Aug 31, 2014
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January 2012 Archive for Standard Grain

RSS By: Joe Vaclavik

Joseph Vaclavik is the president at Standard Grain in Chicago. Standard Grain provides futures and options brokerage to farms, feedlots, elevators, processors, end-users and traders. Visit www.standardgrain.com for more information.

 

Rebound Overnight, Russia Rumors/Weather Rally Wheat...

Jan 31, 2012

 

·         Corn and wheat rebounding from yesterday’s break while soybeans lag behind; Trade growing concerned over issues regarding wheat in Russia and Ukraine
·         Combination of harsh winter weather, which has slowed cash grain movement, along with rumors that Russian government will take measures to restrict grain exports, have the trade concerned; Wheat bull spreading heavily and showing strength in the front month contracts
·         Outside markets mostly positive for grains with US$ lower, crude sharply higher and back over $100, equities higher
·         Japan corn imports from EU hit a record 1.5mmt due to high US prices, but still seeking to buy 1.0mmt of US corn for Jan-March period
·         ADM quarterly profits fall 89% as the ag giant made less money on its various commodity businesses
·         Heavy t-storms hit some of Argentina yesterday, but missed many key growing areas; Scattered storms to continue through Friday; Significant rain/snow event headed for US plains around Thursday night, which could affect cattle and wheat areas
 
The soybean market certainly seems to be convinced that recent rains in S. America have had a positive impact on the crop, although many crop scouts and agronomists agree that there is irreparable damage. Wheat strong on Russian rumor and weather issues both domestic and abroad. A major wheat rally could go further than you might guess as funds are loaded up short. Corn is hanging around recent highs. We believe that Dec ’12 corn could see a nice run higher over the next couple of months. There needs to be 95+ million acres of corn this spring, and it’s the market’s job to ensure that it happens. We’re more neutral the soybean market than anything, low US acreage and SAM weather issues are both supportive. Today might be a good day to stay on the sidelines. 
 
Note: I will be in Nashville at the NCBA Convention on Wednesday and Thursday this week. I will be in Dayton, OH to speak at the Brugler Marketing event on Friday and will return to the office on Monday. I am readily available via phone or email.   
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Bears Get a Lower Trade Overnight, Outsides Negative...

Jan 30, 2012

 

·         Grains lower overnight, correcting from last week’s rally; Outside markets mostly negative for commodities with US$ higher and crude/equities lower
·         Some forecasters calling for better rains for Argentina and S. Brazil, some traders concerned with Russia/Ukraine winter wheat weather
·         Market chatter continues with talk that Russia will restrict/limit grain exports in some way this spring
·         Poor weather preventing grain exports from ports in Ukraine/Russia; Severe frost slowing the pace of cash grain movement
·         Managed money bought soybeans and sold corn in the week ending last Tuesday
·         Last week’s fed decision to keep interest rates near zero for 3 years certainly providing underlying support for commodities as a whole
·         Interior cash grain markets remain strong; Farmer selling improved slightly late last week on the seldom-seen coincident of a rally in both basis and futures
 
The bears will get their lower open today, and the lower trade could hold throughout the day. Remember, bull markets open lower and close higher. This will be a good test. I believe that even if we were to hold a lower trade today, there is still major potential for March corn to test resistance in the 6.60 area. Not much has changed fundamentally, other than some run-of-the-mill outside market movement. March soybeans looking to test $12 psychological support this morning. It looks as if some short covering is still being seen in wheat, as spreads rally. Thinking ahead, we wouldn’t be surprised to see some sort of “Turnaround Tuesday” action tomorrow IF the lower trade holds today. 
 
Note: Be sure to stop by the Straits Financial booth at the National Cattlemen’s Beef Association Convention in Nashville this week! I will at the booth for the most of the day on Thursday.   
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438  

Corn Strong Overnight, Soy/Wheat Mixed...

