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January 2012 Archive for Hedging Corn and Soybeans

RSS By: Howard Tyllas, AgWeb.com

Howard Tyllas is currently a member of the Chicago Board of Trade and registered with the Commodity Futures Trading Commission as a floor broker and as a Commodity Trading Advisor.

March Corn Daily Numbers & Trade I deas for 1 /12/12

Jan 12, 2012

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This report was sent to subscribers on 1/11/12 3:50 p.m.Chicago time to be used for trading on 1/12/12.

March Corn

After the close recap on 1/12/12: My pivot acted as resistance and was 4.185, .012 from the actual high, and my support was 4.109, .021 from the actual low.

March Corn

Use the same numbers as used on 1/ 10 & 11 /12
6.68 XX is the 200 DMA
6.63
-----------6.53 Pivot
6.42 ¾
6.35 ¼
6.24 ¾ to (6.19 ½ FG)
5 day chart.... Down from last week same day
Daily chart ...... Down
Weekly chart .......Down
Monthly chart .... Sideways 6.68 is the 200 DMA
ATR 13 ½ Balanced 56%

 

 

For 1/12/12: I continue to say "Gap from year end is support, and the daily numbers resist".

In my daily corn numbers on Wednesday; my resistance was .02 from the actual high; my support was .03 ¼ from the actual low.
1/12/12:

Grains: Spot on corn numbers and soybean resistance, soybean support was accurate. Long term subscribers can now sing the song of "I do not care what makes a market move to a support or resistance; I make money trading chart levels and numbers, not fundamentals especially when they are unknown". They have seen for themselves many times such as a bullish report causes the market to open sharply higher, and closes lower for the day. Many bullish reports in 2011 where followed within 4 days by draw downs that were $.95 or more. Nothing changed fundamentally in the 3:45 minutes of open outcry, or on the days that followed. They have seen how they really made money, by having a strategy, be able to execute what adds income, and not make bets based on fundamentals. They know how to use their "perception" of the fundamentals, and that is to use those thoughts (and guesses) for a "bias" only.

My guess for tomorrow would be no big deal or a little bearish numbers, and either should cause us to go down until we find real buyers. If it is bullish, I would sell any rally at resistance, and I would roll up whatever we could with puts and calls to lock in more. Unless it is really bullish, the fundamentals I consider bearish, and I am more confident selling rallies, than buying breaks. We still want them to rally and have to send in money to the hedge account, but we can more than live with them coming down. I just do not want our put spreads to run out. I will be looking at the report at 7:30 and I will send out my thoughts before 9am. I know that this huge report is exciting for most around us, but with our position it seems quite boring.... PERFECT!

Lastly, options today will see the winner will not win, and the loser will get killed. My producers are fortunate that we are at a high enough level that even if we get a bearish report, they have enough protection to withstand a limit down move in both soybeans and corn.

I want to trade the numbers, especially at an extreme number, and risk $.05 in corn and $.06 in soybeans using a stop to protect any idea.

1/11/12:

Grains: Spot on soybean numbers and accurate corn numbers. Spreading and position adjusting was the feature on Tuesday, and I expect more of the same today. All eyes will be on this report.

Average trade estimate for 2011 corn yield is 146.163 BPA and production of 12.265 BB, soybeans 41.358 BPA and production of 3.048 BB. Final quarter stocks are pegged at 9.391 BB of corn, and 2.324 BB of soybeans. And the number that means the most to old crop as well as old crop/new crop spreads is the projected ending stocks (carryout) for 2011/2012 of 749 MB of corn and 233 MB of soybeans.  

Monday MLK holiday allows the floor to be closed, but will trade Sunday night through Monday morning electronically. This means we will have report day and Friday to "absorb" the news and adjust positions before the 3 day weekend. I know my producers are well positioned for the downside, and will need to adjust if we go higher in order to capture more gains and allow for more upside. Everyone has the chance tomorrow to buy more downside coverage if felt needed if you are bearish, and you could roll some of your short calls or spreads if you are bullish. Nobody is stopping you from doing whatever you want to do; only you can do that. Write in your journal tonight and execute your plan tomorrow, even if it means to do nothing. NO "old ladies at the racetrack" are allowed in the real world of trading. Anyone who was a trader on the floor for years would never be able to "cry" like that to another trader, we would look at it like you dropped the winning touchdown catch in the end zone, and the ball hit you in the chest. No excuses allowed in the real world. Reasons maybe (and it is usually you), excuses never.  

"The horses are nearing the starting gate" and the windows are still open to place your wager on if corn and soybeans will rally or break. Allocating an exact "bet" is easy to do by buying known risk option strategies, and they also provide the exact "odds" when you make the wager. My producers do this throughout the year and I have stressed my "Goldie Locks" mentality on occasions like this report, to not do too much or too little, but asset allocation that is just right for them on this "one idea". Unless you have a conviction, I would do the least amount to satisfy yourself so you do not act like the racetrack lady. If the market rallies strongly or breaks hard and it would not bother you if it does because you have no idea what the market would do, then do nothing, THAT IS A POSITION.

I prefer to be strong and take what the market will give me, and I am more concerned with how the market reacts to the news than the news itself. You know I have always said no matter the market, I want to have a sell bias when at resistance levels, so if I did want to take a "longshot" bet, it would be a known risk option strategy and I would be short. I want to continue to day trade the numbers without bias and risk $.05 in corn and $.06 in soybeans using a stop to protect any idea. 

