

Let’s hope the bull tries to buy it one more time!

Jun 22, 2010

Today is day two of the correction. After rallying for 10-days we experienced a key reversal on Monday. That is a higher high, lower low and close at the bottom of the trading range. Today’s lower gap opening does give technical support to the belief that a trend change is taking place.
 
Source: CBOT   PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. 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.
If you look on the chart you will note on 5/28 we saw a sharply lower opening which was followed by a 6-day sell off. The total sell off was in excess of 38 cents. If this current break would repeat this pattern, we could see on Monday the March 2011 contract trading close to $3.60 and Dec corn to the $3.50 level.
The problem we have with this level of bearishness is next week’s Actual Acreage report. If the market were to sell off with this much intensity, it would be difficult to see a bearish follow through. So as a bear, I want a retracement towards the end of this week. In fact I would love to see Monday’s highs tested which would develop a great double top formation. This I believe would put bears into a much better position for the eventual decline in July and early August towards the $3.15 to $3.30 price level.
If we have a lower opening and start to move positive by mid-day I believe this will give some bulls hope that the current correction was only correcting an overbought condition rather than a trend change. 
In summary: we are holding all short positions for the Aug/Sept lows, we are simply wanting a retest of Monday’s highs. Remember, as bears we want to entice a new round of fresh bulls into buying this market so we can feed on their equity as we move lower in July on confirmation the crop yield is going to remain above 163.5.
LONG LIVE THE BEAR!

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.

Corn Continues to Battle Expectations

Jun 16, 2010
The corn market continues to battle between the expectation of a great crop as confirmed by the weekly crop conditions versus the Chinese buying and concerns of too much rain affecting yields. This has caught corn in a narrow trading range, but has helped to lift beans because of concern that the last 9% or so are having difficulty getting planted. Plus, some of the crop needs to be replanted due to weather concerns.
In periods like this, I like to look at the charts for some orientation as to what we may expect in front of us. The chart below is an overlay of several of the last few years with the current price action. As you can see, the pattern is for the market to lose steam rather significantly as we move into July for the corn complex. While I’m bearish for corn into the fall, I do believe the market could hang around much like the 2008 top. The other observation is the lows should be confirmed by early October. So waiting for harvest to be completed is no longer a good strategy.
 
 
Source: CBOT   PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. 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.

However, for corn, my big concerns are the acreage report due out the end of the month is going to be bearish and the big farmer who is holding positions that must be moved before the new crop. Both situations place a lot of burden on the corn bulls. Subsequently, I strongly suggest an 8¢ to 12¢ rally over the next 10 days must be aggressively sold for all producers. 
Bottom line: If you do not move inventory now, you are holding all the way to next summer!

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.
 
 

It's Report Day!

Jun 10, 2010
Well it’s report day. We have all the details on our Web site and overall it was neutral to wheat and beans but bullish to corn.  In regards to corn, USDA surprised the trade by pushing up China’s imports sharply to put exports at 2 billion bushels.

The big push however was in regards to ethanol demand, which increase usage to 4.7 with prospects of it increasing further if the EPA confirms that blends levels are going to be increased.  Overall, one has to say that the USDA did everything thing it could to report positive demand growth potential. Maybe there is a lot of pressure in Washington to report that things are improving. While the demand side was positive no adjustments were made on the supply side of the equation. Even with near record crop conditions ratings, the USDA left the crop yield at 163.5 bu. per acre. In addition, while not a top for today’s report concern will start to surfaces later this month that increased corn and bean plantings will be posted due to the very early start for most of the Corn Belt. 


SUMMARY: The USDA pushed the demand side very hard today but did not reflect any of the anticipated adjustments in supply.  Early calls were for 10cents high, which were seen on the open, but the market quickly faded. It is our bias the first level of resistance will be at $3.68 to $3.72 for December corn. A move back to the $3.92 to $4.05 level, which is what all the producers are wanting, is going to take some significant dry weather activity in most of the Corn Belt in July.   While everybody is worried about moving from the El Nino to the La Nina and potentially dry condition nobody is willing to put their neck on the line and say when it’s exactly going to happen.  Right now, the trade realizes if most of the Corn Belt can get a solid 1inch of rain every 10 days in July through early August a bin buster is coming down the pike.
RECOMMENDATION: If you have old crop corn, beans, and wheat any 5 to 8 day rally is about all you are going to get as we move into the end of the month. I would not want to have significant amounts of unpriced old crop inventory being held much beyond the first week of July unless a massive change in weather patterns develop. This is the bounce you have been waiting for, if you don’t move the product now it’s going to be next April to May before we see any solid selling opportunities develop.
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 slide lower on prospects of good crop!