Jan 27, 2012

 

·         Grains mixed overnight with corn showing strength after yesterday’s sell-off; Technicians still describing corn as a being in a “neutral” phase, however recent spread action makes us lean slightly bullish
·         Grain exports were solid yesterday; Combined old and new crop corn exports over 1mmt, above analyst expectations
·         Outside markets mostly positive, Euro higher along with crude and equities
·         USDA to release new long term ag projections report, which will cover the next 10 years; Projections cover crop and livestock commodities, ag trade and aggregate indicators, such as farm income and food prices through 2021
 
Slow news day today headed into the weekend with nothing too exciting happening in the outside markets. We maintain an upside bias in the grain market, especially in old crop corn. Next big resistance in the march contract is in the $6.60 area; we wouldn’t be surprised to see a trade near there next week barring any major change. Corn spreads barely correcting yesterday, however N-Z still holding near the 80+ mark. Clearly, there is some short covering going on in wheat, where the H-Z spread has rallied almost 30 cents in the past couple of weeks. We wouldn’t be surprised to see corn, wheat and soybeans take out yesterday’s highs at some point today. Yesterday’s “open higher and sell-off” action was simply punishment for bears who blew out of short positions on the higher open. If anything, pushing some shorts out on the open, and weak long out on the close, was a healthy action. 
 
Have a great weekend!     
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438   

Up AGAIN Overnight...

Jan 26, 2012

 

·         Grains up sharply overnight in sympathy with lower US$ and higher outsides; Crude over $1 higher; Technical momentum building in corn, soy and wheat
·         Yesterday’s decision by the fed to keep unchanged indefinitely is certainly supportive to commodities; Some believe rates could stay extremely low for the next 3-4 years
·         Export Sales this morning at 7:30am CST, pre-report estimates:
o   Wheat                         500k-700k mt
o   Corn                             650k-850k mt
o   Soybeans                      700k-850k mt
·         Trade focusing much less on SAM weather, now more concerned with acreage allocation and the debate over old crop corn supplies
·         Dec ’12 corn trading near 5.70 overnight, many producers seem to be ‘chomping at the bit’ to sell $6 futures
·         Rumors floating around that Russia will restrict grain exports; Traders looking for Russia gov’t to impose duties starting in April, according to sources
·         Potential acreage shortage should keep a floor under the soybean market; Neither corn, soybeans or wheat are ‘overbought’ as far as technical indicators are concerned at this point
·         Daily Number:             Support                                    Resistance
o   Corn                6.25 ½, 6.21 ¼                         6.39 ½, 6.46
o   Soybeans         12.08 ½, 12.03 ¾                     12.29 ½, 12.37
o   Wheat             6.29 ½, 6.21 ½                         6.49 ¾, 6.63
 
 
Look for a strong open today as weak shorts blow out of positions. Major resistance in March corn doesn’t show up until the 6.60 area. Stochastics still point higher. Cash grain movement light, however basis levels backing off just a little bit yesterday. Soybeans, despite dragging relative to corn and wheat as of later, could be a real sleeper here once the market starts to think about acreage a little bit more. We think market action could return to “normal” this year in the corn market if good weather occurs; meaning that the market could put in the yearly highs and present selling opportunities for producers in the Feb-June timeframe. We like being long, but traders must “keep it tight” at these higher prices.
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Old Crop Corn Up Again Overnight

Jan 25, 2012

 

·         Grains higher again overnight; Market clearly concerned that old crop corn supplies are not adequate; N/Z spread up again, March corn nearing key fibnonacci level near 6.37
·         Soybeans up reluctantly in sympathy with corn, no fresh news to report however some rumors were floating around regarding Chinese purchases early this week
·         Interior cash market for corn on fire, CIF +10 yesterday
·         Weather in South American not really the hot topic it was a couple weeks ago; Traders now more focused on ’12 acreage allocation and old crop grain supplies
·         Outside markets mostly negative for grains today with US$ higher, crude/equities both lower; Grain clearly showing independent strength
·         Farmer selling still being described as "light" despite recent flat price rally and red hot basis levels
·         Export Sales out tomorrow at 7:30am CST
 
