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July 2008 Archive for Outlook Today

RSS By: Bob Utterback, Farm Journal

Bob Utterback has more than 26 years of experience and offers producers a disciplined approach to marketing.

What is a producer to do?

Jul 31, 2008

This week the big news has been the statement by the Sec. Of Agriculture that the opening up of the conservation reserve would not be forth coming. He found the power of the environmental groups was more powerful than the needs of the American consumer. The market is starting to realize the need to bid for acres will be very aggressive next year. The concern about rising fertilizer prices is also getting a lot of play. I’ve been hearing about 250 plus per ton increases in much of the fertilizer used to produce corn. This plus increasing cash rents to all elements in the production process has producers scratching their head and asking.
 
What’s it going to cost me? How much do I need in prices to make a fair profit for the dollars invested? Finally, is all the cash flow worth the risk with so much uncertainty floating around about ethanol, government policy on CRP and the general health of the domestic and foreign economy?
 
I would suggest it’s not too big of a leap of logic to argue that corn acres are going to have a difficult time growing next year unless beans price crash or input cost drop significantly.
 
So the issue now is whether corn is really costing producers say $5 a bushel F.O.B. the farm, what’s fair profit? Currently the Dec 09 is trading at $6.50 which suggests about a 23% return over all cost. I would suggest most business in the United States would just about kill for such a profit margin. 
 
The problem with most producers is they don’t know if they can keep their cost at $5. They don’t know what their yield will be even with some measure of crop insurance. Finally, even if they could keep cost below $5 and be assured that yields were rather stable due to using irrigation, the potential cash flow risk exposure of a hedge position is frightening for many.
 
So what’s a producer to do in this climate? First off you have to accept no decision is a decision. If you elect to put your money into the crop and have no plan to sell it until it’s harvested and stored in the bin, you are 100% at the mercy of the market. Granted there have been years over the last three where this strategy did pay off but remember, that’s the past not the future. Eventually, supply is going to increase or demand is going to decline and price equilibrium could move dangerous close to or below the cost of production.  This is the history of our industry and I don’t believe we have done anything to change this behavior.
 
So I believe producers have a decision to make. It’s a decision about the form of how you sell. Essentially, it’s our position here at UMS that producers do not have the cash flow or the emotional temperament to handle a net short futures positions for any length of time or level of financial commitment. With the growing uncertainty of the markets and influence of the funds traders I strongly urge clients have to have a limit on their cash flow exposure. By this I mean one develops a strategy that has a limit on risk exposure at the start of the program. Granted, one can selectively hedge the market for a specific level of risk. Get out when it’s been achieved. The problem with selective trading is while on paper it can sound smart, the problems are in the details. Over the years I’ve observed when a client gets taken out of a position with a loss, it’s extremely difficult getting them back quickly into the position on technical signals.
 
So what’s my point? I would suggest any client who will be trying to take advantage of the expected price bounce in 2009 corn between Jan and April to buy acres must be selling in a “put format”.  This implies either you buy calls now on expected fall lows and use the position to insulate a 2009 corn futures position or you wait until spring and buy a put.
 
The decision comes down to do you buy a call now and speculate the market going to rally to sell or do you wait to sell and put the put but the premium will be expense.  Currently, we strongly encourage end users, feed buyers and producers who want to buy calls long term to insulate future selling decisions to be getting ready to start scale down buying of long strategy between August 8 and August 20th. 
 
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com
 
The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading. 
 

Choppy trade in the grains!

Jul 30, 2008
 
The crop conditions continued to improve in a time period when we normally see decline. This alone would have caused some weakness, but the really big factor was the continued slide in the oil complex.
 
Today’s move close to the $120 support level has many talking about oil below $100. Now that gas has gone below $4 at the pump in most areas, consumers are starting to breathe easier. 
 
It should be noted that the oil market has been down since Mr. Bush lifted the executive order against off-shore drilling, but he’s not getting any of the credit. We will still need state-by-state approval for drilling to really increase supplies. But don’t expect it to become an issue before the election time period.
 
