Sep 20, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


September 2011 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.

Pre-Report Comments

Sep 29, 2011

After trading sharply lower overnight, grains managed to have a strong comeback, with wheat leading the way. December corn finished 1¾ cents higher at $6.32½, November soybeans finished 6½ cents higher at $12.30 and December wheat 15½ cents higher at $6.54¼.

The USDA quarterly stocks report will be released tomorrow at 7:30 a.m. This is obviously a highly anticipated report and can be a major market mover. Initially we thought this report would be slightly bearish, but with the market trading almost $1.50 off its highs for corn and $2.35 off its highs for soybeans, there has already been a major adjustment.

For corn, it has been questioned whether the Sept. 30 report includes new bushels that were harvested early and shouldn’t be included in the ending carryout. On the actual survey, they have requested new versus old supply and should clear up the confusion. Plus there was not a whole lot of corn harvested early and it wouldn’t likely be an issue this year anyway.

Another reason we have been talking about a higher ending carryout (higher than other analysts) was partly due to the conversion ratio USDA has been using for ethanol. USDA has been estimating bushels used based on a 2.74 conversion factor when the industry standard is closer to 2.85, leaving a potential for another 100-plus million LESS bushels used for ethanol production.

We have had lower feed margins due to the increased cost of feed, but by the same token more was expected to be put on feed from the inability to graze after a drought in the South. Many were estimating China to come through with large orders for corn imports as well. This never happened despite rumors of major Chinese sales every other day this summer.

So with all these factors combined, the report looked like it could be rather bearish, but again to my point: We are $1.50 off the highs.

For soybeans, the average carryout estimate is 225 million bushels. Of course, this would be a tight stocks-to-usage ratio of 6.9%, but the world has had options for soybeans after South America produced a record crop last year. With many good bean yields being reported so far in the U.S., the market has been less concerned about how much we will be able to "carry in" as long as we have a decent crop this year to make up for it.

Tomorrow we will have an extensive writeup on the stocks report and our outlook, which is reserved for EHedger customers. If you would like to receive this, please feel free to sign up for our complimentary trial by clicking on the link below.

 

 

 

www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371

www.EHedger.com.

Trading commodity futures and options involves substantial risk of loss and may 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. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

A Recap of Today's Trade

Sep 28, 2011

It was another weak day for grains, with corn and soybeans both making new lows for the move and settling near the bottom of today’s trading range. December corn finished 21½ cents lower at $6.30¾, December wheat was down 19½ cents at $6.38¾ and November soybeans were down 39½ cents at $12.23½. 

Much of this was long liquidation, as the outside markets were also sharply lower. Many traders were exiting longs, potentially squaring up positions before Friday’s quarterly stocks report. When we got back below the 200-day moving average around $6.425 in December corn, the market just couldn’t hold support.

Tomorrow morning, we will have export sales. The guesses are as follows:

Corn                                                   600,000 – 1,000,000 MTs

Soybeans                                            500,000 – 800,000 MTs

Wheat                                                350,000 – 650,000 MTs

Until Friday, the markets can remain choppy, especially with moves like we are having in the stock market and energies. The quarterly stocks report will be released at 7:30 a.m. Friday.

 

As we have been saying, soybean volatility has remained especially low until recently. Over the last week, we have watched volatility go from 18% in soybeans all the way up to where the Soybean Volatility Index settled today at 28.90%. Corn volume is still very high at 42.37%. With many option writers having to liquidate short option positions, the options are becoming more expensive. By the same token, holders of short puts that are getting closer to the money have had to exit positions or sell futures, which can put even more downside pressure on the market.  Until Friday, be on the lookout for large swings, and there may be opportunities to get some hedges bought back with calls or get more sales on after a rally.  Please call your broker for re-ownership strategy details.

 

 

 

To receive a two-week free trial of our research, including a tryout of the revolutionary AMMO software, please click on the link below:

www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371

www.EHedger.com.

Trading commodity futures and options involves substantial risk of loss and may 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. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

A recap of today's trade

Sep 27, 2011

Grains finished stronger today along with sharply higher outside markets and a lower dollar.  December corn finished 4¼ cents higher at $6.52¼, November soybeans finished 3¼ cents higher at $12.63 and December wheat finished 10 cents higher at $6.58¼.