We’re really at a key point in the grain markets right now. The market is trying desperately to figure out whether or not the USDA is correct in their assessment of the 2011 corn crop. If the government’s production number is too high, even by 1-2bpa, the upside in both flat price and old vs. new crop spreads could be explosive. Crop insurance indemnities hit a record in 2011, paying out over $9 billion, clearly indicating that the crop was poor.   On the flip side, a market that believes the USDA and their current data likely means we’re smack dab in the middle of a fantastic selling opportunity. July/Dec corn is trading over 80+ on the overnight trade. Many now believe that it has the potential to move well past the $1.00 mark, some looking for an even more substantial move. The hope here for producers is that old crop contracts drag new crop contracts back to a level seen as attractive. We think soybeans hold up, simply because they won’t get enough acreage to move substantially lower. As far as the market is concerned, wheat is corn, and should be treated as such until further notice. Opening calls are higher, bears beware.  
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Grains Struggle to Trade Lower Overnight

Jan 24, 2012

 

·         Grains lower but stable overnight after a strong performance the last several; Corn in particular acting very resilient given recent "bearish" UDSA report; Strong cash grain markets continue to offer support
·         Outside markets modestly negative this morning with US$ slightly higher, crude/equities barely lower
·         Old vs. New crop corn spreads continue to rally as traders give last week’s USDA report the cold shoulder; Trade clearly believes that we may run into some type of corn shortage this summer
·         S. American production numbers continue to fall; Cordonnier lowering Argentina corn number to 20mmt from his previous 21mmt; Lowering Arg soybean production to 49mmt from 50mmt; Dr. Cordonnier lowered Brazil soybean production to 70mmt from 71mmt and left Brazil corn unch at 58mmt
·         Ethanol futures increased for the third straight day yesterday on SAM crop issues and high crude oil prices, which have been supported by EU agreement to ban Iran oil imports
·         Opening calls modestly lower across the board
 
Bears will look to jump on the lower open today, however we really wouldn’t be surprised to see corn, soy and wheat come back to trade in the green. Bull markets open lower and close higher; Today will be good to test to find out just what kind of market we’re trading. Corn spread action leaves us no choice but to be friendly old crop corn in particular, which will hopefully provide enough strength to drag the ’12 contracts back to level that producers find attractive. Beans seem as if there is something else going on…perhaps China buying the board or something similar? We’ll find out after the fact. Regardless: Bears beware.   
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Grain Higher, Spreads Rally...

Jan 23, 2012

 

·         Grain sharply higher overnight lead by nearby contracts; Traders clearly not agreeing with USDA’s assessment of old crop corn production as old vs. new corn spreads shoot higher
·         Rainfall and coverage amounts lower than expected over the weekend in drier areas of South American grain belt; Still a widespread event that should provide 1.00” of precip is slated for Tuesday
·         Basis rallying in some areas of the country, again causing traders to believe that our old crop supply situation may not be as loose as USDA had indicated
·         Outsides mostly supportive overnight , crude slightly higher and US$ .30-.40 lower
·         Nearby soybeans trading back over the $12 mark after showing some sluggish behavior last week
·         COT showing managed money cut their long corn position by 47k to 176k, cut their long soybean position by 11k to 33k and increased their wheat short by 14k to 50k
·         Cattle on Feed seen as neutral to slightly bullish on Friday; On-Feed  at 103% vs. 103.3% est, Placements 94% vs. 94.2% est, Marketings 98% vs. 97% estimate
·         Corn exports from China during ’11 were up 7% from prior year, while corn imports in ’11 were up 11.5% to 1.7mmt according to customs data
·         Informa releasing their ’12 Acreage Estimate on Friday:
o   Corn                94.784mil vs. 94.389 last month
o   Soybeans         78.568mil vs. 74.608 last month
o   Cotton             13.838mil vs. 13.150 last month
 