It will be interesting if the concern about energy prices persists as a political issue for the upcoming election. I believe getting an energy policy that works to provide sufficient fuel and electricity to keep our economy running is the No. 1 issue of the election. All other considerations are secondary. If we don’t have a strong economy we will not have jobs. It’s that simple.
 
All other issues can be resolved eventually if the individual bank account is strong enough to pay the bills. To my way of thinking I believe we must actively develop all renewable resources and increase the research for hydrogen energy and fuel cells on the same footing as the mission to the moon or the Manhattan project.
 
The problem is this implies short term pain for long term gain. Do you hear of any politicians that can get elected on this type of platform? I believe as an informed citizen it’s time we require more from our politicians than feel good comments about social change and a specific plan on how they are going to move us forward to energy independence.
 
 
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com
 
The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading. 
 

End of the month bounce underway!

Jul 28, 2008
The end of month bounce is now under way. The bears are taking some profits and few bottom pickers are trying to buy. The problem is we see limited upside potential right now. It is my opinion the market is going to have to wait until after the August Supply/Demand report. It should show some reduction in usage and we believe a disappointment in reduced harvested acres setting the stage for a bearish report and a bullish reaction.
 
The real potential on the supply side of the equation right now is how late the crop is. Granted it’s improved a lot but we are still seeing a large portion of the crop pollinating this week. This puts a lot of pressure on the market during September “NOT” to have any type of cold weather event. Since the full moon is around the middle of the month, everyone will start looking to the weather maps (I believe around the third week of August).
 
This would all suggest that shortly after the August report, if we are not able to test and make new lows, the fall lows are more than likely in. We want to argue for a chart pattern much like the 1993 pattern where the damage of the early rains was not known until we got into the fields. I continue to believe the best chance of strength will start to develop in October and prices will move higher into Jan to March time period to buy acres back due to high input cost.
 
Summary: I would suggest the odds for a retest of the low are better than 50/50. If the market doesn’t make new lows by mid-August, the odds are better than 80/20 we will firm into September. If no weather event occurs a retest and perhaps a new low will be made in late September. As we move into October, the trend should turn sideways to firm.
 
Strategy: IF you must sell off the combine I would focus on selling in the first two weeks of September. If you can, storage is still recommended for remaining unpriced inventory and holding into the Feb to April time period to price.
 
 
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com
 
The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading. 
 

It’s Friday and the bears decided to take some money home!

Jul 25, 2008

It’s Friday and everyone is ready to get out of Chicago. I suspect after the rough and tumble last 18 days the bears have decided to take some of their money and run. As for buying interest, I have to suggest it’s modest at best. Everybody wants to wait to see if we cruise down again to the old lows after the August reports.
 
As I suggested yesterday, the tone is producers want to buy beans more than corn right now. The reason being tight stocks exist in beans and second the beans are late. The cash market is starting to support the bias of higher values in that basis has gone premium now. Some are saying basis could actually go a lot higher. I would suggest one has to be careful in getting to bullish the basis. If you have hedge to arrive contracts on the books I would really look aggressively at locking up the basis.
 
Outside markets were rather quiet today. The dow bounce back a little after yesterday’s losses. My bias is the trend is down because earnings are going to continue to be weak as the effect of $4 GAS works its way through the economy. The dollar continued its slide but nothing acute. Crude oil gave ground but fought the break all day long. Many believe crude will halt at 120 while others say it will go back to 100.  I’m more of the $100 camp unless we get some type of weather in the gulf this fall.
 
In summary: Increasing outside market speculative excitement of inflation risk is slowing down. If grains are going to bounce back quickly, it will have to be due to weather. Right now the greatest risk is simply the crop is late and the sensitivity it will have to frost scares in September.
 
What should the focus be right now?  I have to suggest end users such as livestock producers, commercial buyers of product such as ethanol plants, or big end users should be using this big price sell off to start moving into a 100% hedged position of next year’s corn needs by no later than late August. In regards to soybean meal I would get at least three months protection.  The problem for beans is acres are going to increase in 2009 which is bearish but near-term the crop is late and any fall problems will send the market to new highs. I would not suggest it would be out of line for all end users to have 4 to 6 months of soybean usage protected during this very uncertain time period for beans.
 