Yesterday’s crop progress report was as expected and didn’t have a large effect on the overnight trade. Last night’s strength was largely tied to the stock market rally toward the later part of the afternoon yesterday. This strength continued right into the morning session, but the market couldn’t hold that support as we finished 14 cents off the day high for December corn and 15 cents off the day high for November soybeans.

The main point to take away from this is that we are still finding plenty of sell pressure on rallies in corn and soybeans. Normal harvest pressure and favorable yields still seem to be holding this market resisted as funds have been heavy liquidators. With the market coming off of oversold status, we could at least see the market hold support until we get more direction from Friday’s quarterly stocks report. The Dow Jones poll of estimates for the report is as follows:

                                                                                                          2011 Jun. 1                          2010 Sep. 1                                                                                                                                            USDA                                    USDA                                                                                       Average                   Range               Stocks                                   Stocks

Corn (16)                                 0.962                     0.820-1.050         3.670                                     1.708

Soybeans (16)                       0.225                     0.202-0.240         0.619                                     0.151

Wheat (14)                             2.045                     1.959-2.247         0.861                                     2.450

We have discussed some re-ownership strategies and these are largely opportunistic. Corn is still over $1.25 off the highs and soybeans are over $2 off the highs. If you are a producer who is well sold and would like more upside coverage, please call an EHedger broker today for a trial of our services and strategies.

 

 

To receive a two-week free trial of our research, including a tryout of the revolutionary AMMO software, please click on the link below:

www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371

www.EHedger.com.

Trading commodity futures and options involves substantial risk of loss and may 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. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

 

Grains Hold Support to Start the Week

Sep 26, 2011

Grains finished stronger today, with corn leading the way. December corn finished 9½ cents higher at $6.48, November soybeans were up 1¾ cents at $12.59¾ and December wheat finished 7½ cents higher at $6.48¼. 

At some point, we are going to find support in these markets, but for the last month it seems that any rallies are quickly sold by the market. As we saw on the last Commitments of Traders report, the managed money has been liquidating grain positions. Have we priced these levels low enough where we could see the liquidation stop or even some fresh buying come in? Time will tell, but much of this will depend on the Sept. 30 Grain Stocks report as well as the October Supply and Demand Estimates report.

Being that it is Monday, we could have found some support on speculation that we would see a bullish weekly crop progress report. In fact, December corn has closed higher for the past seven Mondays in a row despite the weakness in grains recently. The report was as follows:

Corn                                                                Sept. 25                         Five-year average

Dented:                                                               96%                                        96%

Mature:                                                               63%                                        64%

Harvested:                                                          15%                                        16%

Condition:  Corn gained 1% from last week in the good-excellent category at 52%.

 

Soybeans                                                       Sept. 25                         Five-year average

Dropping Leaves:                                               58%                                        68%

Harvested:                                                         5%                                          11%

Condition: Soybeans were left unchanged from last week in the good-excellent category at 53%.

Corn, soybeans and wheat are all in oversold territory, so a slight rebound may be in order.  Between harvest pressure and supply bulls, this market can still remain choppy until we get more direction from Friday’s report. We can try to take advantage of the volatility by having hopeful orders below the market for upside call coverage, and orders above the market for anyone who needs more downside protection.  

Chart: December Corn

Chart: November Soybeans

 

To receive a two-week free trial of our research, including a tryout of the revolutionary AMMO software, please click on the link below:

www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371

www.EHedger.com.

Trading commodity futures and options involves substantial risk of loss and may 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. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

EHedger Afternoon Grain Commentary 9-23-2011

Sep 23, 2011

More liquidation today as corn and soybeans both have double digit losses.  The December corn contract finished 11 ½ cents lower at $6.38 ½.  November soybeans finished 25 cents lower at $12.58, and December wheat 7 higher at $6.40 ¾.

We are now trading a full $1.40 off the highs for December corn and finished just below the 200 day moving average of $6.41.  At settlement below this important level could potentially trigger more sell pressure as we haven’t settled below the 200 day moving average in December 11 corn since July 27th of last year!

Soybeans also broke a major support level yesterday and came all the way down past the 38.2% retracement level of $12.53 today.  The next technical target for bean bears would be the 50% retracement of $11.86 ¼.

