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April 2009 Archive for EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

EHedger Closing Grains Commentary 4/28/09

Apr 28, 2009
 
SETTLEMENTS 4/28
         
May 09 Corn
375
+ 2 3/4
July 09 Corn
383 1/2
+ 2 3/4
May 09 Beans
989 1/2
- 15 1/4
July 09 Beans
983
- 14
May 09 Wheat
510 1/2
+ 2 1/2
July 09 Wheat
522
+ 2 1/2
May 09 Meal
311.9
- 2.1
May 09 Oil
34.90
- 0.64
 
 
 
Selling pressure kept old crop soybeans on the defensive Tuesday, as rumors circulated that China was set to cancel on a recent old crop purchase or roll that order forward into new crop months. We don’t know for sure whether these rumors are true or not, but for our part we’ve been bracing for such moves for some time given that nearby prices have sustained a strong premium to new crop prices for more than a month, even as China’s purchases have scheduled shipments for deeper and deeper into the year. Clearly, China’s needs for soybeans are hefty – on average they import roughly 4 million metric tons per month – but there has been talk lately that domestic inventories there are climbing, which suggested their interest in buying nearby beans at a sharp price premium would be about to wane. Further, prices for soybeans shipped out of the US Gulf – our main export channel – have been softening for the last week or so, which again hinted at diminishing buying interest. 
 
If it is true that China has cancelled some recent US purchases, or rolled some old crop orders until later in the year, then there could be a further steep decline in July prices relative to November contracts. The key question is whether China has any further old crop bean needs, or if they’ve got all the soybean stocks they need until the US harvest. Considering China’s dominance on the demand side, if we see no further old crop bean buying from them, then old crop prices could enter a tail-spin. But, if we continue to see sporadic Chinese old crop purchases, then a more orderly decline in July prices will ensure.
 
Either way, it appears to us that old crop prices are destined to struggle avoiding further weakness as we go forward. 
 
Corn and wheat managed to settle slightly higher Tuesday, although much of the buying seen here resembled trader short covering (held against long bean positions) more than fresh end-user buying. The weaker US dollar was broadly supportive, but weakness in the crude oil, gold and copper markets did little to spur end-user interest in corn or wheat throughout the day.
 
Overall, we are anticipating more choppy movement across the board over the coming days as traders adjust positions across the grains markets in response to the continuing talk of Chinese order cancellations, as well as the still uncertain outlook for Swine flu and it’s impact on demand for soymeal. But the big picture theme here is that all the major US crops will struggle to sustain rallies as farmers here crank up planting activity. Monday’s planting progress report indicated that US farmers are already making real progress in corn and spring wheat, and are starting up on the soybeans. These plantings will only keep climbing in the coming weeks, which will draw people’s focus towards the upcoming supplies, so we anticipate that any upcoming rallies will be short-lived.
 
As a result, we strongly suggest that the few customers out there who have not yet hedged their intended production to get in touch with us as soon as possible to put a solid marketing plan in place and protect yourselves from the likely price weakness that we expect over the summer.
 
 
 
Go to http://www.ehedger.com/sign-up/ for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 
 
 

Grains close sharply lower on "swine flu" fears 4/27/09

Apr 27, 2009
SETTLEMENTS 4/27
         
May 09 Corn
371 3/4
- 5 1/4
July 09 Corn
380 1/4
- 5 1/2
May 09 Beans
1004 3/4
- 35 1/2
July 09 Beans
997
- 37
May 09 Wheat
508 3/4
-23 1/2
July 09 Wheat
520 1/2
- 22 3/4
May 09 Meal
313.7
-11.7
May 09 Oil
35.55
- 0.79
 

 
The grains closed lower. Corn, soybeans and wheat were all sharply lower overnight.    Fears over “swine flu” weighed on commodity and financial markets across the globe. The media continues to sway back and forth on the issue and this was reflected in the prices today. All three markets rallied sharply after the open. Soybeans and wheat were unable to hold these rallies and both settled near their lows for the day. Corn was supported as many were looking for planting progress to be 15-20% planted. Corn came in at 22% planted, which was near the higher end of estimates, and this compares to 9% a year ago and 28% average. Of the major states; Iowa, Missouri, Nebraska and Minnesota jumped significantly with Iowa, Minnesota and Nebraska well ahead of average. This was able to offset the states of Illinois, Indiana, Ohio and Michigan. Soybeans were 3% planted versus 2% a year ago and 5% average. Spring wheat remains well behind at 15% versus 32% last year and 36% average. Winter wheat was rated 45% Good-to-Excellent compared to 43% last week and 46% last year.
Corn planting came in higher than many were expecting. The western belt remains well ahead of average, and the eastern belt is falling behind. Planting progress should pick up in the eastern belt this week and slow in the western belt. Although this is not ideal planting weather, it is not bad. As we have seen, modern technology many farmers to plant nearly 24 hours a day. This means we can catch up very quickly. Many areas of the belt are receiving 2-4 day windows of dry weather, and farmers are taking advantage. Once again, this is not ideal weather but it is not nearly as bad as last year. As long as corn can “keep average planting pace” going forward, corn should continue to struggle on rallies. 
Wheat conditions continue to improve for the winter wheat crop and planting remains well behind average for the HRS crop. If the HRS cannot pull the other classes higher, winter wheat prices should continue to break as we head into harvest. Without corn, soybeans or HRS wheat rallying, we could see futures approach $4 near harvest. July SRW futures hit a high of $5.50 ½ and HRW futures hit a high of $5.98 today. These were the levels we hoped wheat could rally to. We might not see those levels again until after harvest. If we do, I would definitely get caught up on sales if you have not done so.
Soybeans closed very weak today. The Commitment of Traders Report (COT) on Friday showed the funds long 70,000 contracts of soybeans and short 45,000 wheat and 30,000 corn.   If China does not continue to support the market, we could have seen the highs for the year. So far, China has been here to support every soybean break this year. Now that we have turned the funds from large “shorts” to large “longs”, it will be very important that China continues to support the soybean market on these large breaks. With the majority of China’s recent soybean purchases placed in the new crop and nearby basis levels remaining under pressure, we could be seeing their ’08-09 purchases come to an end. Once again, I have no idea what China will do. I do know that if China doesn’t support the soybean market from here, this “bull market” will need some fresh news to keep the 70,000 longs from exiting their positions. 


