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March 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.

 

Corn Collapses, Beans Hold Together...

Mar 29, 2012

 

·         Grains mixed to lower overnight; Corn prices collapsing this week to lowest levels in months; Dec corn able to hold November low at 5.35 overnight while the nearby contract traded below 6.20 after trading 6.56 on Sunday night
·         Soybean prices holding together despite collapse in corn market; Traders eyeing mostly ideal planting weather, which is bearish corn from both a yield and acreage standpoint
·         USDA to release Planting Intentions and Quarterly Stocks report tomorrow morning at 7:30am CST; Trade is looking for corn acres near 94.7mil and soybean acres near 75.3mil
·         Traders looking for corn stocks near 6.15bil/bu, soybean stocks near 1.387 and wheat stocks near 1.223
·         Export Sales this morning at 7:30am CST, estimates:
o   Wheat               450k-750k mt
o   Corn                  600k-900k mt
o   Soybeans         450k-750k mt
·         Outside markets mostly mixed this morning; Currencies flat, outside commodities slightly lower in most major contracts
·         Sources reported that China purchased 360,000mt of US corn yesterday; Traders looking for confirmation this morning at 8am CST; Reuters noting that China is paying less for corn imported from the US than it would for domestic supplies
 
Today is the last day for producers of corn, soybeans and wheat to shore up their marketing ahead of tomorrow’s USDA report. December corn has dropped more than 20 cents on the week, and could certainly slide lower on bearish news tomorrow. The most downside risk likely sits with the soybeans, a market that has rallied nearly $3 since December with very little correction. 
 
Pre-report hedge ideas for new crop corn and soybeans:
 
Corn: Buy the December 540 PUT / Sell the December 440 PUT ---Pay 40 cents or better
 
Soybeans: Buy the Nov 1300 PUT / Sell the Nov 1500 CALL / Sell the Nov 1100 PUT ---Pay 30 cents or better
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik

(312) 462-4438

Slight Rebound Overnight, Traders Await Friday...

Mar 28, 2012

 

·         Grain markets attempt a rebound overnight after yesterday’s collapse; Corn and wheat moving towards lower end of recent ranges yesterday while beans enjoyed a minor correction
·         USDA to release Planting Intentions and Quarterly Stocks on Friday morning at 7:30AM CST; Trade looking for corn acreage near 94.7 and bean acreage near 75.0
·         Yesterday’s trade saw a significant correction in corn and soybean calendar spreads, both of which have been very strong as of late
·         Slow news day today overall, outside markets mostly mixed with some weakness in major commodity markets
·         EU futures backing off after forecast for drought stricken areas
·         Possible frost next week shouldn’t have much of an effect on quickly developing winter wheat crop, most areas will not see a hard freeze
·         Many corn traders continue to tout the possibility of a sharply lower corn stocks number from the USDA; Strong cash market and inverted spreads are generally indicative of low stocks
·         No major increase in option volatility has yet been seen ahead of Friday’s report
·         Rice futures traded to 3-month highs yesterday on concerns that acreage would be light
 
 
Grain producer have 2 days to shore up their marketing and hedge any production that is at risk. The only we know about Friday’s report is that it generally comes with massive volatility, good or bad. Growers of corn and soybeans should look to protect the gap between current price levels and the level of their crop insurance. 
Attempting to predict the results of Friday’s report are futile. You may be right on the direction of the market, but the risk of loss in being wrong is enormous for grain producers in our opinion.
 
Need to hedge your production ahead of Friday's report?  We can have you ready to go by this afternoon!  Call me directly at (312) 462-4438.
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438 

Bean Strength Continues, Corn Rebounds...

Mar 27, 2012

Note:  I will be a guest on Fox Business Network this afternoon around 12:30pm CST to discuss the grain markets.