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com
 
The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading. 
 

Unpriced inventory and what to do!

Jul 24, 2008
As one would expect, I’m starting to get a lot of calls from clients who have un-priced inventory that must be moved? The question is what to do now? 
 
I’ve been talking about time counts and the end of month profit taking activity. Today is one of the first important time counts for corn. We are 18 days off the June high and Tuesday will be 21 days. Being that it’s the end of the month I have to believe we are due for a respectable 10 to 15% price bounce off the last 18-day break. I have to suggest the corn market has more than likely hit a near-term low but could easily test or make new lows after the August Supply/Demand report if we show continued demand destruction and increased yields. I believe corn will not be able to get its groove back until we get closer to September and the concern over frost starts to get on everyone’s mind. The obvious question is will we get back some of this loss of the last 18-days? It really takes some time now if we confirm a yield above 152. The situation is quickly developing with fertilizer cost exploding and corn prices crashing producers are really looking hard at planting only what they must in regards to corn in 2009. This I believe is the one of the best long-term positives for corn. The other positive is the last 18-day break has allowed prices to get down to a level where all livestock producers and end-users such as ethanol producers can at least see some light at the end of the tunnel.

In summary: While I believe we are in the process of making an extreme low I don’t see the potential until harvest and then the best shot is in Jan to April to retest the $7 plus level.
 
If my phone calls at the office are any gauge of producer bias, I have to say beans are where everyone is most surprised. Many producers across several parts of the Midwest say even the full season beans are not as strong as crop condition ratings suggest. They are small and some disease is starting to show up.  When you start talking to clients with double crop beans they are generally concerned. While these comments are not uncommon for mid summer, this year it’s going to be more acute because we know the crop is late, stocks are tight and any concern about frost injury will cause beans to really bounce.
 
So what to do?  I’ve been hearing basis is really getting tight because producers don’t want to sell. If we get basis to $1 over and you have to move beans before harvest I would lock it up. Second, if you have sold and want to reown I would focus on some limited risk vertical call strategy. Finally, if we are lucky and do get a strong bounce into fall I would really focus on selling Nov 09 back above $14 to $15 price range. My bias is bean acres are going to grow domestically and internationally and passing up anything in this range is dangerous.
 
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com
 
The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading. 
 

Roller Coaster in corn!

Jul 24, 2008
Everyone is going on vacation now with their kids and many are going to the amusement parks to ride the roller coaster. Anybody in the bean and corn market did not have to leave home all we had to do was watch the market today. The gap lower opening could have been the signal for the final margin call liquidation cycle. Since we are nearing the end of the month and some very strong 18 to 21 day counts down off the June highs, one has to assume the bears are getting ready to bank some profits and move to the sidelines.
 
While it’s not an absolute rule, I’ve seen many times when the market has these types of severe unexpected breaks, the bull holds off through the correction on the argument it  just can go lower. Once the market bounces (as we anticipate short term) the trader is relieved and believes he or she has survived the correction. Then after the initial 3- to 5-day profit taking bounce the market starts to weaken and test or even make new lows. This is where the bulls psychological and financial position is at its weakest. This is essentially what creates the double bottom pattern in charts and set’s the stage for a long price recovery.
 
Please note that right now I would suggest the corn market is in a more likely stage to create a double bottom than beans. The beans have been much stronger because the stocks are tighter and the bean crop is more marginal. 

 
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com
 
The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading. 
 

How much lower can corn go?

Jul 22, 2008
I was on the road yesterday down to Evansville Ind. Overall, the crops looked stronger than I expected.  My comments back in June was as soon as the corn got tall and we could not see the wet spots the corn market would be in trouble unless we had a lot of heat. Since June 27th, the break has been decisive and extremely painful for the bull but it has bailed out the bear or feed buyers wanting to get next year’s inventory protected. 
 
The issue now is how much further can we go?  I would suggest a close below the $5.95 level for Dec corn is the last good technical support the bull has. If this level is breached we could set up for a final long liquidation break which could push corn clear back to the $5.50 level. 
 
