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November 2011 Archive for Grain Hedge

RSS By: Brock Schimbeno, AgWeb.com

Grain Hedge is a self-directed discount brokerage that saves farmers money when trading in the futures and options market. For $7 commissions per side producers can execute their marketing strategy with authority, any time the markets trade.

Black Friday has Markets Seeing Red

Nov 25, 2011

This is traditionally the day when businesses start to turn a profit giving way to the term "Black Friday."  This week has been quite different for the equity and commodity markets.  The Dow is off 564.22 points this week to finish at 11,231.94.  Oil has fallen 13 cents to trade at $97.32 a barrel.  Gold has tumbled $40.30 an ounce and last trade was at $1,685.50.  The dollar index has risen sharply due to a falling Euro.  The grain markets have continued their slide too.

Corn has once again fallen through key support levels and is down 27 ½ cents on the week trading at $5.82 ½ on the December contract.  The fundamental and technical landscape for the grain is not looking good.  The market blew through support in the $6.00 area and is now hovering near support at the $5.85 level.  Adding to the pressure is a relatively strong dollar index.  Export sales continue to fall and were reported this week to be 312,000 MT, which is up 49% over last week.

Soybeans have been the leader to the downside losing 61 ¾ cents this week, leaving the January contract trading near $11.06 ½.  Global economic jitters stemming from Euro-zone debt issues and a slowing Chinese economy are major contributors to the sell-off.  Again, a strong dollar is providing pressure as is a great start to the South American crop.  Export sales increased to 921,600 MT, which is up 23.5% from last week.

Wheat has followed the other two grain markets lately and is down 23 ¾ cents for the week with the December CBOT contract trading at $5.74 ½.  This market is fundamentally weak with stiff export competition, large supply, and strong dollar contributing to the weakness.  There is not much out there to move this market higher and further weakness is expected.  Export sales were reported as 614,500 MT, which is up 94% over last week.

The days leading up to "Black Friday" have not been kind to the equity and commodity markets.  Both markets in general have had a steep sell off due to global economic uncertainty and a general risk-off attitude.  Weak demand and a sharply stronger dollar index have added pressure too.  Items to keep in mind going forward are: December options expiration today, first notice for December contracts Wednesday, year-end position evening and profit taking should be a factor for the next month.

GrainHedgelogo                                                                  FTbutton

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

RSI for DEC Corn Nearing Over-Sold Territory

Nov 23, 2011

Below we have a screen capture taken from the Firetip platform. We see C1Z trading lower in today's action, down 9 1/2 cents at the time of this post.

Continued strength out of the dollar is helping pull grains lower this morning, and we are now trading 10 cents below the 600 level we have been watching for a while as a level of near-term support. With this in mind, take a look at the low-trade volume we have seen this week as few traders are adding positions moving into the Thanksgiving holiday. We have certainly moved through this level of near-term support, but with declining volume this move lacks the conviction to spur a sharp move lower.

Looking at the Relative Strength Index (RSI) on DEC corn, we see that with today's action it sits at 32. When the RSI reaches 30, technicians consider the contract to be in over-sold territory. This supports the idea that we might see a bounce following low volume selling, but lets take a look at the last time we saw the RSI reach 30. This was back on September 21st, and we saw DEC corn trade nearly 70 cents lower before finding the bottom on October 4th. This highlights the fact that technical indicators can be helpful in making trade decisions, but are only a small piece of the puzzle.

If you would like to chart DEC corn today in your home, take a demo of Firetip or contact a Grain Hedge broker - 866-472-4607. Have a great Thanksgiving everyone, and we'll see you back here on Friday.

Corn11 23

GrainHedgelogo                                                                  FTbutton

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

Technical Tuesdays -- Head and Shoulders?

Nov 22, 2011

In today’s Technical Tuesday installment, we will examine the DEC corn chart and the
interesting formation that is near completion. Below is a snapshot of the DEC corn chart
taken from our Firetip trading software.

As you can see, we started this head and shoulders pattern in mid-May of this year.
Buyers eagerly came into the market forcing corn up to the first peak, known as the left
shoulder. Then, sellers came in at the highs pushing the market to the June 30th lows
establishing the neckline. Buyers returned and drove the market all the way up to 779
on August 29th forming the head. The buying dried up sending the market down to
the neckline near 575 on October 3rd. Tentative buying re-emerged to create the right
shoulder before falling again towards the neckline. Volume is important when examining
a pattern such as this head and shoulders formation.

Big volume forced the market to the left shoulder, diminishing volume formed the head,
and the right shoulder was formed on even lower volume, evidence that buyers have
exhausted themselves. This pattern will be complete if we break through the neckline in
the 575 area comes on increasing volume. To give our Firetip software a try, please take
a demo by clicking the button below.