 
 







 
 
 
Go to http://www.ehedger.com/sign-up/ for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 
 
 

EHedger Weekly Grain Wrap-Up 4/03/09

Apr 03, 2009
        Weekly Grain Wrap-UP

        SETTLEMENTS 4/03
             
May 09 Corn
403
+ 1/2
July 09 Corn
413 3/4
+ 1
May 09 Beans
995 1/2
+ 18 1/2
July 09 Beans
995
+ 18
May 09 Wheat
563 1/2
+ 13
July 09 Wheat
575 3/4
+ 13
May 09 Meal
305.7
+ 8.3
May 09 Oil
35.31
+ 0.21
 
 
 
All three gains closed higher on the week. We finally got the much awaited acreage report behind us this week. The report was a big surprise to most traders.   The report estimated corn acres will be 1 million less than a year ago; soybeans will be 300,000 more than a year ago and wheat will be down around 5 million. They pegged total U.S. acres down around 8 million on the year (the corn, soybean and wheat acres down a total of 6 million). After the report, strong buying came into the market. The open interest increased sharply during the second half of the week as traders continued to build their long positions. We do not believe that these will be the final numbers. At these price levels, loosing nearly 8 million acres is very difficult to believe. Many people have this same feeling about the acres but all of us will have to wait until June to get anther set of acreage numbers. Using the reports acres and trend-line yields; most analysts will be using a 250-350 million bushel carryout for soybeans, a 1.3-1.5 billion bushels carryout in corn, and a 600-700 million carryout in wheat. 
    
               Looking at the big picture and, the overall fundamentals are not bullish from these levels, especially if you believe (as we do) that the acres will be up significantly on the June report. However, there is not going to be any major new bearish fundamental news that will hit the market for the next few months. We may have to wait until the June report. This will leave the market vulnerable to rallies. If the funds want to buy commodities across the board, the technical guys get on a buying program, or people get excited about a wet spring, you may take some heat on your short positions. Without any major problems during the growing season we believe producers will look back this summer and realize that these current levels were great hedging opportunities. On the other hand, that does not mean that the next few months are going to be an easy ride for the bears. We recommend you stay with your hedges at these levels and if you want some upside protection for the next few months we recommend purchasing some fairly inexpensive call strategies.
 
 
 
 
Go to www.EHedger.com for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 

Corn pressured all day, while beans close unchanged 4/01/09

Apr 01, 2009
SETTLEMENTS 4/01
             
May 09 Corn
395
- 9 3/4
July 09 Corn
405 1/4
- 9 1/2
May 09 Beans
954 3/4
+ 2 3/4
July 09 Beans
953 1/2
+ 3
May 09 Wheat
525
- 7 3/4
July 09 Wheat
537
- 8 1/4
May 09 Meal
295.3
unch
May 09 Oil
33.53
- 0.09



  
Corn and wheat closed lower, while soybeans finished the session near unchanged. Everyone has now had the chance to fully review yesterday’s acreage report numbers and determine their effect on grain prices. It appears that yesterday’s sharp reaction for corn and wheat was overdone as both of these markets were under selling pressure the entire day. Corn rallies will continue to meet farmer selling, which has many bushels priced at $4 and above. With USDA acreage now known it appears that outside markets will influence grain trade for the rest of the week. While major changes are not expected it does need to be noted that there currently is a G20 meeting in London. China and Russia are looking for a world currency rather than the US dollar. The faster world economies can recover will lead to better outlooks for commodities. Tomorrow’s trade will be key in determining a near term trend for grains. If prices work higher it will show renewed strength from weather, the report, and potential further fund buying. However, keep in mind that most end users are printing red ink and this limits demand. If prices begin to work lower it will carry a negative tone into the summer. Excluding spring weather scares, yesterday’s acreage will likely be the lowest total we see all year.   
 
Using these acres and trend-line yields; most analysts will be using a 250-350 million bushel carryout for soybeans, a 1.3-1.5 billion bushels carryout in corn, and a 600-700 million carryout in wheat. Although these carryouts would still be ample, the market will remain very nervous on weather concerns this spring. (Many people are already talking about a wet spring). Ideas on final acreage will continue to be strongly debated as we head through spring. Weather will obviously be a big factor and this will influence the market's opinion of what final acres will be. With the market now "worried" about having enough acres, keeping prices high through the growing season will only hurt demand worse. However, the market is not worried about demand right now. The funds have already established "long positions" and today's strong close should trigger more buying. With the report out of the way, we should quickly shift to weather.... let the fun begin! Give us a call if you have any questions, or click here to see all of our current recommendations. www.ehedger.com/sign-up/





Go to www.EHedger.com for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
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