My bias is the corn crop yield is still very uncertain, but I must accept it’s not getting worse, the only issue is are we simply stabilizing the yield or improving yield prospects? In my gut I believe we will end up some place between 148 and 152. The trade I believe is trading as if it’s 152 and growing.  I’m working on the assumption that a 1993 strong fall price rebound is still a very strong possibility. This implies I want to become very aggressive about buying feed needs and reducing the size of my hedge position.  The exact timing is difficult but I would suggest shortly after the August Supply/Demand report to early September, one should have all long positions in place and significant reduction in the overall short position.
 
 
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.
 
 
The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading. 

The technical aspect of corn!

Jul 17, 2008
 
Today I want to talk about the corn charts. Since June 27th the market has experienced a 12 day break which has netted the shorts a $1.34 gain, not bad! If you look at the May 29th rally of $5.9975 low to the June 27th high of $7.96 for $1.96 in 22 days, which 68 cents of the gain has been taken away in 10 fewer than days. This is why many say the bears make money faster when the event occurs. Now that the market has broken 50% level of the June rally we are forced now to look for more long-term technical support levels.
 
The first noticeable level would be the 6/4 to 6/5 breakout event or “gap”. The bottom of the gap is $6.435 and the top of the gap is $6.505. This I would suggest will be the next level of support for Dec 08 corn.  If this level is broken due to long liquidation because of expectations that corn yields are improving closer to the 152+ yield and the continued concern about cash flow liquidity of the financial sector, one has to suggest major long-term support will exist at the March to April lows at $6. These levels I believe will not be breached until:
  1. There is solid confirmation that the flooded acres were not as bad as anticipated and yield response has been confirmed above 152 bushel. It is my bias both of these factors can really be confirmed until we are well into fall and by then the market will be looking forward to the winter markets.
  2. The bigger wild card that could force the market below these levels if we start see a melt down in the financial markets worse than currently seen along with a sharp and sudden break in crude oil.
 
DAILY DEC 08 CORN:
 
SOURCE: CBOT PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS.

 
Conclusion: Tomorrow will be 13 days down, an excellent time count for a blow off bottom. If we don’t hold, then one could easily expect another 5 to 8 days down which gets the market into an 18 to 21 down count. The SSTO indicator which reflects overbought and oversold status suggests we are now moving into ranges where it will be difficult to maintain this aggressive pace of selloff. Finally, I know you will tell me I’m crazy but we are going into a full moon, and it’s been my observation people get crazy around these times. With emotions over charged there is risk the market could overshoot the correction. On the expected technical bounce off this selloff I would suggest it will be difficult getting Dec corn much more than 1/3 of the correction or some place between $6.90 but not over $7.
 
As for how far we can go down? I really feel that over the next 5 to 8 days the odds are more than 70/30 in favor of at least trying to test the gap.  One should be preparing one’s self for a sharp bounce off the lows once this market tests the $6 to $6.30 level.
 
Will we come back to the old highs?  As I suggested yesterday it all depends upon the final acreage and yield figure and how stable the economy remains. My bias: The supply side is going to be tighter than current estimates but frankly the odds of Dec 08 corn making new highs now is more than likely less than 20%. The real potential for corn to move back to the highs will be in the Jan to March time period when we have to keep prices high to assure planted acres.
 
Should you sell it today?  Based upon the chart analysis I have to suggest there is about 50 cents of downside opportunity but my gut tells me it’s getting very late in the cycle to really try to press for short gains. Instead I want to get started around day 18 (July 24) to day 21 (July 29) down off the June high of getting prepared to buy feed needs for most of 2009 and start getting long calls in the July 09 in place to enable clients to sell 2009 corn in the Jan to March time period of 2009.
 
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.

 
The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading. 
 

The great bull market of 2008!