1/10/12:

Grains: Spot on grain numbers! March soybeans rallied back to resistance levels at November highs, and $12.35 held it back in the morning, as well as a retest late in the day. March corn did the same, but backed off early and never really regained its footing. Long time subscribers know I never think the market will be at an extreme price going into a MAJOR report, and that is why I like to day trade from the short side when at resistance levels before this report. Soybeans really went nowhere only breaking $.07 from its high once it was made, but corn broke $.12 once its high was made. Soybeans closed very well, but are having trouble at the same price it did today at $12.35. I have said for weeks, if corn got to $6.67 for whatever reason, I would be an aggressive seller.

Options premium still has a lot of premium kept in them for now, after the report the "steam" should be taken out of them. The Feb $6.50 calls settled at $.23 1/8 up $.01 7/8. If today was the last day, it would expire worth only $.02 ($.02 above $6.50). My producers have short $6.50 calls for the most part, and if they want to get bullish they only need to trade $.25 upside for waiting another month before expiration. Buy the Feb $6.50 call and sell the March $6.75 call, and pay only $.00 ¼ for the roll. So if you got $.08 ¼ for the Feb $6.50 call, you would still retain $.08 of it, and now you have your bin until $6.75, you traded for another possible $.25 in income without risking anything. Corn would need to expire above $6.83 before my strategy stops making money for you. (Of course you can continue to roll up or into the next month if the market continues to rally)  

Soybean Feb $12 calls settled with an extra $.20 in premium at $.52 ¾ but you can roll to the March $12.30 call and it would cost only $.04 1/8, because it settled at $.48 5/8. You keep all but $.04 of what you collected from selling the Feb $12 call, and now you can make $.30 more if above $12.30 on expiration or if you roll up the put spread now or later (cheaper if we rally, more expensive if it goes down) to lock in more than what you have locked in now.

The good thing for my producers is that if the market was testing support right now, we would be forced into buying more protection even though just above support, because with the threat from this report to open sharply higher or lower, being unprotected and not just paying a few cents more if the support fails, would make us pay the extra $.20+ for another $.50 protection. Being at resistance and being protected for $.50 down from here, is really in our favor not being forced into playing "D-Fence".

You know I have been trading with a bearish bias but not so much on Monday, but would continue to day trade the numbers without bias and risk $.05 in corn and $.06 in soybeans using a stop to protect any idea.

1/9/12:

Grains: Spot on numbers, and the soybean support was the exact low of the day. Bullish news (SA production perceptions) but closed lower on the week is not good news for the bulls. Depending on weather forecasts, the market should hold the gap left from 2011 year end at least going into the report on Thursday. Anyone who says they know where prices will end this week or even if it will just close up or down, should get a job as a comedian.

Before the report March corn chart looks to trade $6.59 ¾ (the high on Friday) on the high side, and the gap at $6.19 ½ on the low end, and the pivot would be $6.39 ½ (the low on Friday). December corn is just $.06 away from filling the gap that would make it unchanged on the year. At this time the threat of a huge 2012 crop has put a cap on the "new crop", you could see clearly it was the weakest link on the board. Any $.10 or $.15 rally before the report should be sold. I would not buy December 2012 corn, if I wanted to buy corn it would be the old crop March contract. There is little to no chance for the new crop to outperform the old crop if corn was going to rally. For now I prefer to do a Texas hedge, by selling both old and new.    

Soybean weather is not in a critical stage yet in SA, its weather game will be coming after the Jan report has come and gone. Old and new crop should more or less move in tandem for now unless the report surprises. March soybean chart is like the March corn chart, with Friday's high of $12.19 ¾ as resistance, and the gap from 2011 at $11.72 ½, with the pivot at $11.96.

Charts provided numbers to work with, and my producers for the most part have captured most of what the rally has given them, and the main concern always is if they have enough protection. The chart offers strong clues to what is needed, and each producer (or trader) must follow their own ideas of what is needed, and what is to be risked. If the market rallies, they will be more than ready to roll out of their Feb calls into the March calls, and roll up their puts at least enough to capture some more income in case the market comes back down before expiration, and even more if it continues up. My producers have the luxury knowing the protection they have slows down any major surprise, and will watch premium come into their accounts if the market does not produce more than a $.50 move. They all took the weight of the "gamble" and the stress that comes with it, and replaced it with a strategy that they can control the amount risked as they seek further gains. Anything less than a $.30 move for the week would be a non event.

You know I have been trading with a bearish bias but not so much on Monday, but would continue to day trade the numbers without bias and risk $.05 in corn and $.06 in soybeans using a stop to protect any idea.


1/6/12: Grains: Spot on grain numbers! Soybeans "filled the gap" and corn closed below the gap from Friday's close. Did it rain, or did all those pictures from SA already get all the action it can get for now? (Where are all the pictures of the fields that have a "bumper crop" growing?) I gave all the reasons I said I did not think we could sustain these levels, especially before next Thursday's USDA report. It is such a high risk report that it is far from likely that we will be at an extreme end of a support or resistance level going into it. Take a look at the charts and you will see that 2 Friday's ago (12/23/11) the gap for corn and soybeans is in the middle of the high posted this week, and the lows of December. Those gaps are pivotal to me for a longer term trade, as well as price discovery in the current time frame. Those gaps below are not just support (as always) but are pivotal too on the current charts.  

I think we will be closing near those gaps on the day before the report, which means soybeans would have $.70 and corn $.45 up or down from the pivot (the gap prices) to retest their support or resistance numbers. That is also a limit move in soybeans and $.05 more than limit for corn. 

My producers could care less that the grains broke on Thursday, they already have moved most or all their old crop (and some of the new) up to $6.40 march corn put spreads, and $12 soybean puts. It does not matter if we go down now; they have at least the first $.50 down from here. Before the roll up of their put spreads from let's say $6, they would not have made $.01 if the market would go down to $6 on expiration. Now the market could stay here, go down, or even better if it continues higher, it does not matter. Now we wait for either the market to come down to the gap support, or maybe by Wednesday for the premium to be worthwhile to roll to the March calls from the Feb.

