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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 Grain Commentary 12/30/10

Dec 30, 2010

Thursday we found more “profit taking” after we hit highs earlier this week.  March corn settled 8 cents lower finishing the day at $6.16. January soybeans settled the day at $13.66 which was unchanged on the day. The March Chicago wheat contract settled 14 ½ cents lower at $7.84 ¾ .  The grain markets will be open tomorrow until 12pm.

 

Today would have been the 10th day in a row corn finished higher; we were due for a setback.  Weekly exports this morning were considered bearish and are as follows:

 

Corn     756,600 MT’s     expected range: 750-1050         

Beans    948,200 MT’s     expected range: 900-1300

Wheat   438,100 MT’s     expected range: 450-650

 

 

Given the weaker than expected exports and overbought status, it wouldn’t be surprising to see more “profit taking” tomorrow.

 

As we approach the end of 2010, I want to note that many commodities have made all time highs this year and the bullish bias is holding right to end of the year. This coincides with the loose monetary policy of the US as well as an ever expanding global population and diet change.  China has obviously been the main subject as their growing demand has undoubtedly helped fuel our price rallies, most notably their increase in US soybean demand.

 

So which events had the most impact in 2010?  For one I would have to say the Russian wheat drought really kick-started this rally. This summer the market watched the Russian heat escalate into a true weather concern until wheat’s rally forced corn and beans to follow.  It wasn’t until the USDA’s October report which showed a disappointing corn yield that the markets really took off.  This summer’s hot nights and wet weather were the main factors behind the lower than expected corn yields.

 

Strong grain prices can also be attributed to increased demand from investors.  Funds held all-time record long positions in corn, wheat, and soybeans in 2010.  We also traded at all-time record open interest and volume late this year.  A lot of this has to do with the sharp increase in ETF money coming into AG markets.  This allowed many of the smaller traders to buy corn ETF’s who wouldn’t normally be market participants.

 

So where do we go in 2011?  Fundamentally these markets remain strong.  If the January reports are friendly grains, the acreage battle could keep us strong right into the March 31st planting intentions report.  We like staying well protected in case the bullish bias doesn’t hold, and we like to remain with our spring call spreads for upside potential.

 

We are still looking at getting short term put protection on for corn and beans.  Implied volatility is very high, so if you are thinking about options please call you broker to discuss strategies.

 

Markets are expected to be low volume through December 31st as many traders are on vacation.  If you are looking to add additional protection, or have any market questions, please don't hesitate to give your broker a call.

 

Stop Guessing & Start Marketing

 

 

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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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