Current Marketing Thoughts
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Weekly Soybean & Corn Market Update
Aug 20, 2010
Each week professional grain trader Kevin Van Trump provides clients with his personal insight and commentary regarding recent agricultural news and information that may be effecting current prices and future market direction.
The inability of the market to attract aggressive buying, following the strong weekly export sales numbers and additional reports of lower-than-expected yields, had a few of the big boys a little concerned yesterday. Friday at the close though the market shrugged off concerns and posted another nice gain.
I am sure you have already heard that yesterday's export sales numbers released by the USDA were very good. I just want to give you some additional insight, so you will better understand just how "good" they actually were. To begin with corn, wheat and soybean export sales combined were 6.53M tonnes setting an all-time record, and blowing away the previous high set in December 1994 by more than 805k tonnes. Cumulative old crop and new crop corn export sales reached 2.89M tonnes, the third highest amount since 1990. Cumulative corn sales fell just short of the 16 year-old record set in December 1994 of 3.28M tonnes. As you can see these numbers were huge.
Another interesting report that many of you may want to look at will be released by our friends over at Pro Farmer today at 1:30pm just after the close. The word I am hearing is that during their recent midwest crop tour they found the Iowa corn crop to be smaller than last year. Rumors around the market are that they are projecting Iowa's average to be about 169 bu/acre, down significantly from last years mark of 180. On the flip side rumors are that they found Iowa’s soybean pod count to be significantly higher, but they fear "Sudden Death Syndrome" may do some significant damage before it is all said and done. Because it is still very early in the game I personally don't know how much weight this report will have on long term market direction.
As I had predicted earlier this week, the Soybean market has really struggled as of late. On top of concerns that we may see much higher than anticipated yields here in the US we are now hearing talk that China could start to slow import demand. The China National Grains and Oils Information Centre indicated that the countries top soybean producing region (Heilongjiang) is expecting a bumper harvest this season with yields near 10% above last year. I have heard this region produces about 40% of the countries total soybean production. In general I think we will continue to see soybean prices move lower in comparison to Corn.
With an early harvest coming down the pipe, a struggling US economy, lower crude oil prices and a higher dollar, hedge and index fund managers may continue taking profits off the board during the coming sessions. Don't fall asleep at the wheel because these recent pull-backs may be short lived. In the end continued strong export demand, and extremely tight stocks will continue to drive Corn prices. For now most big players will be looking to take advantage of the pull-backs to add to their long positions. I think we may get several more opportunities to get properly positioned in this market as we move into harvest and farmer sell pressure begins to battle the bulls, but after that all bets are off. This market could go higher very quickly on any major bullish news.
Unfortunately I look for Soybeans to continue falling back, eventually finding support in the mid $9 range. I believe after that we will trade sideways to lower as the market awaits confirmation on continued export demand. If demand starts to gain steam we will be back to higher levels very quickly.
Make sure you don't let profits lip away in a couple of our most recent trades.
#1. The long (5) Dec corn / short (2) Nov Bean trade we initiated on Wednesday 8/18/10 is now up $5,175 per unit in just three days. We are scaling out of a few of these positions now. I think we could get some more out of this trade, but when a market rewards you this quickly my experience is to lock in profits. You can move up your stops if you want to stay in longer.
I just don't want to see you give it all back.
#2 The US Bond position we initiated on Aug 9th is now up $4,300 per unit. If you want to lock in some profits you may want to consider Buying a 134 Put and Selling a 136 Call in the Sept contract. This gives you a nice little insurance policy on the trade for less than $200.
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The comments and information above belong to Kevin Van Trump, Ag Hedge, and their team of professional trade analyst. The information is believed to be reliable but no guarantee either written or implied is being made. Hedging and or Investing in derivatives, futures or options may not be suited for all producers or investors. This information is solely a recap of theories and strategies being used by Ag Hedge and or it's team of trade analyst. Any investment or hedge decisions that you make are solely your responsibility. Please consult with your licensed advisor and read the entire "Risk Disclosure" statement before you consider using any of the above mentioned strategies or trading techniques