I am not worried if we rally, my concern is the same as always, if you have enough protection if we go down. I want protection down to the low of December, anything less than that protection is your "gamble" that can save about $.04 for every $.10 protection below the current $.50 March corn put spreads, or $.80 March soybean put spreads.

Corn put spread "roll up" in December 2012 corn only moved 1/8 cent, from $5.50/$5 to a $5.80/$5.30 spread. To move to a $5.90/$5.40 put spread settled at $.06 1/8. Since the low of November and December "double bottomed" at $5.35, I need put spread coverage down to $5.30 or $5.40 for that reason. Since nobody knows for sure if we can get a report and weather this spring that could send us to retest the all time highs, or a report and weather that will not present an opportunity to "lock in" $5.90 for a long time, allocating some money to "lock in" higher prices on some of your crop seems like the prudent thing to do. This is just one example of the MANY times to reflect what YOU THINK into your hedge when you "morph" (or do not).

I have only 1 producer left who wanted to buy "his corn" back as I recently wrote. I told him I have no problem if he wants to speculate on the "long side" and allocate funds with a known risk strategy, but I have a problem when one "masks" a gamble with anything called a "hedge". To hedge, is to take risk off the table, never by putting risk on. It is easy for me to be strong enough to keep "reality" always in play, even when it means giving up thousands in commissions, not only once with this person, but twice in the last couple of months. I know I saved him $9,000 the first time, and he would be even at best on this one at this time, but win or lose I would make money. He knows that everything is his decision not mine and it does not matter if the trade idea works or not, what is the most important thing to me is to instill respect for the market, and change the way my producers "gamble". To gamble the same size as you produce ("your entire crop") seems to be a large wager. I insist on knowing what your risk is, and dividing that into how many contracts can you do with that money risked. If I wanted to risk $5,000 and each contract costs $.10 or $500, I can do 10 contracts. If I need to risk $1,000 to be proven wrong, then I can only do 5 contracts. I do this for a day trade, or a long term trade, I allocate money. All trades are not equal, either is what I want to "wager" on every trade idea. Some trades are worth taking, and some have "all the stars" lined up and I am licking my chops to bite into the trade. By learning "how to trade" and with much practice you find your account making money and growing, you can start to increase your account size. After a few years of success you might just feel there is a chance you can do this profitably in the long run. If that happens, the commissions generated much more money for me than what is lost promoting the "wrong mindset". This is a mental game, and control is a foundation.

I give all my producers an A+ on their report cards for the first time. Most of them have the perfect mindset, and have executed their plan to "lock in" profits and get 60 to 80% of what the market gave them, then to gamble that prices will be sustained or go higher. I did not think we could rally here, and I have a few producers a lot more bearish than me, and it tickles them pink that they could make money being WRONG, I really like that too. The people that were kind of "shootem up cowboy's" and needed action when we first met, are now much happier to have much less "action" but have much more money. 

I would trade today with a bearish bias, and would continue to day trade the numbers without bias and risk $.05 in corn and $.06 in soybeans using a stop to protect any idea.

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WASDE Report 1/12/2012

Jan 12, 2012

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WASDE Report for 1/12/12

OILSEEDS: U.S. oilseed production for 2011/12 is estimated at 91.2 million tons, up 0.2 million tons from last month. Larger crops for soybeans and canola are partly offset by reductions for cottonseed, sunflowerseed, and peanuts. Soybean production is estimated at 3.056 billion bushels, up 10 million based on increased yields. The soybean yield is estimated at 41.5 bushels per acre, up 0.2 bushels from the previous estimate. Soybean crush is lowered 10 million bushels to 1.615 billion reflecting industry-reported data through the first quarter of the marketing year. Soybean exports are projected at 1.275 billion bushels, down 25 million from last month and down 226 million from 2010/11. Soybean ending stocks are projected at 275 million bushels, up 45 million. Soybean product changes include a lower soybean oil extraction rate, lower projected soybean oil exports, and increased soybean oil ending stocks.

The 2011/12 U.S. season-average soybean price range is narrowed 25 cents on both ends of the range to $10.95 to $12.45 per bushel. The soybean oil price is forecast at 50.5 to 54.5 cents per pound, unchanged from last month. The soybean meal price is projected at $290 to $320 per short ton, up 10 dollars on both ends of the range.

Global oilseed production for 2011/12 is projected at 457.4 million tons, down 0.3 million with lower soybean production more than offsetting higher projections for sunflowerseed and rapeseed. Global soybean production is projected at 257 million tons, down 2.2 million mostly due to lower production forecasts for South America. The Argentina soybean crop is projected at 50.5 million tons, down 1.5 million due to lower projected area and yields. Excessive heat and dry conditions since December throughout much of the principal growing area is expected to limit soybean plantings and reduce yields from earlier expectations. The Brazil soybean crop is reduced 1 million tons to 74 million reflecting hot, dry conditions in recent weeks, especially in the second largest producing state of Parana where planting was more than half completed by late October. Favorable growing conditions in the main center-west region are expected to partly offset crop losses in the south. Global sunflowerseed production gains mostly reflect larger crops in Russia and Ukraine. Preliminary official harvest data from the State statistical agency indicate a higher yield for Russia, resulting in a record 9.6-million-ton crop. Ukraine sunflowerseed production is projected higher at a record 9.5 million tons based on increased harvested area. Other changes include increased rapeseed production for Australia and lower cottonseed production for India.

