Grains Springboard off Lows
Jan 15, 2013
TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.
Grains have enjoyed a sharp rally in the wake of the January USDA reports. It has been a tough trade however with a sharp contrast between old crop and new crop corn as well as a bear trap in the soybeans. Going forward it would seem that there should be a solid floor under old crop corn due to the tight stocks but the rest of the grains have a more cloudy future.
With a 602 million bushel carry over for 2012/2013, it would seem logical that old crop corn should sty firm into the last few days of the current marketing year. There certainly is a need to keep prices high to ration demand. The question is how high? Is there a need to best the drought stricken summer highs? At this time I do not subscribe to that school of thought. Demand has remained slow with the historically high prices. We did see a surprise increase in corn use for feed and residual but demand for exports and ethanol remains weak. However, exports may pick up on a rally as buyers shift their mentalities from "wait for lower prices" to "gotta buy now before its gone". If that is the case we may really have a need to further price ration corn at least until the Argentinean harvest. Argentina, by the way, increased their corn production estimate to 30 million metric tons up from 28 million. The USDA increased their estimate for Argentina by 500k metric tons on last Friday's report to 28 million. South America has a tendency to underestimate their crop to keep prices up for their harvest so I wonder how much corn there really is in Argy. This may end up being what bails us out of our tight balance sheet.
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New crop corn is a different story. Even with the surprise higher demand for feed/residual use, overall demand is relatively weak. And, if we do have a halfway decent growing season next year we may have to see corn prices extend to the low end extreme to buy back global demand. Now, there is certainly a possibility of another drought year but it is much too early to assume that will be the case.
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March Corn Daily chart:
March Soybeans Daily chart:
March Wheat Daily chart:
All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have corn near $7.00 and soybeans near $14.00. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!
Ted Seifried (312) 277-0113 or email@example.com
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