Corn11 17 

GrainHedgelogo                                                           FTbutton  

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

 

Grain Markets Getting Basted Before Thanksgiving

Nov 21, 2011

Monday was met with another large sell-off in the grain markets.  December corn fell another 12 1/2 cents to $5.97 3/4, January soybeans were off 20 1/4 cents to $11.48, and December Chicago wheat lost 6 3/4 cents to $5.91 1/2.  For corn, the lowest point since October 5th was hit.  Soybeans hit a low that has not been seen since November 23rd, 2010 and Chicago wheat dipped to its lowest point since June 29th, 2010.  Adding to the bearish tone is a bevy of negative information that includes, but is not limited to: 

  • interest rates on European debt continue to rise
  • the Super committee failed to come to any sort of debt reduction agreement
  • grain exports continue to lag behind expectations
  • dollar index is relatively strong

 

These are just some of the issues weighing on commodity and equity markets.  The next few sessions will be important for the grain markets, in particular corn, as the markets are pushing towards some key support levels. It is important to keep in mind this week that low volume is to be expected due to the holiday.  With low volume comes inherently higher volatility.  Also, December options expiration is Friday this week and first notice day for December contracts is approaching on November 30th.  Volatility tends to increase as we near dates such as these.

 

The fundamental and technical landscape is not looking good for the grain markets as a whole.  There are a couple of bright spots to be thankful for however.  Corn basis is historically strong for this time or year and some good profit margins are available to livestock producers.  Taking advantage of opportunities when they are presented is paramount to a successful marketing plan.  To discuss your marketing strategies with one of our brokers, please take a FREE DEMO or give us a call at 877-472-4607.

To speak directly with a broker dial 1-877-472-4607

-or-

Visit us online at www.GrainHedge.com

 

GrainHedgelogo                                                                  FTbutton

 THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

Are the Bears Exerting Force?

Nov 17, 2011

It did not take much by way of bad news to propel the commodity markets out of their recent ranges.  The equities fell too, as Euro-zone debt issues continue to bolster risk-off attitudes and trades.  The Dow has lost 382.95 points as of the close Thursday finishing at 11,770.73.  Oil hit its highest level in several months early in the week, but is unchanged overall at $99 a barrel at the close today.  Gold has slid $68 an ounce to settle at $1,720.60, while the dollar index has risen sharply.  The grain markets are down sharply this week.

Corn is the leader to the downside for now losing 24 cents off the December contract ending trade Thursday at $6.14 ½.  Today was finally the day when we broke out of the recent sideways trend and fell through several support levels along the way.  Economic uncertainty around the globe and very poor export sales opened the door for bears to jump into the driver’s seat.  Speaking of export sales, they were reported as 208,900 MT, which is down 17% since last week.

The technical and fundamental landscape for soybeans is relatively weak adding fuel to the bearish fire.  The oilseed lost another 7 ¼ cents on the January contract to settle at $11.68 ¼ Thursday, a four-month low.  Harvest is all but complete domestically and internationally Brazil and Argentina have had a near-perfect start to their respective growing seasons.  Rumors of Chinese purchases kept support under the market preventing a virtual free-fall.  Export sales were reported as 746,100 MT, which is up 23.5% since last week.

Wheat continues to suffer from excess global supply and lost 23 ¾ cents on the December CBOT contract to finish trade today at $5.92 ½.  The Southern Plains received some beneficial rains to aid the winter wheat crop that is almost completely emerged after a rather slow planting.  A sharply higher dollar index certainly isn’t helping matters either.  Export sales were reported as 317,100 MT, which is up 6% from last week.

Bears have once again taken over the driver’s seat for the commodity markets.  Relatively weak demand, a sharply stronger dollar, and ample supplies will cap any rallies in the near future.  Attention has turned from supply side issues to the demand side and the picture isn’t pretty.

To speak directly with a broker dial 1-877-472-4607

-or-

Visit us online at www.GrainHedge.com

 

GrainHedgelogo                                                                  FTbutton                           

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

Harvest is Nearly Complete, Where Do Prices Go Now?

Nov 14, 2011

This afternoon’s crop progress report showed that corn harvest is nearly complete at 93%.  Soybeans are even closer to completion at 96% harvested.  With this year’s crop nearly all in the bin, many producers are asking ‘Where do prices go now?’ 