Continue to watch old vs. new corn spreads for an indication of the market’s perception of our supply tightness. A continued move higher in the July/Dec corn spread would be a clear sign that the trade isn’t “buying” USDA’s recent increase in ’11 corn production. Seasonally, producers should be looking to make some ’12 sales at market peaks between now and the end of June. We have not yet advised any cash sales for the ’12 crop as our seasonal and technical parameters have not been met. 
As always, call the office with questions or concerns. Look for a strong open today barring any negative move in outsides ahead of grain open. As always, call the office with questions or concerns. 
 
Regards,
Joe Vaclavik
(312) 462-4438   

 

 

 

Grain Mixed Overnight, Export Sales at 7:30am CST...

Jan 20, 2012

 

·         Grains giving back a little bit of yesterday’s gains overnight; Spot month corn trading up to 6.10 ¼ overnight before selling off; March beans trading up to 12.04, but look to close the overnight session in the mid to low 1190s
·         Chartists still looking for more downside in grains, as yesterday was a test of the upper end of the range today; Close below last week’s low of 5.99 ½ in March corn would be a negative sign from a technical standpoint
·         Export Sales this morning at 7:30am CST, estimates:
o   Wheat                         300k-450k mt
o   Corn                             550k-750k mt
o   Soybeans                      550k-750k mt
·         International Grain Council lowers world soybean production estimate slightly to 256.4mmt, which would be down 4% from last year’s record crop
·         Argentina gov’t decreased estimate for soy plantings to 18.8mil/hect from 19.0; Corn planting estimate raised to 5.0mil/hect from previous 4.9
·         Mato Grosso, Brazil’s #1 soybean province, continues to see harvest delays due to rains; Forecast calling for more rain through next week
·         Weekly ethanol production at 941,000bpd, down 3k from previous week; Stocks at 19.5mil, up 800k
·         Cattle on Feed out this afternoon; Estimates:
o   On Feed           103.3%
o   Placements     94.2%
o   Marketings      97.2%
·         Outside mostly negative for grains, but no major movement
·         Informa to release planting estimates for ’12 this morning around 10am CST
 
A failure of yesterday’s rally today would certainly be a negative sign for the bulls. On one hand, many believe end-users need to buy this break. On the other hand, there are still a huge number of longs under water from the Dec-Jan rally that have not liquidated according to open interest numbers. This could be a cause for further downside. The “USDA over estimated the ’11 crop” crowd will certainly butt heads with the “97.5 million acres of corn” crowd over the coming months. The crazy thing is that they both might be right. Have a great weekend!
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

USDA Conspiracy Theories and IMF Funding for EU...

Jan 19, 2012
  • Grains higher overnight lead by soy complex; Nearby corn and soy trading to resistance levels at 5.99 and 11.97 respectively; Outsides mostly positive, US$ down slightly, however this certainly looks like another Euro rally to be sold
  • IMF raises $600bil to help deal with EU debut situation, sparking some buying in the commodity markets and rally in the Euro…another band-aid to fix a severed limb
  • Many traders continue to debate USDA’s increase of 2011 corn production on last week’s report; Some believe that the numbers are just not possible given the variances in state by state data versus most normal years
  • Technicals still pointing lower; Most chartists looking for a move to Dec lows in corn in order flush out weak longs; We believe the end user will buy the break near those lows
  • Many producers exhibiting a “deer in the headlights” mentality as new crop corn and soybeans drop; The prospect of 94-97 million acres of corn should terrify producers more than drought and the IRS combined; Corn will be planted post to post given current price ratios
  • Cattle on Feed to be released on Friday; Estimates are 103.3% on feed, 94.2% for placements and 97.2% for marketings
  • Export sales delayed until tomorrow morning due to the MLK holiday on Monday
 
If you believe that there is a USDA conspiracy to keep corn prices low via last week’s ’11 production increase, you should call your broker today and buy the N/Z corn spread. At 58 over, it’s the lowest it’s been in weeks as a result of the report. If you think the ’11 crop is really much smaller than last week’s USDA number, you must also believe that there will be a major supply discrepancy from summer to the fall harvest, which has the potential to be massive. We don’t condone these type of theories, but would be happy to help you trade them if you do.
As one smart farmer told me yesterday,”The USDA is run by the same people who run the post office. Do you really think they’re that smart?” I can’t help but agree.
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438
 

Selling Resumes After Yesterday's Pause...