Informa released their estimates mid morning.  They have corn acres down 420,000, soybean acres up 50,000, and ALL-wheat down 765,000.  Wheat was supported for most of the day and this news certainly helped.  I would say a bigger reason for wheat to be rallying is short covering.  The funds have obviously been massively long corn and soybeans, and at the same time short Chicago wheat.  On days of liquidation we can see those contracts gain ground just from exiting positions (we have seen this same trading style in the nat gas vs crude spreads as well in times past).  Plus we have been trading wheat at a discount to corn for how long?  With feed wheat trading at such a discount to corn throughout the world eventually we will get a reversal as much of that demand switches over from corn.

The latest Commitment of Traders report shows us that managed money was net short 24,908 contracts of Chicago wheat (using futures and options) which is a net increase in shorts by 13,759 contracts.  They are still showing a very large net long position in corn of 249,977 contracts even after reducing this by a whopping 48,356 contracts week-over-week! For soybeans they are still net long 115,791 contracts after reducing their net long position by 42,890 contracts.  I think these numbers show that the managed money have obviously been bailing on positions and this information is as of Tuesday so we won’t know how much more they liquidated until NEXT Friday.  Even though they have liquidated a significant amount, they are still sitting with some very large long positions that can still be sold to push us lower so I wouldn’t jump to any conclusions that this phase is over just yet based on this particular data.

With that said we still have to get through the next couple of reports for more long term direction.  We will know the ending stocks data next Friday and then the October Supply and Demand report will be just around the corner from that.  Now may be a good time to uncover short calls that are well out of the money.

If you would like to double check where you stand after the most recent break please give an EHedger broker a call and we can go over your position in AMMO. 

Have a great weekend and good luck with the rest of harvest!

Bean Chart 9.23.11

Corn Chart 9.23.11

To receive a two-week free trial of our research including a tryout of the revolutionary AMMO software please click on the link below:

www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371 

www.EHedger.com.

Trading commodity futures and options involves substantial risk of loss and may 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. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Grain Commentary 9-22-2011

Sep 22, 2011

Most stock and commodity markets seem to be in liquidation mode and grains are no exception.  December corn finished 35 ¾ cents lower at $6.50, November soybeans down 37 ½ cents at $12.83, and December wheat down 33 cents at $6.33 ¾.

Since the grain close at 1:15 pm yesterday until the time the grains closed today at 1:15 pm the Dow Jones futures have dropped 721 points or 6.65%.  We also had a general risk off trade where crude oil lost $6.78 or 7.8% in that same time frame.  Corn on the other hand lost 5.21% of its value during this time frame.  When we see a general "risk-off" trade it tends to affect many markets, especially ones the large speculators are loaded up with long positions in (like ag futures).  On top of this, we are in harvest, yields generally seem to be coming back better than expectations, wheat is underpriced to corn (feed argument), and we have been trading at record levels this year.  Bulls will make the argument that we are still going to have a tight carryout.  This may be the case but we have ending stocks being released at the end of the month, and then we will have the October supply and demand report around the corner from there.  You have to ask: what will happen if we see an increase in ending stocks and a potential yield increase on the Oct supply and demand report?

One thing to remember about the funds is that they can easily get out even faster than they got in, and that may be what we are seeing right now.  Throughout the year you can see where it made sense to buy every break that we saw, but now we are in harvest and we are seeing another potential outside market crisis which can highly affect grains.  Looking at the December corn chart, I would say the next downside target (maybe support) would be at the 200 day moving average of $6.40, and then below there at the 38.2% retracement level of $6.285.  Of course if the next few reports come back bearish all bets are off.  Anyone who has sold quite a bit and wants to get upside protection for corn now would be a good time to do so for harvest.  We actually were able to get filled buying back our short March $9 corn calls for 6 ½ cents today.

For soybeans we have found support at these levels all year long with that massive trading range we had for November.  At this time we may see support here just like we did before but if you need downside coverage I wouldn’t take chances and I would either make sales or at least look at put protection. We can always buy back the calls for upside potential as production is still unknown and there are always chances for weather events in S. America to take us higher. We know the market has been loaded up selling soybean puts as volatility has been extremely low for bean puts.  If we continue to break this could accelerate the downside move as option writers scramble to cover the short puts.  We have had soybean sales to China with the most recent one this morning for 180,000 MTs for 11/12 delivery, but we have also seen cancellations from them of 240,000 MTs just a couple weeks ago.