·         Grain markets up overnight led by soybeans; May corn reversing to the downside yesterday after trading sharply higher early in the session; Recent lows still holding in both old and new crop corn contracts despite weakness
·         New crop soybean vs. corn spreads traded new highs yesterday; CZ vs. SX now at 2.4 to 1; Soybean market clearly trying to buy back last minute acreage, or conceding that corn will get lion’s share of US acreage
·         New highs in EU wheat futures on weather concerns
·          USDA to release planting intentions and quarterly stocks on Friday, “cheat sheet” on following page
·         Crop scout Cordonnier keeping Brazil and Argentina corn/soybean production estimates unchanged
·         US gasoline traded at a record premium to ethanol yesterday; Gas prices topping $4/gallon in most states while ethanol stocks remain more than adequate
·         US tax officials will not penalize farmers who could not properly file their taxes because they had accounts at bankrupt broker MF Global (article below)
·         Frost likely to affect northern/central Corn Belt and HRW wheat areas beginning next Wednesday
·         Outside markets mostly mixed this morning, opening calls mostly in-line with overnight closes
 
Producers of corn, soybeans and wheat have 3 days to shore up their marketing ahead of Friday’s report. We continue to advise that corn and soybean growers own PUT spreads; Buying an at-the-money option and selling an option below you crop insurance level. The gap between current prices and your crop insurance coverage is what needs to be protected. The risks associated with this report are enormous, as limit moves in either direction are par for the course. Call the office with questions or concerns. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438 

Beans Rally, Corn and Wheat Drag

Mar 26, 2012

 

·         Grains mixed overnight; Soybeans again exhibiting impressive strength while corn and wheat trade near unchanged; Dec corn seems comfortable in the 550-560 range for the time being, however we don’t rule out a move to either side of the recent trading range this week
·         USDA will release its Prospective Plantings and Quarterly Stocks report on Friday at 7:30am CST
·         Average trade guess for corn acreage at 94.7mil; Soybean acreage estimated at 75.4mil; Traders looking for corn stocks near 6.15bil/bu, soybean stocks at 1.39bil/bu and wheat stocks near 1.2bil/bu
·         Outside markets mostly mixed this morning; No major moves in currencies, equities or outside commodities
·         Some chatter over long term China corn demand; Chinese gov’t estimates a 17mmt corn deficit in China by 2020; Oilseed Forum taking place in China also spurring some bullish demand talk for soybeans
·         Corn planting moving forward across the South and event in many Midwestern states; Weather forecasters warn that there are still opportunities for a freeze even into late April
·         Cattle on Feed released Friday; Seen neutral to slightly negative for cattle/feeder cattle markets
·         Funds added to long corn and soybean positions in the week ending last Tuesday; Cut short wheat position slightly
 
Corn and wheat markets will likely hold recent trading ranges into Friday’s report. Soybeans certainly look poised to move higher, however a technical correction of major significance could occur at any point.    Grain producers have 4 days to shore up their hedge positions and do some marketing.  Opportunities are available in both corn and soybean depending on your specific situation.   
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438

Beans Lead Rebound Overnight...

Mar 23, 2012

 

  • Grain markets higher overnight led by soybeans, which traded 15+ cents better in most contracts; Technical strength in beans remains intact while corn and wheat tread water in recent trading range
  • Outside markets providing minor support this morning with lower US$; Outside commodity markets mixed to slightly higher
  • USDA Planting Intentions and Quarterly Stocks reports will be issues one week from today at 7:30am CST; Most analysts looking for a corn acreage number somewhere near 95mil and a soybean acreage number in the 74.5-75.5mil range; Full pre-report estimates will be out next week
  • Argentina grain truckers agreed to lift their recent strike after almost all of their demands were met
  • Argentina government pegging their soybean crop at 44mmt and corn crop at 21.2mmt
  • US weekly beef exports surged to a 10-year high last week, nearly 25% of the exports went to drought-stricken Mexico
  • Some concern growing over dry conditions in W. Europe and the potential impact on the wheat crop there
  • Opening calls will be sharply higher for soybeans, 3-5 higher for corn and wheat
 
Corn bulls should still remain cautious despite the soy-led overnight rebound. We agree with those who have a positive outlook due to issues regarding old-crop corn stocks; however we also believe that monster new-crop acreage combined with favorable weather is more than enough to alleviate those concerns. The problem is that the crop hasn’t been planted, yet. The corn market should have the ability to hold together through the majority of the planting season. Yield will be the ultimate make-or-break factor down the road.