Jan 18, 2012

 

·         Grains down overnight as technical momentum builds; Yesterday was an “inside day” as far as the corn charts are concerned, indicating that it may have been just a slight pause in downside movement
·         One analyst noting that open interest in corn has only dropped 2-3k contracts on recent 50 cent break, whereas OI increased by nearly 70k since the beginning of the rally in mid-Dec; This may indicate that more liquidation is to come
·         Outside markets mostly mixed, US$ slightly lower, crude/equities higher
·         Significant rains aided many of the drier areas of Brazil/Argentina last week; Still, significant damage has been done to pollinating corn
·         Many traders debating validity of recent USDA report, Many different types of “conspiracy theories” as to why gov’t would want to keep prices depressed exist; Some believe gov’t wants to keep prices during Feb when crop insurance levels are set
·         China consumption of grain expected to increase by 2.9% from last year to 585mmt
 
We’ll remain bias to the downside this week, expecting corn to test mid-Dec lows in the 580s; Long term we’ll call ourselves neutral to friendly the ’12 crop, and outright bullish old crop. Wait for a good break to buy and re-own any cash sales made at higher levels. We believe that producers will have a better chance to price Dec ’12 corn sometime in the late Feb to early March timeframe. Stay tuned for new recommendations. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

 

Futures and options trading involves risk of loss and is not suitable for everyone.

Up Overnight on China GDP, South American Weather

Jan 17, 2012

 

·         Grains rebounding overnight after last week’s USDA-induced collapse; Gov’t raising corn production slightly while leaving demand mostly unchanged, a shock to bulls who were looking for lower carryout numbers
·         Soybean carryout growing by 45mil/bu from the Dec report; Production up with demand slightly lower; World carryout numbers bearish across the board
·         China’s GDP at 8.9% vs. estimates of 8.6%; Outsides higher with US$ sharply lower as a result
·         No major changes to S. American weather outlook over the weekend; Best chances for new rains early next week; Reports conflicted on extent of crop damage
·         Corn harvest has begun in the northern areas of Brazilian states Parana and RGDS, outlook negative due to drought issues
·         Today’s NOPA Crush seen at 140.7mil/bu compared to 141.3 in No; Report released at 7:30am CST
 
Last week’s market action had to have flushed out the bulls in the grain market. Last week’s report was not necessarily bullish; We would describe it as being neutral, but bearish relative to market expectations. The government simply didn’t make enough changes to convince us which way our S&Ds are headed. We look for a choppy trade this week, which may be heavily dependent action in the currency markets. Next topic up for discussion: 2012 Acreage Allocation. 
 
Producers: If you’re not worried about the prospects for 2012 grain prices, you should be. There is tremendous downside risk in the corn market especially IF producers were to planted 94-95 million acres or more. Call the office for specifics. 
 
