Sep 19, 2014
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January 2014 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.

Marketing Strategy Alternatives for 2014 Corn Production (Part One)

Jan 29, 2014

For this hypothetical plan, we have come up with four distinctive marketing strategies that will be compared in our monthly statements in our blog:

Strategy #1 - Plant, Harvest and Store.

As we previously mentioned, December 2014 corn is trading well below the cost of production while the current July 2015 futures is trading at $4.6925 around $.61 below the 5% profit margin. In this strategy the producer would not purchase crop insurance. The crop would be harvested and stored to July 15, 2015. An estimated storage cost of $.05 per month would be incurred from October 15, 2014 to July 15, 2015 or $.45. Production costs would be $4.85 plus $.45 storage cost giving a total cost of $5.30. I know some will be saying they have on farm storage and do not need to include storage costs but in this case we will.

With this strategy, in order to make 10% above cost, sales would have to be made at or above $5.83 basis the July 2015 corn contract. Unless a weather event is seen during the spring planting season or at pollination, it may be difficult to see this level; therefore at this time it seems that this strategy may not be that profitable and more than likely it may just breakeven.

Strategy #2 Purchase Crop Insurance, Plant, Harvest and Store.

This strategy is the same as above except crop insurance will be purchased at a cost of $.20 per bushel. The production cost now rises to $5.50 but in this case, compensation will be made if prices go below insurance levels. With this strategy your downside risk is protected and one can take advantage of any upside price move because the crop is in storage and not priced.
Strategies #1 and #2 are pretty basic and limited as to the amount of profit/loss to be made throughout the marketing season. The decision as to when to sell the cash hedges based on July 2015 corn futures has to be made. One can wait to see if a weather event is seen this summer, a bounce into spring 2015 or in July 2015 upon delivery. There is no use of the futures markets so the only loss will be if the desired target price is not seen and production costs in either strategy is not covered.

On Friday we will lay out the final other strategies and discuss revenue enhancement. Revenue enhancement refers to trading the market with strategies designed for minimal risk while attempting to enhance revenue by one to two cents after costs each month. One must always remember there is a risk when trading the markets and our strategies may not always work, but this strategy will be discussed in detail at a later date.

If anyone feels they need to put structure into their risk management decision-making 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.

 

2014 Corn Marketing Plan

Jan 28, 2014

For some time now, we have mentioned in our blog the services we have available to help the producer when marketing his anticipated corn production. Starting today and during the first week of each upcoming month we will post a hypothetical balance sheet of how our marketing strategies work to accomplish the desired target selling price. Along with the balance sheet, a summary of how each of the strategies is doing and any changes made in the initial plan to reflect the movement in the current market Logically, the producers using this service have a marketing plan designed especially for their specific needs and how they wish to market their production.

Over the next several blogs we will lay out the specifics of a hypothetical farm and its marketing strategies. We hope this endeavor to describe, track, and follow the strategies throughout a marketing season will show how the process works and give some insight. If you have any questions during the process, email me at laura@utterbackmarketing.com.

Farm: Let’s assume our producer has a 1200 acre farm in the Midwest. For the 2014 production year, this farm has designated 700 acres to corn and 500 acres to soybeans. Table One is the baseline figures for the farm.

Table 1: Baseline Figures

A storage cost of $.05 per month will only be used if the decision is made to store the anticipated production

SOURCE: UMS Past performance is not necessarily indicative of future results. Although very 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.
 

Assumption: We believe that, with a decent 2013 corn harvest, weak demand, the potential for a great corn crop coming on in South America and the 2014 growing season in the U.S., there will be little reason for December 2014 corn prices to move back above $5.25 unless a weather event is seen. It is more likely for December corn futures to see $4 or below this fall. At this level, our hypothetical farm would be producing corn below the cost of production. Decisions have to be made now before planting preparation begins and time is lost to other jobs on the farm.

First a decision has to be made as to how much profit above the cost of production is desired [normally 5% to 10% above costs would be satisfactory]. Therefore the target selling price for the 2014 marketing season is $5.3025 to $5.555. As of the 1/24/14 close, December 2014 corn futures contract was trading at $4.495 or $1.06 below the high end of our hypothetical selling target. If our core assumption is correct and there is a minimal amount of carry between the deferred contract months, we see only two choices:

• Sell off the combine and reown on paper.
• Store until March or July 2015 on the anticipation carry will widen and hope to possibly sell at a better price is given.