 
As always, call the office with questions or concerns.
Regards,
Joe Vaclavik
(312) 462-4438

Favorable Weather Pressure Corn and Wheat Markets...

Mar 22, 2012

 

·         Grains lower overnight led by soybeans; A close lower today in corn would be the 4th day in row lower after Friday’s “bullish” close
·         Soybeans holding together in recent trading range after a setbacks on Monday/Tuesday; Soy vs. corn spreads rallying even further; CZ vs. SX ratio now near 2.37 : 1
·         Outside markets mostly negative for grains this morning; Crude/equities/metals sharply lower with US$ higher
·         Clearly, prospect of early planting and favorable conditions weighing on corn prices; Many analysts now believe that some last minute acreage switching could be done as soybeans gain on corn; Still, most analysts looking for soybean acreage somewhere south of 75.5mil
·         Bearish Chinese manufacturing data partially responsible for this morning’s outside market break, possibly adding to grain pressure
·         EIA weekly ethanol production at 893,000bdp up 1k per day from previous week; Ethanol stocks at record 22.7mil barrels
·         Export Sales this morning at 7:30am CST, pre-report estimates:
o   Wheat               400k-500k
o   Corn                   600k-850k
o   Soybeans           900k-1.1mil
·         Opening calls marginally lower across the board
 
Support in May corn should be found in the 6.25 to 6.30 area. The soybean charts look as if the recent price decline is temporary, as no major chart damage has been done. Corn growers should still consider PUT options on the December contract as hedges. The 5.50 PUTs are trading near 50 cents today, allowing a floor to be set at 5.00. Again, selling a 2nd PUT below your crop insurance levels is a good strategy to offset some of the cost and increase your price floor. Call the office with questions. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438

Corn Tests Yesterday's Lows Overnight...

Mar 21, 2012

 

·         Grains mixed overnight after yesterday’s collapse; Corn, soy and wheat contracts falling hard yesterday after Monday’s technical reversal in May corn
·         Corn trading near yesterday’s lows on the overnight session after trading above 6.50/May early in the session; Some blame lack of bullish news while others believe recent rains set up many farmers for an ideal planting season
·         Rains across several plains states helping winter wheat; Although the crop is far ahead of schedule in many areas, yields should be good barring any significant frost event
·         Talk of another China soybean purchase yesterday may have supported the soy complex overnight
·         Cash markets across the US correcting along with break in futures prices
·         Oil World releasing new, and not surprisingly lower South American production estimates; Brazil soybean production pegged at 66.5mmt, down from 68.0 previously; Argentina soybean production down 500,000mt to 46.5mmt
·         Argentina truckers strike still going strong as corn and soybean harvest begins; Truckers to meet with gov’t officials tomorrow
·         Many farm groups upset over new budget proposal for 2013 that would cut ag subsidies and make crop insurance more expensive for producers and less profitable for insurers
·         Outside market mostly quiet overnight
 
The corn market in particular did a complete 180 degree turn since Friday’s bullish close. As far as charts are concerned, corn and wheat still look range-bound from our end. A correction to the downside in soybeans is good for the long term health of the market. Option prices for new crop corn are still cheap in our opinion. As of yesterday’s close, the 5.60 Dec PUT option was worth just under 53 cents. Buying this option allows a corn producer to set a floor at 5.07/Dec futures with unlimited potential for upside price improvement. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438

Down Overnight, Rains Across Much of US...