Last week’s USDA/WASDE report did little to excite the markets in any direction as we continue to trade mostly sideways and range bound.  Instead of wondering where the futures markets are headed, producers should focus on certainties when marketing their cash grain.  Basis levels are at historically high levels for this time of year that is certain.  To be certain of these basis levels, take advantage by either selling in the cash market or using a basis contract to lock in this high level.  The futures market is only paying 18 cents to store until July, which certainly doesn’t pay for cost of carry.  Producers need to think about marketing their cash grain now as the economics are not present to store and wait for basis or cost of carry to improve.  If grain is marketed now and a producer wishes to keep the top side open, use the board to re-own.

Marketing now has several advantages.  First, it locks in basis, price, or both.  Simply selling in the cash market would lock in both price and basis.  Second, money will be saved on storage (either commercially or privately).  This money could be used to re-own on paper.  Re-owning on paper would re-open the top-side potential.  A strategy with defined risk would be to go long call options, where the premium paid is what is at stake.  Long futures can be used as well, but the risk is undefined and a producer could be subject to margin calls.  Lastly, using the board instead of holding the cash grain frees up the timing of sales.  Board positions can be liquidated or added with a few clicks of the mouse or by giving your broker a call. 

To give this strategy a try, sign up for a free demo today! Or speak directly to one of our brokers at 877-472-4607.

 

GrainHedgelogo                                                                  FTbutton                           

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

Italian Debt Concerns Weigh on Markets

Nov 10, 2011

Italy’s skyrocketing interest rates have sent shockwaves through the financial and commodity markets.  The Dow has had volatile trade and is down 89.38 points this week to close Thursday at 11,893.86.  Oil’s surprise reduction in stocks coupled with Middle East unrest has led the market higher adding $3.16 a barrel to close today at $97.65.  The dollar index is up sharply due to the Euro’s decline and gold has tacked on 90 cents an ounce finishing at $1,758.90 today.  The grain markets have sold off across the board.

Wednesday’s USDA/WASDE reports were bullish for corn on paper, but the trade did not reflect this sentiment.  Corn is down 10 ¼ cents on the December contract ending trade at $6.45 ½ today.  The USDA reduced expected yield to 146.7 bushels per acre, but decreased feed consumption by 100 million bushels.  Harvest is nearly complete at 87% and exports missed expectations.  Export sales were reported as 251,900 MT, which is down 59.5% from last week.

A larger than expected ending stocks revision has a very bearish overtone for soybeans.  The USDA increased ending stock by 35 million bushels in Wednesday’s report adding to an already bearish technical and fundamental trade.  South America’s planting season has been almost ideal for their expected record crop.  These factors will continue to push beans lower and should keep export demand lackluster.  Export sales were better this week, however, at 604,000 MT which is up 188% from last week.

WASDE reaffirmed a glut of wheat on the world market this year.  Domestically, we did see a slight reduction in yield and production for this past season.  Not a lot of support can be found for wheat lately as ample supplies, weak export demand, and a stronger dollar all weigh on the market.  Winter wheat planting is nearly complete at 94% and the crop is rated 49% good to excellent.  Export sales continue to be routine at 298,400 MT, down 6.8% since last week.

Italy’s growing debt concerns has kept a lid on any rally for the equities and commodities alike.  A weaker Euro causes the dollar to strengthen with the effect of decreasing export demand.  A friendly USDA/WASDE report from Wednesday was overshadowed by the rising concerns surrounding Italian debt.  This situation will have to be monitored moving forward as will the planting season for South America.  

To speak directly with a broker dial 1-877-472-4607 

 

GrainHedgelogo                                                                  FTbutton                           

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

Outside Markets Tank on Euro-Zone Fears -- WASDE Brings Few Surprises

Nov 09, 2011

This morning's USDA WASDE report didn't bring any surprises to the grains as this screen capture shows from the Firetip platform. At the time of this post we see corn down 2, beans down 14, and wheats down 8 to 15. It looks like we are going to continue to be range bound moving forward, with downward pressure coming from a dollar index that has found support as Europe continues to wade through sovereign debt issues.

Reuters is reporting this morning that Italy's borrowing costs are reaching "a breaking point" and we have seen equity markets absolutely tank in the morning’s trade. At present the Dow, S&P 500, and NASDAQ are all down 2% or more on the day.

We look for Europe’s problems to get worse before they get better, only adding strength to an already strong dollar. Expect range bound trading moving forward with dollar strength keeping a lid on any rallies.

tradingmatrix

GrainHedgelogo                                                                  FTbutton                           

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

 

Fundamentals and Technicals Look to Push Beans Lower

Nov 08, 2011

For this week's edition of Technical Tuesday's we took a look at the JAN soybean chart.

After last month's WASDE report we started to form a descending triangle trading between 1285 and 1200. Technicians look for a breakout to the down side following a descending triangle, but the fundamentals provided in tomorrow's WASDE report will certainly outweigh any technical formations in the chart as far as the trade is concerned.