Jul 15, 2008
Today’s higher open and sharp correction has now broken important technical support levels. The longs are aggressively moving to the sidelines to preserve equity and sellers are getting confident that they need to press the market for lower price action.  
The big question on one’s mind is whether or not the great bull market is over!  In a word MAYBE!
Some of my bearish concerns are:
Today’s technical failures, the great uncertainty regarding our banking industry, continued equity losses, the tapped-out consumer, improving crop conditions, and finally crude oil is taking a big hit, a move back to $100 can put a lot of pressure on ethanol usage and subsequently corn demand.
In general, the demand side of the equation looks weak ahead and could be sharply lower if we are not careful.
On the bullish side:
The dollar continues to slide due to the concern about the U.S. economy. This should help to keep the slide in exports down. 
While the crop has stabilized, I’m convinced yield potential has been lost. The seasonal trend is for the crop to decline over the next 30 days. All it’s going to take to get the trade excited after a $1.34 sell off in December corn is about 5 to 8 days of 90+ degree temps.
In summary: Right now the trade is acting like corn yields are going to be around 150 bu. to 152 bu. per acre. If this is correct, the highs are in. If, as I suspect, the crop has more yield variability and any risk is seen with an early frost, we have a solid chance of seeing and even making higher highs in the January to March time period. Right now it all comes down to weather. The problem is the bull will not be able to prove his case until the combines start to run. So fighting the market right now if you are long is more than likely going to be difficult at best.
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Rude awakening for the bulls!

Jul 14, 2008
The bulls woke up to a rude wake up call!  After a neutral-to-bearish USDA Supply and Demand report with a positive reaction, the bulls were feeling very comfortable on Friday’s close. Most of the argument for higher values was based upon the weakness in the dollar, strength in crude oil, and seasonal expectation of heat moving into the market to reduce yields.
Well, the market is getting what it wants in regard to the dollar weakness because of the growing financial mess of the banking industry. The crude was firm but gave up ground on concern that the economy and subsequent demand could be under pressure as the decline in equity stocks continue. The factor that the trade missed the worse was weather. The rains came but the heat is not coming in as badly as we need it to really decline crop size. With the sharp downtrend in beans today it allowed corn to close below technical support which has triggered aggressive long liquidation and some speculative selling.  You know the drill, doom and gloom is now very much the state of mind of many clients holding long futures or cash positions. Granted it’s negative now but I still believe overall corn has a good chance of price recovery this winter while beans should see their best case on any summer problems if they develop.
So what’s ahead?  As I said back in mid-June when the crop gets big enough to hide the ponds and unevenness of the crop from the road it’s going to be hard for the bulls to keep the market in trend.  My expectation is we will find technical support by the end of the month and the market from August to October could essentially be sideways. The trend followers will be frustrated but the essential sideways market will be great for short-term traders.  
What’s the impact on strategy?  The critical question is what changes in crop mix should one be considering for 2009 to reduce ones over all risk.  I want to increase bean production to the maximum for 2009 beans above $15 and if a price event occurs in the winter or spring of 2009, aggressively sell 2010 corn. I will be talking a lot about this in our upcoming seminar in August, essentially technique and risk, give us a call if you are interested at 1-800-832-1488. 
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.


The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

My thoughts on the Supply/Demand report!

Jul 14, 2008
The USDA's Supply and Demand report came out very close to overall expectations. It was positive for the bean complex in that it reduced carryover down to 140 million bushels. They did this mainly by reducing U.S. yield down to 41.6 bu. per acre. Beans will be very fixed upon the weather outlook over the next few weeks. With 74.5 million acres planted, even a ½-bu. per acre reduction now leads the market dangerous close to extremely tight carryover stocks. The implication is clear that beans are going to be the leader of the pack for the next few weeks.
What’s the implication on corn?  With November 2009 and 2010 contracts now approaching the $15 level, higher input cost on the horizon for corn, will producers elect to start planting more beans?  I have to believe this could be a very prudent game plan because you reduce your cash flow exposure of the input side on corn. If you really feel adventurous, focus on getting the floor in place on beans and the place a speculative long position in corn.  We are going to be talking about this position a lot over the next few weeks. If you are interested in going over all the positive and negatives of the strategies involved, we are setting up a meeting for August 23rd here in New Richmond, Ind., to talk about the upcoming exciting opportunities ahead.
The variable that will influence how strong the market will be now will be the weather. A mere ½-bu. drop in bean yields could add more than a $1 to beans. In regards to outside market influences, the oil market is surging on concerns about Iran while the dollar is tanking because of all the financial concern about the status of the financials. We came across a really good article which explains many of the variables at work right now. The conclusion is the U.S. consumer is exhausted and chickens are about ready to come home to roost. If you would like to see a copy of the article send an e-mail to laura@utterbackmarketing.com and she will send it to you.
Well, summing it up, I don’t know of a time in my professional career in the commodities where so much stress and anxiety existed on both the bearish side for equities and bullish side for commodities.  As always my fear is for producers when things get looking too good to be true it’s usually the train coming down the tracks rather than the birth of a new day. I hate to always be negative but producers have to start looking really hard in the next few weeks about selling 2009 and 2010 beans. 
Have a good weekend and get rested up for another exciting week.
Bob
If you have any questions or would like to read more of my daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.