Mar 20, 2012

 

·         Grains sharply lower overnight after yesterday’s weakness; May corn posting an “outside down” chart reversal yesterday
·         Other than technical, it’s tough to pin this early week sell-off on any one factor in particular; “Profit taking” seems to be the most popular excuse among the pundits
·         Cash markets backed off slightly to end last week and to begin this week, a possible precursor to weakness yesterday and today
·         Crop scout Dr. Cordonnier pegs corn acreage at 95.5mil with a yield estimate of 161-162bpa; Soybean acreage pegged at 75.0mil using a 43.5bpa yield
·         Southern states making some headway in corn planting; Texas 33% planted, Louisiana 37%, Georgia 19%, Alabama/Mississippi both 4%
·         Rains across much of the Midwest helping producers who will look to plant corn in the first few weeks of April; High temps will help to increase soil temps in addition to alleviating some concerns over recent dryness; Rains also helping winter wheat producers a great deal in certain areas
·         Rapidly developing winter wheat crop is far ahead of schedule in many areas, leaving some concerned over the possibility of a frost in the weeks ahead
·         Argentina truckers strike continues after no deal was made yesterday
·         Outside markets mostly negative for grain market action today with crude/equities/metals sharply lower lower, US$ higher
 
This week’s weather events are certainly a bearish factor for our grain markets. Corn Belt producers who had some dryness issues may now have adequate moisture while increasing soil temperatures. HRW wheat growers across the plains are getting the rains they need, which will do wonders as long as temps stay relatively warm. Yesterday’s chart action for nearby corn and wheat was ugly, and the action overnight doesn’t make it look any better. We’ve said many times that our biggest fear for grain producers would be a sell-off ahead of the March 30th report. We feel as if too many producers have far too little coverage for new crop production, aside from crop insurance. The gap between current prices and your crop insurance level is what needs to be protected. Call the office for recommendations specific to your operation.    
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438

Down Overnight Despite a Strong Weekly Close...

Mar 19, 2012

 

·         Grains sharply lower overnight after a strong close Friday and initial follow-thru buying early last night; Old crop soybeans trading leading the way down, as both corn and soybeans bear spread vs. new crop contracts
·         860 contracts traded at 5.75/Dec corn last night, part of a massive sell order that could not penetrated early in the session
·         No major reason for the break overnight, most blaming “profit taking” or “technical setback”
·         China gov’t will offer farmers more subsidies for grain production if oil prices continue to rise
·         Outside markets are quiet with currencies/crude/equities/metals all near unchanged
·         Brazil soybean harvest 55% complete vs. 47% last week and 43% on avg
·         Corn basis leveled weakened last week after several weeks of strength; CIF and Decatur both down 8-9 cents
·         Traders continue to discuss the prospects for increased Chinese demand for corn and soybeans; China gov’t sources estimate current corn stockpiles at 10% of last year’s
·         Heavy rainfall this week across much of the country should assist HRW wheat growers and hamper early corn plantings temporarily in many areas; Winter wheat should develop at an accelerated pace through next several weeks
 
 
Grains look to start the week lower; however we remain a short-term upside bias based on last week’s strong closes. Weekly charts are looking a little better. A weekly continuation chart for corn shows higher lows in each of the last 4 weeks. Bulls are excited at the idea of a friendly stocks report while bears continue to tout massive acreage. A season rally would not be out of line during the next few weeks.
We continue to advise PUT option strategies for new crop corn and soybeans ahead of the March 30th acreage/stocks report. Call the office for specifics.     
 