The difference in price can be made up by using all the marketing tools available to best sell the product about to be produced. Now is when decisions should be made regarding insurance, how and when to sell production, marketing diversification, and finally if an event is seen throughout the marketing year what steps will be taken in order to offset risk or defend the decisions already made. All of this is what makes a good marketing plan. For those producers using this service, we have made these decisions with them and individualized a marketing plan to fit their specific needs. Each month, statements will be sent to them, along with our recommendations and outlook for the following month(s). Having this information should help the producer make decisions or adjustments if necessary.

On Wednesday, we will describe two of the four marketing strategies to be followed, their costs and our thoughts on each strategy.

If anyone feels they need to put structure into their risk management decision-making 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. We welcome emails: 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.

 

Are the Near-Term Lows In for Corn?

Jan 24, 2014

For now or as I write this blog it seems that December corn may be consolidating a near-term low in the market. A close above $4.50 would certainly show strength and the potential for a move back to the $4.60 level but I continue to suggest December corn is in a sideways trading pattern for now. If you still have 2013 corn to be sold I would wait for a bounce in the market back to the $4.40 level and be done. Call our office if you would like to discuss reownership or revenue enhancement strategies.

(click to see larger image)

December 2014 Corn

cornchartutterback

SOURCE: UMS Past performance is not necessarily indicative of future results. Although very 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.

As for soybeans, with strong exports this week the nearby contracts closed up 8 to 9 cents on the day while the November 2014 contract closed at $11.09 up only ¼ of a cent. With continued good weather and the prospects of a good South American crop one has to consider being an aggressive seller on any bounce in the market. For now nearby contracts may stay firm or bounce on good news but the closer we get to harvest in South America one would have to assume China may begin to cancel orders. Be careful if you are long in the nearby soybeans, one might want to consider other alternatives.

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 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.

 

 

 

Corn Unable to Trend Higher

Jan 17, 2014

Corn continues its sideways trading pattern unable to break out to the upside. Seasonally this is the time period when bin doors shut and corn moves higher on the premise of fighting for acres. With sufficient supply, there is no reason for the market to show direction one way or another. Corn exports were up and there was a forecast of decreased production in Argentina and the market could only close up $.0125 from the previous week’s high. The trend is definitely sideways until a weather event is seen. A move above $4.62 would give the potential for the market to go back to the December high of $4.686 with the next line of resistance at $4.782.

One should be watching the U.S. Dollar, the March Dollar index closed today at 81.362 and a break above November’s high of 81.56 would imply the potential to move back to the 83.00 level. This would be bearish for all grain exports here in the United States.

We know we sound like a broken record but 2014 is not going to be easy making marketing decisions for corn when prices are at these levels and the crop is not even planted. Producers will have to be diversified in their selling and defend their decisions if the market moves in the wrong direction. It is our intent to recommend hold all short futures positions in the deferred May 2015 contract in an effort to benefit from positive adjustments in the Sep 2014/May2015 spread seasonally suggested from now into spring.

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 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.

 

Record Cold Temperatures to USDA Reports -- All in a Week

Jan 10, 2014

January started out with a bang, from record cold temperatures throughout much of the United States to a few surprises in the USDA reports. So let’s take a look, as for weather much of the Midwest will be above freezing this weekend with some areas calling for rain and the potential for flooding in January.

Now on to the reports, in a nutshell the corn numbers were considered bullish with a reduction in yield from 160.4 to 158.8 per bushel as well as a reduction in ending stocks at 10.426 billion bushels. What does this mean?

The slow grind down is over for now but it will be difficult for corn to move higher. December closed at $4.582 and one should anticipate a choppy to sideways trading band between now and the March Prospective Planting report with $4.70 to $4.75 as strong resistance and it would take some type of weather event to go above this level.

Soybeans came in at trade expectations so there were no surprises and continues to be at risk for lower to choppy trade. South America continues to have a great growing season along with continued rumors of the potential for increased 2014 planted acres in the U.S.

If corn were to see a weather event this spring, it will only add to the bearishness of beans. Producers should have a marketing plan in place with the decisions made as to how and when they will sell their soybean production. $11.09 is now resistance for November 2014 soybeans and the close below $11 makes way for the next downside objective of $10.69.

Finally wheat took the worst hit today with July wheat closing down 13 cents at $5.806.With increased wheat stocks and a loss of winter wheat acres one would have to anticipate very little recovery from today’s down trend. Look for our recommendations in the beginning of the week.

 

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 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.
 

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