The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

The trend is higher for beans!

Jul 09, 2008
We believe beans want to continue to rally, mainly on concern that planted double-crop acres could fall way short of expectation. We are hearing reports that many acres in the flood affected areas that were expected to be shifted to beans have given up. Second, beans don’t like wet feet and yields are being affected. The final concern is with all the wet conditions, it will be an excellent year for diseases (especially Asian rust which has not impacted the U.S. as dramatically as it was feared a couple of years ago). 
The November beans contract bounced off above the uptrending support—which suggests that as long as the market can stay above the $14.80 to $15.05 level, the trend looks good for beans. If the market were to close below this level, expect massive long liquidation.
The three big outside market concerns now are:
  1. Will Congress do something drastic to take the speculative funds out of the commodity sector?  I feel they are going to do something which could be short term negative but eventually the money will find a way around the limitations if there is money to be made in commodities verses equities.
  2. Which way will oil move—towards $200 or towards $100? My bias is higher near-term but not explosive unless we see a major terrorist event. 
  3. How will the stock market continue domestically and internationally? Concern is growing the high fuel costs are finally going to start dragging down demand and very poor earning reports are right around the corner.
Summary: It appears that soybeans have some fundamental concerns that can keep prices higher. My biggest concern is the impact of outside market forces. This all suggests one should be cautious on exactly how much risk one accepts to the upside and downside right now.  If your position is not quickly correct, don’t fight it and move to the sidelines.
Give us a call at 1-800-832-1488 if you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.


The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Corn has now moved back to technical support!

Jul 08, 2008
Today’s full fledge long liquidation break has now taken the market back to some important technical support levels. First, for December corn, $7 is actually 50% retracement of the total June rally, today’s low of $7.02 is close enough for us. Second, the market did however close the June $7.05 to $7.15 gap. With the double top formation, this does give some weight to the bears in that a major high has been made.
What’s next? Friday we have a USDA Supply/Demand report coming out. Expectations are for some acreage adjustments but the big numbers will be in the August report. Overall, I have to believe acres will be reduced but not as much as the bulls want. We will not get the real numbers until the final January report.
So what’s pushing the bulls so hard today? I believe it’s a growing fear that Congress is looking for a scapegoat and it’s called the speculators or more specifically the ETF’s. This issue started to surface a few weeks ago, many thought it was going to be put to bed until after the elections. It however appears Congress wants to get something done faster. While short term it could be bearish, it could actually work to the markets advantage in getting some excess baggage off before the fall time period. As for blocking money from coming into commodities, I believe if there is money to be made the big money will find ways around any government restrictions.
In summary, December corn has achieved my downside targets much quicker than I would have liked. I really wanted to see these levels closer to the end of the month. Since it’s come early, one needs to be careful in how you buy. Right now I would focus on put selling or vertical call strategies rather than net long positions. Until we get to the end of the month I’m not really excited about going net long in a big way for a sit and hold position.
Give us a call at 1-800-832-1488 if you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.

The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Rain makes grain!

Jul 08, 2008
The bulls went long into the holiday weekend expecting hot and dry and then the rains came into the Midwest reducing a lot of the heat. Guess what, the crops are starting to look better. Our expectation is the weekly crop ratings will be improved for corn and beans.
 
