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December 2013 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.

Outlook for the Near-Term in Grains

Dec 31, 2013

CORN:

We are excited about starting another year of working with farmers to improve their bottom line. As we start the year we will be looking for some important final numbers from the USDA in the January report. Our bias: Corn and soybean yield will improve slightly, which will offset the increase in demand projected in the December supply demand report. We expect the market is nearing a price level where price stability will be developed.

Simply put, we are nearing a level where the bears will find it difficult to push prices significantly lower. As for the bulls, many will be relying on the seasonal trends to rally prices but one must be aware that the fundamentals really don’t look promising.

In our opinion the only real hope the bulls have for higher prices lies in a good old fashioned weather event. This implies the earliest the bulls will have some fundamental hope will be in late April to early May, but more than likely it will be late June to early July confirmation of hot and dry conditions before the bulls can flex their muscles.

To help producers develop, implement and monitor the various risk management opportunities ahead, we are starting a consultation service where we merge crop insurance with cash sales, options and futures strategies to evaluate and manage risk. If anyone is interested in a periodic review of their position and want to develop a one-to-one relationship with a professional at UMS, call Bob or Laura at 1-800-832-1488.

We don’t believe March corn will move much below $4.10, even if the January 10 report is bearish. And it’s going to be very difficult getting the July corn back above $4.75 until we have actual confirmation of significantly lower planted acres and yields trending well below 152.

Speculative strategy recommendation: After the January reports use any oversold condition to focus on selling July $4.00 or lower puts on an oversold condition.

SOYBEANS:

This complex has been the strongest of the grains and oilseeds. The continued strong demand by the Chinese for our soybean products pushed Jan soybeans over $13.50. Unfortunately, the recent slip in the Chinese soybean export pace plus expectation of an improving crop in South America has stopped the soybean market in its track. Moving forward, the bears are banking on improving yields in the January reports for the U.S. crop plus the potential of Chinese cancellations once the South American crop comes on board has many bulls heading to the sidelines.

Looking forward the biggest concern is that the new crop [2014] could still have a headwind to deal with because of the growing expectation that acres are going to grow in excess of 4 plus million acres.

Even with the growing list of bearish fundamentals, we are concerned it may be difficult for the old crop soybeans to break much below $12.50. The seasonal pattern over the last 43 years and even the last 13 years all strongly suggest the January to March time period will be difficult to move lower.

Speculative recommendation: Focus on selling out-of-the-money July soybean puts on an oversold condition after the January reports.

WHEAT:

The wheat complex fell on hard times in November and December. It all started with improving crops out of Canada and then confirmation that the U.S. crop was strong as well. Similar to corn and soybean, we feel we have to suggest the wheat market is nearing a time period and price level where some price consolidation will be seen. While many may imply this is an indication of a buy signal, we suggest refraining from buying wheat for a significant flat price rally.

In fact, we would not be surprised to see wheat become the short leg of the classic long corn/short wheat spread as we move from March to July. We assume those following our previous recommendations are currently holding hedges in the Dec contract because of the carry. After the January reports focus on selling May puts to help offset any seasonal bounce we may see between January and May.

If anyone feels they need to put structure into their risk management program and would like to discuss marketing strategies, call Bob or Laura (1-800-832-1488). We will also try to answer questions in upcoming blogs and we welcome emails to laura@utterbackmarketing.com or utterback@utterbackmarketing.com.

THIS MATERIAL HAS BEEN PREPARED BY A SALES OR TRADING EMPLOYEE OR AGENT OF UTTERBACK MARKETING SERVICES, INC. AND IS, OR IS IN THE NATURE OF A SOLICITATION. THIS MATERIAL IS NOT A RESEARCH REPORT PREPARED BY UTTERBACK MARKETING SERVICES, INC. BY ACCEPTING THIS COMMUNICATION, YOU AGREE THAT YOU ARE AN EXPERIENCED USER OF THE FUTURES MARKETS, CAPABLE OF MAKING INDEPENDENT TRADING DECISIONS, AND AGREE THAT YOU ARE NOT, AND WILL NOT, RELY SOLELY ON THIS COMMUNICATION IN MAKING TRADING DECISIONS.

DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.

THE RISK OF LOSS IN TRADING FUTURES AND/OR OPTIONS IS SUBSTANTIAL AND EACH INVESTOR AND/OR TRADER MUST CONSIDER WHETHER THIS IS A SUITABLE INVESTMENT. PAST PERFORMANCE, WHETHER ACTUAL OR INDICATED BY SIMULATED HISTORICAL TESTS OF STRATEGIES, IS NOT INDICATIVE OF FUTURE RESULTS. TRADING ADVICE IS BASED ON INFORMATION TAKEN FROM TRADES AND STATISTICAL SERVICES AND OTHER SOURCES THAT UTTERBACK MARKETING SERVICES, INC. BELIEVES ARE RELIABLE. WE DO NOT GUARANTEE THAT SUCH INFORMATION IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. TRADING ADVICE REFLECTS OUR GOOD FAITH JUDGMENT AT A SPECIFIC TIME AND IS SUBJECT TO CHANGE WITHOUT NOTICE. THERE IS NO GUARANTEE THAT THE ADVICE WE GIVE WILL RESULT IN PROFITABLE TRADES.
 

Tough Decisions to be Made in 2014

Dec 18, 2013

The bin doors have shut and many were expecting the market to begin to bounce off fall lows and for the most part the corn market has shown us that it does not have the strength to sustain a move higher and it is too early for corn to go much lower. With the market being in a sideways trading band, many are concerned with 2014 and where prices will be next year. 

The bottom line:

Demand growth will not overcome growing supply. The only option we have for higher prices is a combination of less than 92 million planted acres and yield below 158. If carryover is between 1.8 and 2.1, the Dec contract should bottom out around $4.10; if carryover goes above 2.5 billion, futures prices next fall could easily drop below $3.50. Subsequently, waiting for higher prices will only pan out this summer if there is a significant yield reduction event. If not, by the time you realize the crop is OK, it will be far too late to sell in our estimation.
 
As for soybeans, once South America’s soybeans move into the marketplace, a long-term downtrend should develop. If producers follow through with their intent to increase planted acres, the downside risk in soybeans could be significant. We still believe it is critical to get downside price protection in place. Our bias: Have a flexible strategy like being long puts rather than short cash or short futures this early in the year.
 
If anyone feels they need to put structure into their risk management program and would like to discuss marketing strategies, call Bob or Laura (1-800-832-1488). We will also try to answer questions in upcoming blogs and we welcome emails to laura@utterbackmarketing.com or utterback@utterbackmarketing.com.
 
THIS MATERIAL HAS BEEN PREPARED BY A SALES OR TRADING EMPLOYEE OR AGENT OF UTTERBACK MARKETING SERVICES, INC. AND IS, OR IS IN THE NATURE OF A SOLICITATION. THIS MATERIAL IS NOT A RESEARCH REPORT PREPARED BY UTTERBACK MARKETING SERVICES, INC. BY ACCEPTING THIS COMMUNICATION, YOU AGREE THAT YOU ARE AN EXPERIENCED USER OF THE FUTURES MARKETS, CAPABLE OF MAKING INDEPENDENT TRADING DECISIONS, AND AGREE THAT YOU ARE NOT, AND WILL NOT, RELY SOLELY ON THIS COMMUNICATION IN MAKING TRADING DECISIONS.
 
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
 
THE RISK OF LOSS IN TRADING FUTURES AND/OR OPTIONS IS SUBSTANTIAL AND EACH INVESTOR AND/OR TRADER MUST CONSIDER WHETHER THIS IS A SUITABLE INVESTMENT. PAST PERFORMANCE, WHETHER ACTUAL OR INDICATED BY SIMULATED HISTORICAL TESTS OF STRATEGIES, IS NOT INDICATIVE OF FUTURE RESULTS. TRADING ADVICE IS BASED ON INFORMATION TAKEN FROM TRADES AND STATISTICAL SERVICES AND OTHER SOURCES THAT UTTERBACK MARKETING SERVICES, INC. BELIEVES ARE RELIABLE. WE DO NOT GUARANTEE THAT SUCH INFORMATION IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. TRADING ADVICE REFLECTS OUR GOOD FAITH JUDGMENT AT A SPECIFIC TIME AND IS SUBJECT TO CHANGE WITHOUT NOTICE. THERE IS NO GUARANTEE THAT THE ADVICE WE GIVE WILL RESULT IN PROFITABLE TRADES.