Note: Check out our "Upcoming Events" page! We’d love to see you out at any of the Straits events!
 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Steady Overnight after Yesterday's Collapse

Jan 13, 2012

 

·         Grains mixed overnight after yesterday’s USDA induced collapse; USDA numbers themselves were not overly bearish, they were simply far different from what traders had expected  (traders clearly had bullish numbers priced-in ahead of the report)
·         Yesterday’s report could implications on this year’s acreage allocation of corn vs. soybean ratios were to make a significant move as a result of the report; 2CZ-SX losing big yesterday
·         Soybeans able to close 30+ cents removed from yesterday’s daily lows
·         Our lead forecaster noting no major changes in SAM weather patterns this morning; Scatted T-Storms affect Southern Brazil and Paraguay over the next 24 hours
·         Outside markets mostly negative for grains today with crude/equities/metals slightly lower, US$ slightly higher
 
There was nothing groundbreaking on yesterday’s USDA report. The carryout number for corn, for example, changed very little. Some of the world numbers were slightly bearish; A problem that may need to be solved via lower prices. Spot margins for ethanol and livestock producers are negative for some areas, which is something that could turn into a problem for domestic demand. Is it possible that the government could wound our golden goose (ethanol) and lower corn usage sometime this year? 
 Market expectations ahead of this report are what really caused the problem. Knowing market expectations headed into a report is a must for any trader, farmer or end-user. Call our office today to learn how you can better prepare yourself for upcoming reports.   

Producers: Follow our lead for new crop sales. Not recommending anything now. We’ll wait for market peaks in the Feb-June timeframe to make our sales. We may advise option positions on a portion of the ’12 crop in the coming weeks.
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Traders Await Tomorrow's USDA Report

Jan 11, 2012

 

·         Grains lower overnight in sympathy with outside markets ; Rains in South America certainly not helping the bulls this morning; Corn bear spreading to start the day; Some longs may look to liquidate ahead of tomorrow’s USDA report
·         Analysts not looking for much change in the production numbers from the USDA tomorrow, however the demand number remain a much bigger question, some believe more corn has been used domestically as a result of lower prices
·         Most believe that the potential for top-end yields for the S. American corn/soy crop has been eliminated, however the story may be slightly overblown
·         Ukraine grain harvest may be as low as 44-46mmt vs 56.4 last year
 
Reminder: The first ever "Trade the Farm" seminar is quickly approaching. Click www.straitsfinancial.com/us/upcomingevents_10_565183477.pdf for brochure and registration information!
 
 
Look for tomorrow’s USDA report for our next sense of market direction. Producers, call the office today to discuss your option as far as hedges again old crop inventory and unpriced new production. Looking forward, corn producers should be terrified at the prospect of 94-95 million acres of planted corn this spring from a price perspective. Give me a call to discuss how you can protect next year’s production without necessarily locking in a flat price. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438                                 

Mixed Overnight, Traders Contemplate Report Possibilities

Jan 10, 2012

 

·         Grains torn between S. American rains this week and a potentially bullish USDA report on Thursday morning; Brazil raising estimate for soy production overnight
·         Brazil government cuts corn crop forecast to 59.2mmt from 60.32mmt in Dec; Brazil soybean crop estimated at 71.75mmt, up .7% from last month
·         Despite rains this week in the driest areas of S. America, there are not any follow-through rains in the forecast for next week
·         USDA to close 249 offices in an effort to save money; Half of the closing will be local "county" offices that deal with farmers, Ag Sec Vilsack announced yesterday
·         USDA report Thursday AM at 7:30am CST; Pre-Report estimates in following pages
·         Farm leaders in Argentina calling on gov’t to suspend export taxes to help struggling farmers follow the worst drought in recent memory
·         Outside markets seen as positive for grain trade this morning, crude/equities/metals sharply higher with US$ lower
 
 
Most traders believe that Thursday’s USDA report will be friendly, however it seems that there is a growing bearish sentiment for the longer term. Traders are now discussing the possibility of 94-95 million acres of corn in 2012 and the potential price implications given a number of different weather scenarios. Farmers: Your risk that is that 95 million acres is planted and weather is normal. A scenario such as this would likely result in sharply lower prices; Prices that will likely fall below your breakevens and insurance levels.
 
Reminder:  Be sure to consider attending the first ever ‘Trade the Farm’ seminar in Demotte, IN on February 17th!  Click the link below for more information. 
 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

 

 

The information contained herein is the opinion of the writer or was obtained from sources cited within the update.  It should be noted that the impact on market prices due to seasonal or market cycles and current news events may be reflected in market prices.