 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438

Grains Look for Follow-through Buying

Mar 16, 2012

 

·         Grain marginally lower overnight after strong closes yesterday; May corn finished over key resistance level at 6.66 yesterday while Dec was able to close above 5.70 for the first time since March 5th
·         Soybeans look to continue their run higher on concerns over China demand and the possibility of low acreage domestically
·         Many traders continue to question the validity of USDA’s current old crop stocks numbers; some believe they’ll be reduced drastically by USDA on the 30th
·         Open interest in Sept PUT options on corn has risen drastically since the beginning of March; Many believe early planting will lead to early harvest and bigger supplies earlier in the year; Sept corn currently trading 34 cents over Dec
·         Argentina farmers have begun soybean harvest, however heavy rains there have slowed efforts
·         China corn futures up sharply overnight DCE exchange, enormous volume noted in Sept contract
·         Outside markets mixed; US$ lower, equities higher, crude higher, metals sharply lower
 
 
Many technicians will look for follow-through buying the in the grain markets today. We’d be cautious as a bull, as profit taking ahead of the weekend is possible. New crop corn continues to be the weak link in the ag complex, however another solid close today may convince us to become a little more friendly between now and the March 30th report. 
We believe that some sort of risk management strategy on new crop corn and soybeans is a must headed into March 30th. Call the office for personalized recommendations. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438

Beans Lead Ag Complex Higher

Mar 15, 2012

 

·         Same story, different day: Soybeans upside leader in grain complex overnight; Corn again testing recent highs at 6.66/May, an area that has now been rejected 4 times in 9 trading sessions
·         Export Sales this morning at 7:30am CST, estimates:
o   Wheat                400k-600k mt
o   Corn                   550k-850k mt
o   Soybeans           650k-900k mt
o   Soymeal             75k-150k mt
o   Soyoil                 0k-20k mt
·         Sinograin, who manages China’s state grain reserves, has stockpiled only 1.2mmt of corn from last year’s harvest according to an industry website; States reserves stockpiled over 11mmt from 2010 harvest
·         Agroconsult pegging Brazil soy crop at 67.1mmt, down from their Feb estimate of 69.9mmt and current USDA estimate of 68.5mmt
·         Outside markets mostly positive to start, US$ slightly lower with crude/metals/equities slightly higher; Sell-off in bonds the last few days should be noted
 
 
Grain producers have 2 weeks to decide what type of positions they’ll take into the March 30th acreage and quarterly stocks report. We recommend owning at-the-money PUT options on new crop corn and soybeans. Against these options, we like selling a PUT below the level covered by crop insurance. Call the office for specific details.    
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438 

Beans Continue to Gain on Corn Overnight

Mar 14, 2012

 

·         Grains mixed overnight; Soybeans up again with wheat and corn down; Corn traded to the high end of recent range on yesterday’s open and failed to penetrate major resistance at 6.66/May
·         Outside markets mixed with currencies, crude and equities mostly flat; Bonds and metals both moving sharply lower
·         Today is last trading day for March grain contracts
·         Argentina dock worker’s strike has been suspended until next week, although issues have not been resolved
·         Several wire stories discussing the potential for China corn imports in 12-13; One noted analysts believes they will total as much as 6-8mmt
·         China corn plantings seen up 2% in 12-13
·          Yesterday’s sale of 240,000mt of US corn to unknown destination rumored to be China purchase
·         President of American Farm Bureau says a revised farm bill this year is unlikely, suggesting that the election year will hamper efforts to get one passed
 
The failed rally in corn yesterday should be a caution flag for bulls as we approach the planting intentions and quarterly stocks report at the end of the month. More traders are beginning to question the validity of current USDA old crop stock estimates. Many now believe that old crop stocks will shrink drastically, while spring plantings could be massive. Old vs. new crop spreads have already moved a great deal, however many now believe that a move higher in the spreads is imminent. 
Soybeans continue to make highs on China interest and the prospect of low spring acreage. The market continues to be extremely overbought from a technical standpoint, a fact that doesn’t necessarily mean a whole lot in a trending market. 
Call the office for hedge ideas ahead of the March 30th report. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438 

Beans Rally Overnight, December Corn Drags

Mar 13, 2012

 