All of this plus continued concern that something could happen by the government players to reduce the attractiveness of the ETF’s investment money in commodities was simply too much for the bulls today. As I suggested last week on Ag Day, this market is going to continue to be very violent which leaves producers in a difficult decision making process of how much risk to take on a day-to-day basis.
 
The corn and bean charts have now developed a very dangerous double top. This is going to give the bears some confidence in July as the crop improves. If you’re a long-term bull waiting for a demand rationing event in the November-to-March time period as I am, the current correction is desperately wanted.  I’ve been on record for some time now looking for a cooling off in July. I’m not going to tell you I saw limit down moves in corn, beans and wheat as we are seeing today but frankly I’m not that surprised.
 
How far can we go down?  I continue to believe wheat will be the weakest of the commodities because of building world production capacity. Remember wheat can be produced in several parts of the world which allows a crop to be coming into the world system much more frequently than corn and beans.  I would suggest producers really need to take advantage of any solid fall rally in corn and beans to get a base under their 2009 production.
Give us a call at 1-800-832-1488 if you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.



The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.

Crude Oil, demand and what this means for agriculture!

Jul 01, 2008
I just heard a new phrase in reference to crude oil, it is in a “demand destruction phrase”.  Everybody is talking about the Energy Information Administration International Energy Outlook 2008 report released last week (please note that we sent it out to all our internet clients and it is at our web site).  The highlight stated: “World market energy consumption is projected to increase by 50% (yes, that’s doubling demand from 2005 through 2030). Total energy demand in the non-OEC countries increased by 85%, compared with an increase of 19% in the OECD countries.
Implications: Even if the U.S. becomes very aggressive on conservation, the demand explosion in Asia is going to keep prices high for energy, which is where the term demand destruction comes into play. As a nation that consumes 25% or higher of the world energy supply, there are many in the world that would now suggest this is unfair and must be changed. If we don’t watch out, the standard of living in the U.S. is going to go on a multiple year decline! This I believe is the overriding No. 1 issue for this year’s election. If you don’t have a strong economy that creates jobs, you can’t hope to improve the lives of your citizens. It’s simple, no money, no play!
In regards to agriculture, this energy outlook must be considered positive to the ethanol production sector. If you combine this with world population growth it does suggest the demand outlook for agriculture is very bullish. My belief follows the following line of thinking. You only have demand if people can afford to pay for it. This is going to be the future problem for all world governments as energy costs go up, it’s a hidden tax on consumers disposable income. Eventually, it will lead to slower growth. If you dove tail this with a restrictive energy policy and higher taxes to pay for government transfer programs from the rich to the poor you set up a dangerous economic future for slower growth in income by rising cost. In the end you will move into a serious stagflation or worse we could be heading towards a economic downturn not seen since the early 30’s. Eventually, if the problem is not resolved I believe it will lead to a major military conflict over natural resources.
What to do?  I would suggest as a grain producer you need to be using the current incomes to help pay off debt rather than increase debt to avoid taxes.  Second, you need to focus on locking in the profit margins specifically for 2009 and 2010. Third, the most challenging, is we need to start rethinking how we produce our crops. The agricultural revolution of the 19th century and 20th century  has been based upon cheap oil. This is not the future we have in store for us,  which implies that every part of operations must be reviewed. Just because this is how we’ve done it in the past, there is no reason we must do it in the future. Today I’m asking questions. I will be looking forward to your comments in the future. I will try to react and even introduce in my daily comments as time permits.
Finally, this is our last comments prior to the 4th of July. Everybody here at UMS invites you to go out and celebrate the freedoms we have been given. Yes things are going to get rough ahead of us for the U.S. consumer but we must still recognize we are a lot better off than many other parts of the world.  Only by working together can we hope to improve our lot in life.
Give us a call at 1-800-832-1488 if you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com.


The recommendations and opinions contained herein are based upon information from sources believed to be reliable. However, that information may be incomplete and unverified. There are numerous factors that can affect the markets, which cannot be fully accounted for in the preparation of these recommendations. Those following these recommendations do so at their own risk. The firm and/or customers of the firm may take a position that may not be consistent with the recommendations herein. Any recommendation does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any commodity interest. Commodity trading involves risks, and you should fully understand those risks before trading.
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