Ag Marketing Seminar in Indiana!

Jan 09, 2012

Straits Financial and Indiana Grain Co. are sponsoring the first ever "Trade the Farm" seminar on February 17th in Demotte, IN!  Click the link below for information and registration. 

 

http://www.straitsfinancial.com/us/upcomingevents.html

 

Call Joe Vaclavik with any questions at (312) 462-4438 or email jvaclavik@straitsfinancial.com

Up Overnight on Report Expectations

Jan 09, 2012

 

·         Grains rebounding last night after last week’s break; Significant rain event is expected for the driest parts of S. America this week; USDA report on Thursday
·         Forecasters calling for heavy rains in the driest areas of S. America, hot temps to persist for most of the week; Amounts near .75"-1.50" with heavier amounts locally;  At least 1 week of dry weather will follow this week’s rain event
·         USDA to release Crop Production report on Thursday morning; Informa pegged corn production at 12.340bil/bu using a 147.0bpa yield (USDA 146.7/12.310); Informa pegging soybean production at 3.08bil/bu using a 41.8bpa yield ( USDA 41.3/3.046)
·         COT Report issued on Friday; Managed money increased corn long by 44k to 192k, increased soybean long 9k to 33k; Managed now long 10k wheat, reversing positions
·         USDA Ag Secretary spoke at annual American Farm Bureau meeting; Said congress could cut farm subsidies more than expected
·         Argentina soybeans 89% planted, up from 87% last week
 
Grains caught a bid overnight on expectations for a friendly report on Thursday. Although heavy rains are expected for the driest portions of Brazil and Argentina, forecasters do not believe any follow-through rains will be seen. Producers should look to make sales into a rally this week ahead of Thursday’s report. 
Long term, we have major concerns about the ’12 corn market. A combination of 94-95 million acres of corn and ‘normal’ weather could result in a massive crop. The market implications of such a crop would be enormous for producers. It is very important that producers use any significant rally between now and the planting intentions report to hedge new crop production.
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Rebound Overnight, Traders Look to Next Week's Report

Jan 06, 2012

 

·         Grains rebounding overnight after yesterday’s correction break; Forecasters continue to look for heavier rains through the driest areas or S America next week, with 1.00"-2.00" coverage and even heavier amounts locally
·         Outside markets mostly positive today with a small rebound in the euro; Crude/metals higher, equities flat
·         Export Sales this morning, Pre-report estimates:
o   Wheat                         300k-500k mt
o   Corn                             350k-550k mt
o   Soybeans                      400k-600k mt
·         Informa to release estimates for next week’s report this morning near 10am
 
 
 
Many traders looking for bullish numbers on next week’s report. Despite the change in SAM weather patterns, the markets could still rally next week because of this expectation. We’ve noticed that very few producers have taken steps to hedge or make sales on 2012 corn, much different than the forward sales we’ve observed the last couple of years. Producers should look to price a portion of this coming year’s production on a rally to $6 Dec12, hoping that it will be the worst sale they make this year. Give us a call with questions, we’ll have pre-report trade guesses out next week. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438   

New Lows in Euro, More Rain Possible in South America

Jan 05, 2012

 

·         Grains lower overnight; US$ strength and possible rains next week in S. America to blame
·         Early this morning, GFS model output is suggesting much heavier rains in some of the driest corn/soy areas in S. America; Although our lead forecaster is not yet convinced, longs in the market may exercise caution
·         Brazil’s top corn state, Parana, cut forecast for corn production to 6.4mmt vs. 7.4 in Dec
·         Outsides also mostly negative this morning grains, US$ higher again as the Euro plunges into new lows
·         Wall Street Journal running story this morning on shortages of seed corn throughout the country; Seed corn production down 25-50% in 2011 according to some sources
·         USDA to release Jan Crop Production report one week from today; Most traders anticipating bullish numbers at this point, pre-report estimates next week
 