Jun 07, 2010
Grains and oilseeds continued to slide lower under the pressure of a good developing crop and weak outside markets. The unpriced producer is now getting into real trouble. He’s got a lot of 2009 corn crop still to move and 2010 inventory production is just around the corner. While it’s not a scientific study I get the impression from my phone conversations with people in the grain industry that producers are under sold for the 2010 crop at this time of year.
So many producers are going to be selling 2009 corn at or below the cost of production and if that was not bad enough 2010 corn is nearing cost of production levels. So what is the producer going to do? I suspect now that producers are going to only dump what they can, store and hope for a recovery event. Normally, this strategy has really helped but I would suggest now is not normal times.  The problem developing is with big carry incentive in the market producers should be selling the carry to assure a return to storage like an elevator. History suggests they will not sell the market because the flat price represents a loss. So, they will put it the bin and hope for a rally.
My first concern is we are nearing the cycle low of a five- to seven-year cycle as we move into 2011. It’s been my experience in these time period, prices can go lower than expected but it’s equally very difficult to stay short and everybody gets long to early. The function of the market will be to drive supply out of production and stimulate usage.
The second big unknown right now is the outside markets, which are in turmoil. The news media is daily trying to tell us how good things are but everybody knows by looking in their checkbooks that revenue is low and expenses are high. Unexpected demand growth does not seem to be on the horizon. So, a “V” bottom is slowly giving rise to a “W” or double dip recession. This is what everyone is worried about. Now when globally governments of the world have thrown a lot of money at trying to turn the economy and employment still goes lower.  It seems very simple to me higher taxes, higher cost of employee cost associated with health care and an overall governmental distain for business and profit  has most businessmen thinking. Why take any risk, right now I’m simply going to hold onto what I’ve got and wait and see what happens.
In summary: Today’s gaps on the corn chart are a potential dangerous warning sign. Either they are an exhaustion gap and the market turns up within the next two to three days or the more negative interpretation is it’s a breakaway gap to lower price action. My fear is its the latter. 
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.
 

Good growing conditions!

Jun 07, 2010
The corn and bean markets are reflecting good growing conditions and bearish outside markets. While beans did take out a few shorts yesterday, the bulls could not hold the ground gained and gave it all back today. It’s widely assumed that limited supplies of old-crop beans exist. The crushers want beans, but if they have to bid up too much, they will simply shut down due to poor profit margin and for planned yearly improvements.
 
Outside markets continue to be very negative, with the Dow close to 10,000, and the dollar was up. The jobs outlook today did show overall growth, but it was primarily in government workers, which is short-term. The private sector added a very anemic 41,000, which is hardly a sign of robust economic growth. While these numbers are concerning, the big uncertainty continues to be how deep the European debt crisis will get and its potential negative impact on China and India, which are major trading partners.
 
Overall, our concern continues to be that supply in regard to corn and beans could easily be average to above expectations, while bullish demand prospects fail to hit the market due to a deflating global economy. Overall, this forces carryover up at a time when producers have limited new crop inventory sold and rather large supplies of corn and wheat on hand.
 
Implication for market plan. I am bearish but finding it very difficult adding new cash or futures sales after such a negative last few days. The market is clearly oversold and should bounce. I suggest now would be a great time to put in a bearish put strategy which protects most of the downside risk but limits your cash flow exposure if we get any type of hot and dry July/August 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.
 

Both the bull and the bear have a good argument!

Jun 07, 2010
The bulls are hoping for a seasonal rally while the bears are hoping for a rally to get catch-up sales in place.  It’s been my experience over the years when everybody is wanting a move to occur the odds are significantly reduced that it will occur as everybody wants.
The bulls have some strong arguments.
  1. While rain makes grain, too much rain actually hurts the crop and does not allow the crop to grow. Many times over the years the old timers suggest you go from too much rain to too dry. This is a worry for the market as we move from El Nino to La Nina.
  2. China has bought some corn and the premium still seems to be very stong in favor of buying U.S. corn. The latest numbers suggest there is over a $1.20 advantage to Chinese buyers to buy U.S. corn at the Chinese ports. We simply don't know right now how much it cost them to to get tot he interior. "Talk" is the U.S. is still a very attractive buy.  
  3. The historic seasonal favors price strength from Memorial Day into late June to early July.
  4. The BP oil spill could lead to significant regulation on deep well oil drilling. This “could” push the administration to supporting more domestic production of corn Ethnaol.
The bears have some strong arguments as well.
  1. Every year some part of the U.S. has problems but overall the crop is in good condition. Rain and heat make a great crop and the potential to exceed 162 bu. per acre and 42 bu. per acre is still very good for corn and beans, respectively. 
  2. The European debt situation is not going away but is going to spread all over Europe and lead to stagnate global demand prospect for most of 2010 and well into 2011. Bottom line: demand prospects most fundamentalist are using is way to high. Stocks will build for both corn and beans as we move into 2011.
  3. In regards to corn we still have a very big level of old crop corn in farmers hands. The corn is in poor condition and must be mixed with new crop. The basis will be coming under major basis exposure in August to Oct. The cash market will subsequently bull down the futures market even if demand prospects long term look to improve.
  4. Technical overhead resistance is very strong for Dec corn at $3.92 to $3.96 and November beans at $9.35 TO $9.50 level.
In summary: I would suggest the bull’s time to shine is now. If they can’t get this market moving by the end of June, I would suggest the bears will take over and drive it below the cost of production this fall.  This will be the time period when feed buyers and anybody wanting to speculative own corn and beans should be getting extremely aggressive in position.

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