·         Grains higher overnight led by nearby soybean contracts, which took a quick breather yesterday; Dec corn struggling to penetrate upside resistance at $5.70
·         May corn looking to test early January highs near 6.72; Today would be the 3rd significant up day in a row following Friday’s neutral to negative report and rumors that China has made more US corn purchase
·         Argentina’s corn crop is likely to total 21.5-22.0mmt this year, mostly unchanged from 2011, according to sources
·         Chinese gov’t not able to sell any soybeans at auction today
·         Oil World pegging Brazil soybean output at 68mmt, down from 75mmt last year and USDA’s current projection of 68.5mmt; Oil World projecting Argentina soybean output at 47mmt vs. current USDA estimate of 46.5mmt
·         Port workers in Argentina continue their strike, halting movement of about 85 ships
·         Brazil soybean harvest 49% complete vs. 38% last week
·         Corn planting moving forward in the South; Most Midwest producers plan to plant corn as soon as crop insurance policies will allow
 
 
We’ve said it once and we’ll say it again: December corn options are cheap (relative to the last 5 years). The average trading range in corn the last 4-5 years is over $2 per bushel. At-the-money PUT options run between 50 and 55 cents per bushel. Do the math and figure out what makes sense for your operation. At the very least, these options should be purchased on all bushels not covered by crop insurance ahead of the 30th, depending on your policy. If Informa is right, and 95.5mil acres of corn are planted, the options could be a life saver. If not, you’ve still got the corn and have unlimited upside on your cash grain. In many situations, we might advise more complex option strategies; however this time it’s very simple. Take advantage of the low volatility while it’s still there.  
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438

Grain Markets Quiet to Start Week

Mar 12, 2012

 

·         Grains mixed to start the week after Friday’s wild report day session; May soybeans charting a doji star reversal pattern on Friday, closing 15+ cents off the highs (chart next page)
·         Dec corn rallying post-open on Friday on Chinese purchase rumors; Floor rumors sparked quick 10 cent rally ahead of a sell-off later in the day
·         Warm weather across most of the corn belt has many producers looking at early planting, a far cry from the last 2 years in which many corn growers planting much later than normal due to wet conditions
·         Informa projecting US Corn acreage at 95.5mil, up from their previous estimate of 94.7; Soybean acreage projected at 75.1mil, up from previous 74.5
·         Outside commodities mostly lower with gold/silver/crude lower, currencies mostly flat
·         Export Inspections today at 10am; Export Sales Thursday at 7:30am CST; Planting Intentions March 30th, 7:30am CST
 
Corn producers caught some good luck on Friday, as the market decided to hold together despite a non-event report. As we’ve said many times before, worst case scenario for corn growers at this point would be a sell-off into the acreage report at the end of the month. December PUT options are still cheap. The $5.50s are trading in the 45-46 cent area, giving producers an opportunity to set a floor above $5.00 with no ceiling. We’d like to have the opportunity to buy 560s or 570s at a similar price ahead of the 30th
It’s tough to say whether or not we’ll see any follow through to Friday’s reversal in soybeans, as such patterns have become decreasingly reliable in recent years. Fundamentals are friendly while technicals are desperate for a pull-back. We wouldn’t be surprised to see a slight correction in the corn vs. soybean spreads sometime ahead of the report , as the spreads between new crop corn and soy have been one-directional for several weeks. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438
 

Simple USDA Report Summary

Mar 09, 2012

 

**Corn:  USDA leaves domestic balance sheet totally unchanged from Feb; World carryout down to 124.53mmt vs. 125.35/Feb, analysts expected 123.46mmt; Argentina production left unchanged at 22.0mmt, Brazil production increased to 62.0mmt from 61.0/Feb
                -Corn neutral to slightly bearish
 
**Soybeans:  USDA leaves domestic balance sheet totally unchanged from Feb; World carryout down to 57.3mmt from 60.28/Feb, analysts expected 57.76mmt; Argentina production lowered to 46.5mmt from 48.0/Feb; Brazil production lowered to 68.5mmt from 72.0/Feb
                -Neutral to slightly friendly
 
**Wheat:  USDA lowering domestic carryout to 825mil/bu from 845/Feb; 25mil/bu increase in exports and 5mil/bu reduction in food usage; World wheat carryout dropping to 209.58mmt from 213.10/Feb, analysts expected 212.6mmt
                -Slightly friendly on reductions in both world and domestic carryout, both of which were below analysts expectations
 
 
Call the office with questions! (312) 462-4438

Rebound Overnight, USDA Report Friday A.M.