 
Although the grain markets remain bullish from a technical standpoint, longs should exercise caution today. New lows in the Euro currency combined with the chance for heavier rains in S. American corn/soy areas next week could be enough to break the markets today. Keep an eye on South American weather updates. Outside commodities are actually holding up very well considering currency action.
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

No Change in South American Weather

Jan 04, 2012

 

·         Grains trade mixed overnight after yesterday’s rally; Grains continue to focus on South American weather issues
·         Hot, dry weather continue to impacting pollinating corn in S. Brazil and Argentina; Showers early to middle of next week will likely not be enough to solve problem; Corn in Northern Brazil is looking significantly better
·         Outside markets mostly negative this morning with US$ higher, crude/equities slightly lower; Currency action should continue to be a key input for grain prices
·         Monsanto exec looks for 15% drop in cotton acreage due to relatively high corn/soy prices
·         Option volatility in corn/wheat soaring again yesterday; Feb corn vol near 39%, up from the low 20s just a few weeks ago; Feb 660 straddle in corn settled at 53 cents yesterday
·         Cropcast lowering estimate for Argentina corn production to 24.5mmt, down 3mmt from last week; Soybean estimate lowered to 49.8mmt, down 1.6mmt from previous
·         Farmer selling across the corn belt was heavy yesterday according to sources
·         Chart watchers remain bullish the grain markets, however charts for corn/soy and wheat are now approaching ‘extreme overbought’ conditions
·         Canada’s Ag Dept drought maps show that W. Canada’s farm belt is driest in 5 years; Many areas receiving less than 40% of normal rainfall in last 3 months
 
 
Grains look poised to continue their recent rally as S. American weather issues worry traders. The markets have the potential to turn on a dime IF weather forecasts were to change; It is the possibility of these sudden changes that make weather markets so difficult to navigate. March corn now 80+ cents removed from recent lows. Technicians are now looking for a move to the $6.80 area after yesterday’s positive close. Overall, we remain neutral to bearish for the next 3-4 weeks.
 
Producers: We’ll look to price a small percentage of new crop corn on a move over $6/Dec12. If $6 is the worst sale you make this year, you’re in good shape.   
 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

Grains Continue Focus on South American Weather

Jan 03, 2012

 

·         No overnight trade due to New Year’s Holiday; Outside markets are mostly supportive this morning with US$ lower and crude/equities sharply higher; SAM weather issues still an overall bullish input, however trade will watch forecasts of rain for early next week
·         Rain needed in RGDS Brazil soy/corn areas, rainfall chances continue to disappoint; Temps have not been as hot as expected; Hot/dry weather persists in S. Argentina crop areas, however some forecasters are calling for a rain system early next week
·         Brazil exported .814mmt of corn in Dec, down from .908/Nov and well below a last year’s number of 1.93mmt; Soybean exports at 1.47mmt vs 1.75/Nov and only .292mmt in 2010
·         COT showed managed money increased long in corn by 22k to 149k, Increased long in beans by 21k to 23k; Cut short in wheat by 13k to 29k
·         USDA to release Jan Crop Production on the 12th; Pre-report estimates coming next week
 
 
Traders are unsure of how to call the markets this morning, however most agree that weather issues in S. American maintain a bullish tone. Still, just as with US weather issues, the market is looking 6-10 days out. There are some rains forecasted for Argentina crop areas early next week. North Brazil is in good shape while S. Brazil areas of RGDS and Parana have some issues. Technically speaking, the grain markets maintain a bullish bias, however corn/soy/wheat are all now officially overbought as far as the charts are concerned. SAM weather issues should trump outside market action this week.
 
Producers: Use this rally to extend old-crop sales on corn and soybeans. We’re not advising any sales for the 2012 crop at this time. Keep an eye open for a new marketing newsletter from Straits that will begin with the ’12 corn and soybean crops.   
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438    

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