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May 2011 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.

Grain Outlook: A Tale of Two Crops

May 16, 2011

Last week’s break in the commodities was more to do with the weak tone of the outside markets than corn fundamentals. We would suggest the current concern regarding demand bearishness has crested for now and the focus is now turning back to supply or planted acres. This year it looks like it is going to be a tale of two crops. The western crop is starting off great while the eastern crop in many cases is not even in the ground. 

Looking forward I expect the western states will have to deal with the heat and drought conditions in Texas moving north while the east will be simply worried about timely rains. The current USDA estimate of 158.7, to our way of thinking is going to be close to the high end and more than likely could fade a little if any dry weather stress develops in July and August.
 
Over the next two weeks, we will be focused on how many corn acres are getting planted and how many could potentially be switched from corn to beans. I’m in the camp that the 92.2 million acres is high and will drop closer to 91 million or lower by the June Acreage report.  This would imply the bulls will have the upper hand in the market until late June. If we don’t have some really bad heat to move into the Midwest, we should see a June high. 
 
If these fundamental assumptions are accepted, more than likely one will end up with the belief that the market can be positive over the next 30 or 45 days but it can’t be explosive unless a major dry weather event is seen or crude oil starts to make new highs. Because of these basic assumptions, I have to say new crop Dec corn should find it very difficult making it back above the $6.70 level.
 
Just a side note: Many advisory services are suggesting it is the time to be watching basis bids for both old and new crop. We are hearing from farmers that the basis bids are being increased significantly. We would expect the best basis bid to be present between now and mid July. So if you have sold the cash but left open the basis I would be getting ready to lock up the basis level by early July.
 
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. 2011.
 

 

The Bulls and Bears…

May 04, 2011

We are now in that no man’s land between the bulls and bears. Both camps are becoming more convinced of their position while lacking the facts to push their cause. The bulls have been in control since last March suggesting the supply side is in peril, demand has not been rationed, and prices have to move to significantly higher levels in order to adequately ration supply. The bear’s argument is just about the opposite. The planters are really going to start running next week. Demand is starting to show some signs of being tired and the market technically is very overbought and due for a correction.

So what’s it all mean? The market is currently focused on the late planting conditions. We are starting to see some solid planting progress in the western states and warm weather is coming to allow planting in the central and eastern Corn Belt as we get into mid-May. The crop will get in and I anticipate a solid cooling off of the market as we move past the May Supply/Demand report next week. 
 
I however must strongly suggest this is not the final curtain call for the bulls. After a solid correction into late May I sense a real desire by the trade to be bullish in June and July. The concern will be that the corn crop will get planted under less than “ideal situation” and will be very sensitive to shallow roots and dry weather stress as we move into pollination. Anybody remember 1988!  I would suggest the best chance for a new high in Dec corn will arrive some time after Memorial Day but before the 4th.
 
Suggestions: Focus on selling Dec corn above $6.75 to $6.85. Be ready to sell July puts or get speculative long on a solid 30 to 50 cent correction going into late May.  And finally whatever position you have in place going into June, be prepared for market volatility. If the exchanges increase the daily limits to 50 cents, it could be wild!!
 
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. 2011.
 
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