Mar 08, 2012

 

·         Grains rebounding overnight after yesterday’s break; US$ lower with equities rebounding after a big one-day break on Tuesday
·         USDA to release March crop production report tomorrow morning at 7:30am CST; Pre-report estimates on following pages
·         Export Sales this morning at 7:30am CST, estimates:
o   Wheat               300k-600k mt
o   Corn                  500k-750k mt
o   Soybeans          600k-900k mt
·         Brazil corn exports seen at 8mmt vs. 9.5mmt last year; Brazil gov’t raises corn production estimate to 61.7mmt from 60.8mmt in February
·         Brazil soybean export volume seen at 31.8mmt vs. 32.4 last year, soy crop pegged at 68.75mmt vs. Feb estimate of 69.23mmt
·         Traders looking for modest drops in old crop stocks on tomorrow’s report; Most producer and traders are looking past tomorrow to the planting intentions report on the 30th
 
 
Most aren’t expecting anything too exciting on tomorrow’s report. The grain market seems convinced that the corn acreage number will be substantial at the end of the month. Many corn growers will now lean on heavy crop revenue insurance as Dec corn moves lower. Options are still cheap, relatively speaking. During the last few several, many instances occurred in which an at-the-money option would cost over $1 per bushel for corn. The average yearly trading range for the December corn contract the last 5 years is over $2 per bushel. At-the-money options for December corn currently run just over 50 cents per bushel. Do the math and decide if setting a floor on non-guaranteed bushels makes sense for you. 
 
As always, call the office with questions or concerns.
 
Regards,
 
Joe Vaclavik
(312) 462-4438 

Choppy Overnight

Mar 07, 2012

 

·         Grains mixed overnight after a choppy session yesterday; Soybeans continue to show most strength among ag complex
·         Dec corn breaking upper end of recent "triangle" chart formation on Monday before collapsing back towards the bottom end yesterday; No shortage of sellers on rallies in corn
·         Outsides loosely positive for grains today; Equities markets holding steady this morning after yesterday’s sell-off; Crude holding the $105 area for the time being
·         No deliveries for corn, soybeans or wheat
·         Chinese gov’t officials claiming earlier this week that they will not have any major import needs for corn after last year’s record crop
·         Analysts continue the debate over next year’s soybean carryout; Some looking for a sharp drop near intolerable levels if soybean acreage does not rise relative to current USDA projections
·         Another dock workers strike in Argentina has halted grain exports for the time being; The now yearly event will likely not last very long; Up to 150 ships may be affected
·         Livestock prices correcting lower the last 2-3 days; Most technicians had been looking for a setback while fundamentalist believe the market still exhibits a bullish landscape over the longer term
·         Export Sales tomorrow morning; USDA Crop Production on Friday morning
 
 
Grain producers still have plenty of time to get a floor set on 2012 production ahead of the March 30th planting intentions report. Our main concern right now would be that the market sells off ahead of the report, leaving producers with no choice but to either buy put options or sell some cash at lower levels on at least a portion of production. The risks associated with this report are enormous, in our opinion. December 560 puts run about 52 per bushel this morning, which would allow a producer to set a floor at $5.08 with unlimited upside. Option buyers should note that volatility levels are currently fairly low. Please call the office for some different ideas on how to protect the ’12 crop during the next couple of weeks. 
 
As always, call the office with questions or concerns.
 
Regards,
Joe Vaclavik
(312) 462-4438 
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