 

 

Grain Supply and Our Concern for Future Demand

Dec 05, 2013

We do not deny that world population is growing. We question if there will be enough income to pay for it! We know many people think it is wrong to not want to feed those who are under fed throughout the world.

We also ask if it is really fair to them to feed them, making them solely dependent upon others. Why not work on keeping population levels consistent with what a region can produce? The sooner we accept the fact that the world’s resources are finite, the better [long-term] we will be as a world community.

As for the immediate price implications, it’s been a costly journey for the bulls since August of 2012. We believe bull markets sow the seeds of their own destruction and bear markets sow the seeds of bull markets. We call this the primal agriculture cycle. Granted, the magnitude of the price cycle can be influenced by government policy, weather events, technological advancements and other unknown events. The eventual highs and lows are about basic economic relationships.

When prices move too high and destroy demand, giving major incentive to producers to increase supply. It takes a lot of time to complete this cycle. The current low prices are sowing the seeds for an eventual bull market. The only question is how long we have to say down here. This is the big issue many will debate in 2014.

How fast will demand rebound and will supply be cut back by the lower prices? Eventually, when the supply comes online, prices must fall to levels where demand is ignited and production is curtailed. We suggest such big macro supply and demand events cannot take place until negative returns develop.

How low and how long do prices have to go in order to reignite demand and curtail future production? We can ask the questions, but it’s difficult to give the answer because of all the variables of the equation. We believe this cycle will not be completed until the fall of 2015.

This is why active risk management in regard to each farm’s profit and loss is so critical now and in the future. To this end I’m working with producers to develop an integrated risk management plan that combines crop insurance, cash, options and futures contracts sales as well as other critical marketing decisions. If anyone feels they need to put structure into their risk management program, call us at 1-800-832-1488.

If anyone has questions and would like to discuss marketing strategies, call Bob or Laura (1-800-832-1488). We will also try to answer questions in upcoming blogs and we welcome emails to laura@utterbackmarketing.com or utterback@utterbackmarketing.com.


THIS MATERIAL HAS BEEN PREPARED BY A SALES OR TRADING EMPLOYEE OR AGENT OF UTTERBACK MARKETING SERVICES, INC. AND IS, OR IS IN THE NATURE OF A SOLICITATION. THIS MATERIAL IS NOT A RESEARCH REPORT PREPARED BY UTTERBACK MARKETING SERVICES, INC. BY ACCEPTING THIS COMMUNICATION, YOU AGREE THAT YOU ARE AN EXPERIENCED USER OF THE FUTURES MARKETS, CAPABLE OF MAKING INDEPENDENT TRADING DECISIONS, AND AGREE THAT YOU ARE NOT, AND WILL NOT, RELY SOLELY ON THIS COMMUNICATION IN MAKING TRADING DECISIONS.

DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.

THE RISK OF LOSS IN TRADING FUTURES AND/OR OPTIONS IS SUBSTANTIAL AND EACH INVESTOR AND/OR TRADER MUST CONSIDER WHETHER THIS IS A SUITABLE INVESTMENT. PAST PERFORMANCE, WHETHER ACTUAL OR INDICATED BY SIMULATED HISTORICAL TESTS OF STRATEGIES, IS NOT INDICATIVE OF FUTURE RESULTS. TRADING ADVICE IS BASED ON INFORMATION TAKEN FROM TRADES AND STATISTICAL SERVICES AND OTHER SOURCES THAT UTTERBACK MARKETING SERVICES, INC. BELIEVES ARE RELIABLE. WE DO NOT GUARANTEE THAT SUCH INFORMATION IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. TRADING ADVICE REFLECTS OUR GOOD FAITH JUDGMENT AT A SPECIFIC TIME AND IS SUBJECT TO CHANGE WITHOUT NOTICE. THERE IS NO GUARANTEE THAT THE ADVICE WE GIVE WILL RESULT IN PROFITABLE TRADES.
 

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