We are looking for a slight reduction in soybean yield, but with this an increase in ending stocks. On net we look for this to be neutral to slightly bearish on the bean market as export sales have continued to struggle, and in South America the start of a bin-busting crop season is under way.

To start charting corn, soybeans, wheat, cattle, and a slew of other commodities in your home today, take a demo of the Firetip platform or call our office 877-472-4607

beans11 8

GrainHedgelogo                                                                  FTbutton                           

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

 

Revisions to USDA Estimates to be a Catalyst?

Nov 07, 2011

There has been a relative lack of fresh fundamental news for the better part of a month in the grain pits.  As expected, the grains have generally traded in a sideways to drifting-lower pattern as a result.  The markets are really looking for a catalyst to spark a move higher and out of the recent ranges.  Even though corn and soybean harvest is nearly complete at 87% and 92% respectively, the supply side of the pricing equation is still up in the air. 

Wednesday brings us the latest round of USDA/WASDE reports for the grain markets to digest.  The general consensus of analysts is for revisions lower in both total production and yield for corn and soybeans.  The average guess has corn production slipping 52 million bushels and yield falling 4/10ths of a bushel to 147.7 bushels per acre.  Estimates varied from 12.049 billion bushels to 12.549 billion bushels on production, while yield estimates ranged from 145 bushels per acre to 149.5 bushels per acre.  Soybeans had analysts guessing in much tighter ranges.  Production is estimated between 2.951 billion bushels and 3.110 billion bushels.  Yield estimates range from 40.4 bushels per acre on the lower end to 42.2 bushels per acre on the higher.  If the average of the analysts comes to realization, this could shape up to be a moderately bullish scenario for corn and soybeans.  Ending stocks could prove to be the market mover, however.

Ending stocks for corn on average is looking to fall by 71 million bushels to 795 million bushels with a range of 692-900 million bushels.  This would add to the bullish sentiment that is estimated for production.  Soybeans, on the other hand, are looking for ending stocks to be revised higher by 22 million bushels to 182 million bushels with a range of 150-254 million bushels.  This would have a neutralizing effect on a slightly bullish production estimate.

If these average estimates are realized, then a moderately bullish reaction in corn and mostly neutral reaction in soybeans is to be expected.  In tomorrow’s Technical Tuesday edition, we’ll examine the price areas that will provide resistance and support in the post-report session.  GrainTV will air tomorrow as well at 9:25 AM CT at www.graintv.com.  For more information about this or our other services, please sign up for a free demo!

GrainHedgelogo                                                                  FTbutton                           

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

Sideways Trade Continues at Mid-Day

Nov 04, 2011

The sideways trade that we have seen for the last two weeks in the grains has continued this morning. As you can see from this screenshot taken from our Firetip trading platform we have corn down 1 1/4, beans down 3 3/4 and Chicago wheat down 3.

We have included November soybeans in this matrix as a reminder to producers that first notice day for this contract has passed. Producers that do not intend on delivering should roll-out to a more distant month. Additionally, once a contract's first notice day has passed there are no limits on price action. In today's trade this isn't an issue but on report days or when market volitlity is high price movements can be large.

Moving to livestock, live cattle and lean hogs remain in the top half of their recent trading range and are making small gains today. To get live quotes in your home today for $7 commissions per side, take a demo of Firetip!

11 4 TM

GrainHedgelogo                                                                  FTbutton                           

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

 

Technical Tuesdays -- Beans Heading Lower?

Nov 01, 2011

Since mid-October, soybeans have been slowly drifting lower and are clearly in a
downtrend after hitting highs on August 31st. The potential is to continue on this path for
the foreseeable future, especially with South America’s crop looking to be a bin buster.
The supply side of the market is not an issue going forward, but the demand aspect
remains a major concern as exports have been lagging well behind the projected pace
of the USDA.

The chart below comes from our Firetip trading platform and depicts the
January soybean contract. Overhead resistance comes into play around the 1240 area
and will drift lower as we move forward. Support will be first met around the 1185 area
with further support in the 1165 area. Unless a surprise reduction in the supply comes
from the USDA’s November 9th reports, we anticipate beans to continue lower. To
discuss these or any other technical analysis, please call one of our brokers. If you would like to start charting today in your home, click the red button below to take a demo of Firetip!

BeansS2F

GrainHedgelogo                                                                  FTbutton                           

THERE IS A RISK OF LOSS IN TRADING FUTURES AND OPTIONS. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INVESTORS.
PLEASE READ OUR RISK DISCLOSURE.

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