Global oilseed trade for 2011/12 is projected at 113.1 million tons, down 0.9 million mainly reflecting reduced soybean trade. Lower soybean exports for Argentina and the United States are only partly offset by an increase for Brazil. Imports are reduced for EU-27, Russia, Taiwan, Japan, and Turkey. Soybean imports for China are unchanged at 56.5 million tons. Global oilseed ending stocks are projected at 74.8 million tons, down 0.7 million from last month as reduced soybean stocks in Brazil and Argentina are only partly offset by higher U.S. soybean ending stocks.

WHEAT: U.S. wheat ending stocks for 2011/12 are projected slightly lower this month as reductions in expected domestic use mostly offset higher projected exports. Food use is projected 5 million bushels lower based on flour production data recently reported by the North American Millers' Association for July-September 2011. Feed and residual use is projected 15 million bushels lower as December 1 stocks, reported in the January Grain Stocks, indicate lower-than-expected disappearance during September-November. Seed use is raised 4 million bushels based on the winter wheat planted area reported in Winter Wheat Seedings. Projected exports are raised 25 million bushels based on the pace of sales and shipments to traditional markets. Increases for Hard Red Winter, White, and Soft Red Winter wheat more than offset a reduction for Hard Red Spring wheat. Ending stocks are projected 8 million bushels lower at 870 million. The 2011/12 season-average farm price is lowered 10 cents per bushel on each end of the range to $6.95 to $7.45 per bushel.

Global wheat supplies for 2011/12 are projected 2.7 million tons higher with production raised for Kazakhstan, Brazil, and Russia. Kazakhstan production is raised 1.5 million tons as nearly perfect growing season weather is reflected in a new record yield. Production is raised 0.8 million tons for Brazil, in line with the latest government estimate. Production for Russia is raised 0.2 million tons reflecting the latest official estimate.

Lower 2011/12 projected exports for Australia are more than offset by increases for the United States and Russia. Global consumption is raised with a 1.0-million-ton increase in expected domestic disappearance in Kazakhstan where record supplies will be difficult to store and maintain. Global ending stocks for 2011/12 are projected 1.5 million tons higher at 210.0 million.

COARSE GRAINS: U.S. feed grain supplies for 2011/12 are projected higher as an increase in estimated corn production more than offsets a reduction for sorghum. Corn production is estimated 48 million bushels higher with a 0.5-bushel-per-acre increase in yield and a 45,000-acre increase in harvested area. Sorghum production is lowered 32 million bushels with yields estimated 0.9 bushels per acre lower and harvested area reduced 503,000 acres.

Corn use for 2011/12 is raised with higher exports. Exports are projected 50 million bushels higher reflecting the strong pace of sales to date and reduced prospects for Argentina. Ending stocks are projected 2 million bushels lower at 846 million bushels. The 2011/12 season-average farm price for corn is lowered 20 cents per bushel on each end of the range to $5.70 to $6.70 per bushel. Prices received by producers to date have remained well below prevailing cash bids limiting the upward potential for the season-average farm price.

Other 2011/12 feed grain changes this month include a reduction for sorghum feed and residual use and an increase for barley feed and residual use, as indicated by the December 1 stocks. Sorghum exports are reduced with the smaller crop and sluggish export sales. The sorghum farm price is projected 10 cents per bushel lower on both ends of the range to $5.60 to $6.60 per bushel based on reported prices to date. The barley farm price is projected at $5.15 to $5.65 per bushel compared with $5.20 to $5.80 per bushel last month as reported farm prices for malting barley drag down the season average for all barley. The oats farm price range is narrowed 5 cents per bushel on both ends of the range to $3.25 to $3.55 per bushel.

Global coarse grain supplies for 2011/12 are nearly unchanged this month as higher corn production in the United States, Ukraine, EU-27, and Russia is mostly offset by lower expected corn production in Argentina and the lower sorghum production estimate for the United States. Global barley and oats production are also raised, mostly reflecting higher crop estimates from Russia.

Argentina 2011/12 corn production is lowered 3.0 million tons as extended dryness since late November and periods of extreme heat in late December and early January have sharply reduced yield prospects. Recent rains have brought much needed relief from high temperatures and dryness and are expected to stabilize crop conditions, but substantial damage has been done, especially to corn that was exposed to heat during pollination and early grain fill. Corn production is raised 1.5 million tons for Ukraine based on the latest official indications of record yields and output. EU-27 and Russia corn production are each raised 0.4 million tons based on the latest official estimates. Brazil corn production is unchanged as rising area prospects for second crop corn offset a reduction in first crop yields resulting from December and early January dryness in the southern growing areas.

Global corn trade for 2011/12 is raised slightly with lower projected corn exports from Argentina more than offset by higher exports from the United States and Russia. Imports are raised 1.0 million tons for China, more than offsetting reductions for Syria and Taiwan. World corn ending stocks are raised 1.0 million tons as lower stocks in Argentina are more than offset by higher stocks in Ukraine and China. At 128.1 million tons, global stocks are nearly unchanged from 2010/11.

SUGAR: Projected U.S. sugar supply for fiscal year 2011/12 is decreased 578,000 tons, raw value, from last month, mainly due to lower imports from Mexico. Mexico's sugar exports are reduced to reflect lower availability, as production is dropped based on lower-than-expected sugarcane yields and sugar recovery from harvested sugarcane for the season to date. Also, Mexico's sugar imports are lowered to reflect the slow pace of entries under two previously announced tariff rate quotas (TRQ). Other reductions in U.S. supplies include a minor reduction in production (Texas) and TRQ imports from Dominican Republic. Sugar use in the United States is unchanged from last month.