If you would like to double check where you stand after the most recent break please give an EHedger broker a call and we can go over your position in AMMO.  Happy Friday tomorrow and good luck with the rest of harvest!

Chart: December corn Grey Line = 200 day Moving average, dotted line = first retracement

 Chart: November beans

To receive a two-week free trial of our research including a tryout of the revolutionary AMMO software please click on the link below:

www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371 

www.EHedger.com.

Trading commodity futures and options involves substantial risk of loss and may 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. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 9-12-2011

Sep 12, 2011

Today’s major focus was on the September USDA Supply and Demand report and like many report days we saw some large moves.  December corn ended up finishing 9 cents higher at $7.45 ½, December wheat down 2 ½ cents at $7.27 ¼, and November soybeans down 29 ½ cents at $14.13.

On the report they ended up lowering the corn yield to 148.1 from 153 on the August report and 148.8 as an average guess.  They are also using one of the lowest ear weights in 20 years and the lowest since 2003. They ended up lowering feed and residual usage by 200 million bushels to 4.7 billion. The ethanol usage was also lowered by 100 million bushels to 5.0 billion. US corn carryout is pegged at 672 million bushels which is lower than the August estimate of 714 but higher than the average analyst guess.

There was a huge unwinding of the beans-corn spread today with soybeans having a large liquidation. The USDA soybean yield estimate came in at 41.8 which was 0.4 bpa higher than the average analyst guess.  With China cancelling 240,000 MTS of 2011-2012 soybeans last week before we even harvest the crop this was a little unsettling for the bulls.

Also today we had crop progress released and is as follows:

Corn                                                   September 11th                     5-year average

Dough:                                                    97%                                       96%

Dented:                                                   84%                                       82%

Mature:                                                   29%                                       33%

Condition: 53% good-excellent which is 1% better than last week.

Soybeans                                               September 11th                 5-year average

Dropping Leaves                                         15%                                        27%

Soybean condition: 56% good-excellent which is unchanged from last week.

Winter wheat is 6% planted vs 10% on average at this time.

Last thing to note, several weather watchers have called for a hard freeze in the upper Midwest for Wednesday, Thursday, Friday.  Take a look at the breakdown of the following states % of dropping leaves:

                                                              September 11th                 5-year average

Minnesota:                                                    9%                                        30%

Iowa:                                                            8%                                         24%

Wisconsin:                                                   15%                                        27%

North Dakota:                                               13%                                       37%

South Dakota:                                               33%                                       43%.

Obviously this is cause for concern it just depends on how cold it gets and how far south it is.  We will have to see how it plays out but this is something that could give soybeans a lift this week.    

If you have any questions or would like to run through your marketing plan again in AMMO please give your broker a call.

Chart 9.12.11

 

Best Regards,

EHedger

For a free trial of EHedger services including the morning automated phone call, daily afternoon market commentary and/or a free consultation, please contact EHedger at 866-433-4371. You can also visit us at www.EHedger.com.

 

Trading commodity futures and options involves substantial risk of loss and may 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. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 

EHedger Afternoon Grain Commentary 9-9-2011

Sep 09, 2011

It was an interesting end to a short week at the Chicago Board of Trade. The outside markets were sharply lower, triggered by continued uncertainty about the European debt crisis. The corn and soybean markets were able to finish higher despite these outside factors. December corn settled 2½ cents higher, closing at 7.36½. November soybeans were able to settle 8½ cents higher at 14.26¾. Chicago wheat was unable to follow corn and soybeans and settled 8¼ lower for the December contract.

This morning’s export sales report was largely disappointing, as corn was below the trade estimates and soybeans were at the lower end of estimates. In addition to the sales report, it was announced that China has cancelled 240,000 MT of US soybeans for 2011-2012 delivery. This was an interesting development, as we are going to be heading into the glut slot of our supplies during harvest. We will continue to monitor this activity to see if further cancellations are reported.