LIVESTOCK, POULTRY, AND DAIRY: The 2012 forecast of total red meat and poultry production is raised from last month, largely reflecting increased pork production. USDA's Quarterly Hogs and Pigs report estimated that the second-half 2011 pig crop was just over 2 percent higher than 2010 and indicated that producers plan a slight decline in sows farrowing in the first half of 2012. However, with continued gains in pigs per litter, more hogs are expected to be available for slaughter and the 2012 pork production forecast is raised from last month. Beef production is little changed from last month although adjustments are made to the quarters. USDA will release its Cattle report on January 27, providing an indication of producer intentions for heifer retention in 2012 and feeder calf availability. Poultry production forecasts are unchanged. Egg production is lowered slightly for 2012. For 2011, small changes are made, with beef and pork production estimates raised, but broiler and turkey estimates lowered. The egg production estimate is unchanged.

Trade forecasts for beef, pork, broilers, and turkeys are unchanged for 2012. Beef, pork, and turkey estimates for 2011 are unchanged but broiler exports are raised due to stronger-than-expected shipments in October.

Cattle prices for 2012 are unchanged from last month. The annual average hog price is lowered reflecting a lower first-quarter price forecast. The first-quarter broiler price is raised but the annual price range is unchanged. Turkey and egg prices are raised from last month. Prices for 2011 are adjusted to reflect December estimates.

The milk production forecast for 2011 is lowered slightly on lower expected cow numbers for the fourth quarter, but the forecast for 2012 is unchanged from last month. Larger-than-expected cheese imports for 2011 and into 2012 boost fat-basis import forecasts, but the strength of cheese imports in 2012 is offset by lower expected imports of skim products resulting in a lower 2012 skim-solids import forecast. The skim-solids exports estimate for 2011 is raised on higher-than-expected October exports.

The forecast 2012 cheese price is lowered, but forecasts for nonfat dry milk (NDM) and whey prices are raised. The higher whey price is expected to more than offset the lowered cheese price forecast, resulting in a higher forecast Class III price. The higher forecast NDM price results in a higher Class IV price. The all milk price for 2012 is raised to $18.30 to $19.10 per cwt.

COTTON: This month's 2011/12 U.S. cotton estimates include slightly lower production and lower exports, resulting in a net increase in ending stocks. Production is lowered 153,000 bales, as a reduction for upland cotton in Texas is partially offset by higher estimated extra long staple (ELS) cotton production. Domestic mill use is unchanged. Exports are reduced 300,000 bales to 11.0 million due to lower U.S. supplies and strong competition from foreign exports. Ending stocks are raised to 3.7 million bales, equivalent to 25 percent of total use. The forecast marketing-year average price received by producers of 86 to 94 cents per pound is narrowed 1 cent on each end of the range.

The world 2011/12 cotton estimates show slightly lower production compared with last month, with consumption reduced about 1 percent. Production is reduced mainly in India and the United States. Consumption is estimated 1.0 million bales lower for China, as the substantial accumulation of cotton in the national reserve is expected to support prices and constrain mill use. Consumption also is reduced for Thailand. World ending stocks are raised 700,000 bales to 58.4 million. The forecast stocks-to-use ratio of 53 percent is above both the 5- and 10-year averages.

RICE: The U.S. 2011/12 rice crop is estimated at 185.0 million cwt, down 3.1 million from the previous estimate due primarily to lower yields. Average yield is estimated at 7,067 pounds per acre, down 100 pounds per acre from last month, but an increase of 342 pounds per acre from 2010/11. Harvested area is estimated at 2.618 million acres, down 6,000 acres from the previous estimate. Long-grain rice production is estimated at 116.4 million cwt, down 1.1 million from last month, and combined medium- and short-grain production is lowered nearly 2.0 million to 68.6 million. Rice imports for 2011/12 are unchanged from last month.

The National Agricultural Statistics Service's (NASS) Rice Stocks reported total rough rice stocks at 146.9 million cwt as of December 1 and total milled stocks at 6.2 million (9.1 million cwt on a rough-equivalent basis). Total rice stocks on a rough-equivalent basis are 155.9 million, down 15 percent from a year earlier. Long-grain stocks as of December 1 are estimated at 96.9 million (rough-equivalent basis) and combined medium- and short-grain stocks at 56.2 million.

Rice 2011/12 domestic and residual use is lowered 3.0 million cwt to 124.0 million cwt-all in the long-grain class. Long-grain domestic and residual use is projected at 89.0 million cwt, and combined medium- and short-grain at 35.0 million. The decrease in domestic and residual use is implied from the higher-than-expected December 1 stocks estimate. All rice exports are lowered 1.0 million cwt to 90.0 million-all in the long-grain class. The pace of exports and sales of long-grain rice is lagging based on U.S. Bureau of Census data through October and U.S. Export Sales data through December. Long-grain exports to the Western Hemisphere have been lagging due to competition from South America, principally Brazil. Additionally, long-grain exports to the Middle East have been lagging due to strong competition from other suppliers. Conversely, the pace of sales of combined medium- and short-grain rice is supportive of the current export forecast. The 2011/12 rough rice export projection is lowered 1.0 million cwt to 33.0 million, while exports of combined milled and brown rice are unchanged at 57.0 million cwt (rough-equivalent basis). All rice ending stocks for 2011/12 are projected at 38.5 million cwt, up 0.9 million from last month, but down 10.0 million from 2010/11. Long-grain rice ending stocks are forecast at 20.6 million cwt, up 2.9 million from last month, but a decrease of 15.1 million from the previous year. Combined medium- and short-grain rice ending stocks are projected at 15.2 million cwt, 2.0 million below last month, but an increase of 5.1 million from 2010/11.

The 2011/12 long-grain, season-average farm price range is projected at $13.50 to $14.50 per cwt, unchanged from last month, while the combined medium- and short-grain farm price range is projected at $15.00 to $16.00 per cwt, down 50 cents per cwt on each end. The all rice season-average farm price is forecast at $13.80 to $14.80 per cwt, down 20 cents per cwt on both ends of the range.

Global 2011/12 rice production, consumption, and ending stocks are raised slightly, and trade is lowered from a month ago. The increase in global rice production of 0.6 million tons to a record 461.4 million tons is due primarily to larger forecast crops for Bangladesh and Cambodia, which are partially offset by reductions for Brazil, Pakistan, North Korea, and the United States. Larger forecast Aus and Aman seasonal rice crops in Bangladesh led to the forecast record crop at 34.0 million tons, up 1.0 million from a month ago. Global domestic disappearance (includes post-harvest losses) is raised mostly due to increases for Cambodia and Thailand. Global trade is lowered as import forecasts are reduced for Bangladesh, the Philippines, and Russia. Export 2011/12 forecasts are lowered for Brazil, Thailand, and the United States and raised for Cambodia. Global 2011/12 ending stocks are forecast at 100.1 million tons, up 0.6 million from last month, an increase of 2.9 million from 2010/11, and the largest stocks since 2002/03. Global ending stocks are up primarily due to increases for Bangladesh, Thailand, and the United States, which are partially offset by reductions for the Philippines and Brazil.
 

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Disclaimer: No guarantee of any kind is implied or possible where projections of future conditions are tempted. Futures trading involve risk.In no event should the content of this be construed as an express or implied romise, guarantee or implication by or from Howard Tyllas, that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.

 

 

March Soybean and Corn Daily Numbers, and Trade Ideas

Jan 06, 2012

The grain numbers were sent to subscribers on 1/4/12 2:05 p.m. Chicago time to be used for trading on 1/5/12.

March Soybeans

After the close recap on 1/5/12: My pivot acted as resistance and was 12.32 ¼, .01 ½ from the actual high, and my support was 12.07 ¾, .01 from the actual low.

March Corn

After the close recap on 1/5/12: My pivot acted as resistance and was 6.58 ¼, .01 ½ from the actual high, and my support was 12.07 ¾, .021 from the actual low.

Subscribe now! Do yourself a favor and get your numbers after the market is closed to be used for the next session trading. Ask yourself how much would it have been worth to read my comments and get my numbers 14 hours before today's open outcry?

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March Soybeans 
                                                   
12.61
12.44 ¾
--------------12.32 ¼ Pivot
12.20
12.07 ¾ FG

5 day chart... Up from last week same day
Daily chart .... Down
Weekly chart ... Down
Monthly chart Up $13.09 ¾ is the 200 DMA
ATR 23 Overbought 86%

March Soybeans

chart, March numbers) The gap left from Friday is support and then the uptrend line, and my daily numbers resist.

In my daily soybean numbers on Wednesday; my resistance was .09 from the actual high, my pivot acted as support was .05 (.03 ¼ in open outcry) from the actual low.


March Corn


6.71
6.64 ¼ 6.67 is the 200 DMA
-----------6.58 ¼ Pivot
6.52 ¼
6.46 ½ FG
6.40 ½ Use the same numbers as used on 1/4/12
5 day chart.... Up from last week same day
Daily chart ...... Down
Weekly chart .......Down
Monthly chart .... Sideways 6.67 is the 200 DMA
ATR 13 ½ Ex. Overbought 91%

March Corn

 For 1/5/12: Gap from Friday is support, and the daily numbers resist.

In my daily corn numbers on Wednesday; my resistance was .02 ½ from the actual high; my support was .01 ¼ from the actual low.

1/5/12:

Grains: Spot on corn numbers and soybean support, soybean resistance was accurate. Trying to pick a top in a weather market is not easy to do, so I do not want to get aggressive unless at extreme resistance levels, or until after the report next Thursday. Last two 3 day weekends produced gap higher opens that have held up well. March corn has the 200 day moving average at $6.67 helping to resist further advances. Corn and soybeans are trading at 60% of their average trading range, and reduced volume, does not bode well for further advances of significance.

Almost all options closed lower on the day, long overdue for the start of time decay. I expect premium to come down today, options are still expensive. You can ... Subscribe Now..., and I would trade the numbers without bias and risk $.05 in corn and $.07 in soybeans and use a stop to protect any idea.

1/4/12:

Grains: Spot on soybean resistance and accurate corn resistance numbers, but support numbers were not in play due the sharply higher open. I did not look at the weather before the open, but the floor was called sharply higher due to hot dry conditions in SA. Pinning the tail on the donkey I would also add a weaker dollar, sharply higher crude oil prices, friendly charts, and the appetite of investors for commodities and equities. I look at the fact that if SA loses 10 MMT from what was predicted a few weeks ago, will be nothing compared to a 45+ MMT gain in the US 2012 crop if we get average trend yields.

March corn has rallied $.88 since 12/16/11, and I consider it a rally in a bear market. I look at my experience gained and wisdom learned, to be cautious in selling too aggressively while the market is taking production away (for now) and the possibility for more of the same weather to linger. I also know that before the January Final report (next Thursday) there will be a big chance for profit taking going into this very risky report. Maybe this year the pattern will be the same as in 2011, within 4 days after a bullish report, the market sells off significantly. Who knows what the USDA will do, with less coming from SA they could increase our exports, and guessing what 2011 production will come in at is like throwing darts blindfolded.

Now that corn is at the 200 day moving average, has priced in current weather by the closing bell on Tuesday, market corrected $.88, is extremely overbought, and there is a major report next week. I want to roll up whatever I could in corn to "lock in" what the market has given me. My producers have done extremely well by rolling into March when corn and soybeans were near the bottom. Not only did they get every penny of the down move because there long puts were deep in the money and acted like futures, and the short puts were almost worthless when the roll was done, but they bought "at the money" put spreads and allowed about $.40 more potential income if the market could rally and stay above $6.50 on expiration. Almost everyone moved a significant portion of their puts up already, so if it cost $.08 to do so, they made another $.32 not $.40.

Soybeans added even more income, because most allowed $.80 above their put spread. Most had their crop back above $11.20 or $11.60 after buying back their January shorts sold above $12, and moved up to $12 for March already. Take all costs off the extra $.80 and you need to pinch me to make sure I am not dreaming, that the market rallied this much. At one time today (when on the high) their soybean position was up $.15, and the corn was up $.09 since Friday (futures gain versus what was lost on the hedge position).

About ½ my producers called in, but all elected to take my advice and NOT rolling up to a higher strike in March just yet. Yes I would recommend doing that in 2 weeks or more from now at this price level, because most of the premium will be "sucked out" of the calls by then. I told them all to remember, if this was the last day and we closed at $6.58, the $6.50 call is worth $.08, and your bin is worth $6.58. They sold the call at $.09 (more or less) and that means that nothing was lost on the call, but their bin gained from $5.90, $6, $6.20, or above wherever their put spread starts, to $6.58. The put spreads are or will be paid in full by the time the March options expire. $.38, $.58, or $.68 profits, or take off whatever spent, and we have WINDFALL PROFITS once again, and this is from about 12/19/11 when the roll was made into March!

When you can make that much money no matter bull or bear, and the only risk is not having enough put protection if the market goes down, is truly amazing, but it is what I totally expect from my strategy, what amazes me, is all the opportunities the grain markets offered us the last few years, up and down. My producers who called me today understand the advantage of being the casino owner, rather than playing the game of buying the market, or selling the market, and lose money if they are wrong. How easy do you think it would be to get long this market, and watch it go down below $5.80 corn and $11 beans, and hold it long enough to make what my producers made by NOT risking money and just WATCHING to see if the market can rally and add income they way it did? They did not need to bet on it, the strategy "baked" those thoughts of the "what if" into the strike prices selected less than 3 weeks ago.

On all the hedges that have already been rolled up to the call strikes, wait for the market to come down enough to buy back the short Feb calls when the premium comes out, because when you roll, less of the premium will be lost in the March calls.

December 2012 corn was actually $.01 lower for the day in mid-session, but was dragged higher by the strength in the old crop. If there is a shortfall in SA production, this is bullish the "old crop" because there will be less supply to last until 2012 crop is harvested. But it more depends on when the US gets planted, if in early that really hurts the old crop/new crop spread, but if it gets in late, that is bullish the spread relationship. Less SA supply equates to more US exports, but high prices destroy demand such as feeding livestock or grinding for ethanol. It is a constant flowing market, with supply/demand the ultimate driver of direction, and price where the real buyers and sellers show up, is the ultimate support and demand.

In my 36 years in trading the grain market, I have never seen a fundamental picture that comes down to abstract data and unknowns to work with, and the need for at least what the USDA Jan final report will show, will give us something to "secure our feet to the ground" type of fundamentals. I am sure the losers of the report will tell why they do not believe the numbers, and the rest of us will go back to the "guessing game" of how many acres will be planted in the US, and how much of it will go to corn, and soybeans.

Nothing has changed, $3 or $13 is possible 1 year from today, so I have no problem betting on it no matter if you were a bull or a bear, just make sure the amount you wager is not significant on 1 trade idea, the risk is known, and you have a plan. If I had to wager long term from here, I would play the short side.

Markets are quiet tonight on very low volume, and the funds have already morphed from being short to now long. In the last 2 weeks the funds bought about 74,000 corn contracts, but open interest went down 85,000 contracts, which is short covering action. Back in the day of open outcry only, I learned early on from someone who saved me time, money, and energy, by explaining to me the function of being a floor trader on a day where the open is called sharply higher or lower. He explained that the loser will be paying up on a sharply higher open, or will be selling it under if the market is sharply lower to get out, and the emotional trader looking to get in because the market will keep going up (or down) and disregard price on entry. I learned that the "big boys" who really were the liquidity in the grain market, would not sell at a reasonable price on the open, but at a price that no matter if the market would be limit bid an hour later, they would be able to get out for a profit starting minutes after the opening bell sale price. "Why are you here, to do a stranger a favor? You have no position and the market is going to be sharply higher, you want to make sure it is at a price where you have little to lose if the market takes out the high of the opening range, but has a good chance to hold (since it is a strong resistance you sold at) and get out in the first few minutes for a good profit, more than risked".

The highs were made on the opening bell Tuesday, and within minutes corn broke $.05 ¾ and beans broke more than $.12, by the end of the day soybeans posted almost $.21 loss from the high from the opening bell. I trade price and time, I use my charts for levels of where prices are likely to support and resist, and take trades from my ideas and risk a little using a stop, looking for a nice reward if right. 99% of the time I traded much less than my account size would allow. I do not get excited easily, and it is usually when I make money when totally wrong, I like that. Everything else I expect, winner or loser, no emotions about it. News even significant, make me yawn unless it is good news in the long run for my producers. My mindset has always been to participate in the market and try to take what the market gives me, not to stand there 24 hours a day, every day, and fight it out, no thank you.

The markets did gap higher and that is supportive, and has a chance to post further gains in an emotional market that has less volume now. You think the market is going higher, plan a risk reward, allocate funds and do it. Keep a journal, and do not tell yourself what you should have, cudda, or woulda done, that means YOU are the problem for not being able to listen and execute what you think. Want to bet $10 on that horse, football game, or corn going up or down, no problem, it is only a problem when the amount risked is beyond a reasonable wager.

I told you the reasons why I wanted to sell rallies last week, and for the most part worked out well. At times it was like salmon swimming upstream though. I still feel the same for this week unless really bullish weather, and I still say "The gaps from (last) Friday will be strong support and could be retested, and I continue to say I prefer to sell rallies this week, and I would trade the numbers without bias and risk $.05 in corn and $.07 in soybeans and use a stop to protect any idea".

1/3/12:

Grains: Spot on grain numbers. Comments from Friday said everything. Weather is the compass that will either point north or south, and then it is a question of "value" based on current guesses of what production could be. It is ridiculous to think they can be anything but lucky if what they guess actually is produced. So it is really a matter of wanting to bet that the weather will stay dry, or rainfall will get back to normal before too much production is lost. On Monday night going forward, no matter if the direction is up or down, the question will be how far up (or down) the market could go before sellers (or buyers) will show up and end the move. Weather market or not this is always the case, but with weather markets, it could swing past value areas due to emotions, and the fear of the unknown production gains (or losses) makes one think the market will continue trading higher (or lower).

Forecasts will be the fuel, and the more extreme the forecast, the more fuel for the move. Not only does that hold true for continued hot/dry weather, but if a change of weather occurs and forecasts are for plentiful rainfall for an extended period.

All participants are not sure what the other will do to start the year, and this is also futile to predict price as is fundamentals now. I look at the charts for trade ideas, not only day trades but longer term trades. January soybeans are still in bull bode for 2 weeks now, gapping higher last week to end the year on a high note. The steep uptrend line starts the week at $11.84, and then the gap support at $11.63 keeps the bulls in control for now. November high of $12.31 ½ would be an objective and then resistance at $12.50 would be next.

March corn also ended the year on a bullish note, and since the high in November was just above the high of October, $6.76 ¼ will be strong resistance. Gap at $6.52 is the first resistance and if hurdled on Monday night especially if it gaps higher, would bode well for bigger gains.

New crop will follow the old crop and should underperform the old crop gains or losses. My producers gained from $.05 to $.15 in the bin more than they lost on their position, and that was just on Friday. The market did leave in quite a bit of premium, and it will take more than a $.04 move for ... Subscribe

Everyone had some of their bin back from above $5.90 to $6.20, and more at $6.30, so everyone made more income and have locked in $6.40 now. Whatever the cost of the put spreads and roll up, minus the premium collected from the short Jan calls, and then the Feb calls, plus the commission, is the income made since the December roll. If you had $5.90 puts, and now locked in $6.40 puts, that is a $.50 gain, minus the cost (puts bought/calls sold) is what the profits is in just the last 2 weeks. Depending on how bullish or bearish the person was, after just selling 2 months of calls (1 more coming selling the March) the put spreads were already paid for, or just a handful of cents more to collect when they sell the March. It also cost money to roll up to $6.40. Even with that cost and roll up the short Feb call to March now, or when the Feb is a few days to expire, you should more than make up for the rest of the puts rolled to $6.40. This means a $.50 gain by the time March expires, or at least $.40 profit if you sell your cash when the Feb is ready to expire (and the premium is sucked out of it). $.40 gain in 6 weeks, really? Just check my past comments, or ask my producers, and they will tell you that is factual.

Same goes for soybeans, many moved from the original $11.60/10.80 put spreads were rolled to the $12/11.20 (both old and new crop), and for the old crop that means another $.40 minus expenses (in 2 weeks). Many had some at $11.30 and $11.20 put spreads, which makes for $.70 to $.80 gains minus expenses. This is a great income for a year let alone 2 weeks, but they must wait for at least 3 weeks (same as corn) to get most of the premium. When my producers send me money I know they are making much more money than they are sending in. And the best part is it did not matter if they were bullish or bearish 2 weeks ago when they rolled from the Dec, they made more money because it rallied. They could be bearish one day and 3 days later not, and bearish again and 3 days later they might not know what to think, and it does not matter because they are not trading so to speak, they are just managing risk (the downside) and allowing for some upside. They are waiting for the basis to get better, and if they store on farm they are paying themselves to store by collecting another $.04 a month from the carry (May futures are $08 ¼ over the March).

The last three years my producers made unheard of windfall profits, and this year are more encouraged to "gamble" using my strategy because they understand for themselves how they are more like the casino owner than the player they used to be. They understand that when in the bin is when they have the utmost control. The only time they cannot cash sale, is when the market goes down and there is too much time left in the puts and they have not come to full value. When it rallies though they can benefit even more than on expiration, ... Subscribe now.

 

Want to know what I think for tomorrow and going forward?

The 6 markets now covered daily are Soybeans, Corn, Crude oil, S&P, 30 yr TBond and Gold

My numbers usually are sent at least 12 hours (via your email) in advance of the next day open outcry session. Subscribers use them as best suited to their own needs and sometimes that involves the overnight trade.

Find out why my subscribers from Canada, China, Czech Republic, Germany, India, Switzerland, South Korea ,Turkey and the UK keep renewing this service.

HowardTyllas Daily Numbers & Trade Ideas cover 6 markets for less than $10 a day.

HowardTyllas Daily Numbers & Trade Ideas is designed to help you plan your trading strategies for the coming day.

$199.00 USD for each month, renewable monthly

HowardTyllasDaily Numbers & Trade Ideas $ 199.00

If clicking on the above link does not work please copy and paste the following in your browser:

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Howard Tyllas

Put yourself in a position to make money, use the daily numbers service!

Email: dailynumbers@futuresflight.com
http://www.futuresflight.com/

Tel.1-312-573-2699, 1-312-823-9189

Disclaimer: No guarantee of any kind is implied or possible where projections of future conditions are tempted. Futures trading involve risk.In no event should the content of this be construed as an express or implied romise, guarantee or implication by or from Howard Tyllas, that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.



 

 

 

 

 

 

 

 

 

 

                                                   

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