Stories of demand destruction have been circulating lately. We have heard stories of Australian feed wheat trading at $60.00 a ton discount to US corn. Chinese crush margins have remained poor and, as previously stated, we saw a 240,000 MT cancellation of Chinese soybeans for next year’s delivery. It is not typical to see cancellations at this time of year for a crop we haven’t even harvested yet. With regard to the wheat market, India is also starting to export wheat for the first time since 2008 on huge surpluses.

With December corn trading par with December wheat, we expect to see a lot of wheat being fed in the world. Looking back to see if there were any years where December wheat has traded at a discount to December corn, there looks to be only one year in the last 40, and it was 1983.  Interestingly enough, December was the first contract to do so (neither July nor September traded negative, December traded 12 cents negative). Also March, May and July 1984 all traded below corn, with July 1984 making the lows at around 20 cents under on July 17. Wheat stayed around "par" with corn that year for nearly six months, similar to what we are currently looking at (at least in the futures), only it was the opposite six months starting with corn harvest. I also looked up the corn and wheat feeding number for those years:

In '82/'83, corn feeding was 4,640 and wheat was 195

In '83/'84, corn feeding was 3,938 (-702) and wheat was 371 (+176)

In '84/'85, corn feeding was 4,180 and wheat was 407

Eventually we could feed enough wheat to significantly help increase our ending corn stocks for next year. This could eventually put an artificial "ceiling" for corn from demand destruction as right now corn is the most expensive feed grain in the world. Of course, if we see even further reductions to yield than what the market is already projecting, we could see corn go back and take out the highs again, but rationing is going on now and at levels above here.

I have included our estimates for Monday's report as well as the average analyst estimates. I will have the report and our reaction in the morning grain letter on Monday morning. Have a great weekend!

Chart 1 9.9.11

Chart 2 9.9.11

Chart 3 9.9.11

Best Regards,

EHedger

For a free trial of EHedger services including the morning automated phone call, daily afternoon market commentary and/or a free consultation, please contact EHedger at 866-433-4371. You can also visit us at www.EHedger.com.

 

Trading commodity futures and options involves substantial risk of loss and may 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. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

EHedger Afternoon Grain Commentary 9-7-2011

Sep 07, 2011

Grains started the morning stronger but managed to turn lower during the day. December corn finished 7¾ cents lower at $7.48, November soybeans down 1¾ cents at $14.20¾, and December wheat finished 8½ cents lower at $7.51½. 

The Stats Canada report was released this morning and was slightly bearish. This helped push wheat lower. Wheat traded down to a 2¾ cent discount to corn at one point during the day in the December contracts. Any further weakness in the wheat could result in further corn weakness. We have had wheat at a discount to corn multiple times this year and now that the December contract has breached this level we have to think we could still see plenty of wheat being fed in the world.

The next major report will be on Monday the 12th and is the September USDA Supply and Demand report. The Dow Jones poll of analyst expectations was released today and is as follows:

USDA Chart 9.7.11

USDA Chart 2 9.7.11

As you can see we have a wide range of guesses, but for the most part we can see that most generally believe that corn yields will fall below 150, with the average guess at 148.8. For soybeans, the average guess is 41 bpa. For the 2010-2011 carryout, they are projecting an average of 974 million bushels. Since we aren’t expected to finish out the year with a very tight "carry-in" to 2011, the weight is still most heavily weighted on final 2011 production. It is still anyone’s guess what final yield will be until we are through with harvest, but early harvested acres seem to be coming back better than expectations so far. At this point, we are factoring in such bullish crop production estimates and the market still feels heavy. We like remaining with adequate sales going into harvest and we may look at re-owning bushels on a harvest break.  Please contact an EHedger broker today for a more detailed strategy of hedging in today’s volatile markets.

Best Regards,

EHedger

 

For a free trial of EHedger services including the morning automated phone call, daily afternoon market commentary, and/or a free consultation, please contact EHedger at 866-433-4371. You can also visit us at www.EHedger.com.

 

Trading commodity futures and options involves substantial risk of loss and may 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. 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 EHedger LLC, its affiliates, officers, directors, employees, or agents.

Log In or Sign Up to comment

COMMENTS

Legacy Newsletter
 

Follow Us

Facebook Twitter You Tube
 

Hot Links & Cool Tools

    •  
    •  
    •  
    •  
    •  
    •  
    •  

facebook twitter youtube View More>>
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions