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September 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.

Grain stocks not giving out favors today

Sep 30, 2008
The grain stocks report did the corn and bean markets no favors today. While project (A) saw a bounce, the market essentially opened lower on the bearish stock numbers and headed lower. The bear now has the bull in a full fledge stampede for the exits. Concern that demand is going to continue to contract on a global basis has all commodities in a correction mode.
As I suggested yesterday the ability to break strong technical base of support in all the commodities has the market in fear of a full blown correction to where we started out last fall. Today’s corn close below $5.05 must be respected with the next level of support at $4.80. If this level is broken the margin calls for the longs will force the issue for the bulls to get out which could force the final liquidation phase.
So the question that everybody is asking is what to do with unpriced inventory. I have to suggest you focus some level of disaster price protection. Why not store your corn but look at some type of 70 cent to 80 cent vertical put strategy in the March contract for corn and focus on a $1.50 type vertical in beans and wheat. The bottom line is to put a limit on the bleed and allow yourself time for the market to stabilize.
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.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. 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. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.
 

Liquidity and fear-the major driving force in the markets

Sep 29, 2008
Today is one of those days where if (you are right) the market your ready to eat steak and drink champagne! If you were wrong, you are ready to head for the outhouse to puke your guts out!  Equally, the prudent trader with money is sitting on the sidelines waiting for the great buys to develop.
The major driving force right now is liquidity and fear. Fear that the financial package is not going to get pasted, fear it’s not going to be implemented quick enough, fear it’s not going to be big enough. Today we saw the financial crisis deepen to some European banks. As the economic crisis broadens, concern over future demand gets worse. How restrictive will banks become on lending? As borrowing standards tighten over the next six months and everyone holds their breath to see how deep the financial crisis will get, it’s going to make it difficult for producers. The net impact is the high cash flow crops like cotton and corn may have difficulty getting the acres it wants and lower cash flow crops like wheat and beans may actually see greater acres than needed.
As for the current situation, today technically is about as black a day as you can get for commodities. All commodities were near or at their limit down price moves. In the case of crude oil, cotton, wheat and beans broke below a nice double bottom formation with corn potentially following suite tomorrow. 
The risk of these technical moves is it’s suggesting a major shift is taking place in the underlying fundamentals. The sharp gap lower price action below strong support has now opened up Pandora’s box of exactly how much down side risk does exist.  Now that the house has voted down the bail out, it’s going to take more time to get the bail out bill passed. Second, we are into harvest and cash is starting to hit the market. Third, credit is drying up which is forcing many of the trading funds that use borrowed money to run their operations to reduce the size of positions due to margin calls.
So in summary: we are now seeing fear. I’m not saying we will not go lower tomorrow but the market will be unable to sustain this level of bearish tone for much longer than 8 to 15 days. I’m suggesting all clients who have a solid financial footing and have cash to invest be getting prepared to buy 2009 corn, cotton and live hogs between now and the end of the month.  
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.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. 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. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.

The week's events and grain markets

Sep 25, 2008
The doctor’s credo of doing no harm is what we hope Washington does with the financial bail out. We know it smells, but if we don’t get the credit markets working, it’s going to be a much bigger problem. I am concerned about the demand prospects for the next year or so. I anticipate after all the dust settles, bankers in the future will be more cautious in loaning. For example, in the past they would get an appraised value of the property to be bought and loan up to  80% to 95% of the value dependent up the type of loan. On top of this, they would many times give a home equity loan for $10,000 and up simply because they gave the loan. I would anticipate the percentage of the appraised loans to go down say to 60% to 70% and the home equity loans to really dry up. This effectively reduces money supply and liquidity to the economy when it’s needs more growth. If we don’t see economic growth, good loans could suddenly come into difficulty. 
The housing market correction is only a part of the much bigger problem which is high energy values! If we don’t as a country move faster in removing our dependency upon foreign oil, the current economic situation has the potential of being the tip of the iceberg. As the country and consumers go more into debt to maintain their standard of living, while energy values continue to rise because of our reliance on oil which is a finite resource, I believe the economic system is increasingly being built on a weak foundation that could eventually crumble. 
So my bias right now is at best I assume stable and at worse stagnate demand prospect, a complete opposite pattern that we saw this time last fall. On the supply side of the equation, early yields in the Midwest seem to be coming in better than most expected. I’m starting to lean to the side of the argument that corn and bean yields in the October report have greater odds of increasing than decreasing. Finally, I would suggest a large percent of the unpriced grain is going to be stored and held well into next year. This all suggests to me it’s going to be difficult to rally the market as much as producers want since we saw $8 corn and $16 beans last year.   
Suggested strategy: If you are going to store corn into the March to May time period, consider selling a deep-out-of-the-money call at the strike price you would be willing to sell inventory.  For example, May corn is now at $5.90, let’s say you want to sell it at $6.60
I would suggest you sell the May $6.60 calls today for 40 cents. This will in effect pays you for all your storage cost to next May and give you some protection to downside risk if your upside expectations are not met. Remember, you are unpriced in the cash inventory and are taking all the downside price risk. Equally, if the market does rally you will have some margin risk on the out of the money calls but the loss will be offset by the increase in your cash sales. I would also note if you do elect to hold unpriced you may want to focus on locking up basis, remember if prices rally you could see basis widen.
In summary: I’m concerned about demand not meeting recent learned expectations of constant growth and supply exceeding our concerns for decline. Subsequently, producers are going to get caught holding inventory for price gains that don’t materialize and make it very difficult to market next years inventory efficiently when production cost are increasing.  By selling calls it reduces your upside unlimited potential but pays for your storage cost and gives some downside protection while still maintaining a reasonable upside price gain if you are correct about market seasonal firmness from fall to next spring.
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.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. 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. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.

Commodities were mixed today

Sep 24, 2008
The corn and bean market both saw modest gains today but the was able to get above the important $6 level in December 2009 corn and $12 in November 2009 beans. Both price levels have been psychological overhead resistance levels. The major long term resistance for December corn is $6.50 while $13.25 is for beans. My bias continues to be very strong that there is justification for corn to rally but beans are living on borrowed time. I continue to urge producers to look aggressively at getting a floor under all of their 2009 beans at current levels by forward selling in the cash market and then come back on paper with a 3 to 5 dollar vertical call strategy. I continue to stress the potential for significant increase in bean acres domestically and internationally next year with a very uncertain demand outlook at best.
We just put a special report on at our website about a natural gas play for this winter and fall. If you are interested call us for a free trial subscription. Bottom line: it’s time to buy at the 7-cent range.
December hogs are starting to develop a solid technical base at the 65 to 66 level.  The charts are very balanced right now and would suggest we could go either way. Since we could still see a little more sell off on herd liquidation into October, I would hold off on buying for a bounce but it’s very close and one needs to be ready.
Just a quick note about gold—the reason why ag traders watch it is because it’s historically been a good warning signal for inflation or a flight of capital from the equities which also helps commodities. After seeing close to a 1,000 a ounce high in July, it crashes below $750 in a significant long liquidation break. Then in September we experienced a historical one day rally. This was all fueled by the uncertainty associated with the financial markets. The chart is developing a compression formation called a triangle formation. The implication one should be getting ready for a violent price move. We could go another couple of days but I would not be surprised to see a major breakout by mid week. Since it’s difficult to say which way this would be an excellent time to buy a put and call in nearby options. Once the breakout occurs hold the winner and sell the loser.
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.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. 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. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.
 

Grains and outside markets higher today

Sep 22, 2008
The outside markets were quite strong today. Crude oil is now back above $108, the dollar down over 94 points and gold up $39. This bullish tone helped to encourage the corn, wheat, and bean market as well. Nearby corn moved up to $5.63, up almost 25 cents at one time, new crop December 2009 corn came within a ½ cent of getting back to $6 and July 2009 wheat was to $7.97.  The bean complex was strong as well with November 2008 beans up to $12.03 at one time and next crop November 2009 beans back to $11.94. In summary, today was a very pleasant change from last week’s doom and gloom price action. The concern will be does this rally have legs to remain standing all week?
While there is a federal bail out coming, there are ALREADY are some difference between Congress and the White House in how it will be conducted. Concern is still very high that there are other problems to occur with the stock market. Perhaps one of the biggest concerns is: how involved will the government get in the stock market? With the regulation of the short selling programs, many insiders are getting worried that the U.S will move against speculative investment money in the market. If we take the speculator out of the market we also take the liquidity out of the market. The net result is we could actually make the market more unstable and my bias is the lows would be worse while the highs would not be as high if the hedge funds are restricted in their level of involvement in the market.
As you know I’ve been wanting to buy December 2009 corn. With the rebound from the $5.58 to the current $6 level I’m neutral now to the market. My focus would now be moving over to November 2009. When you can start making $11 plus for off the combine cash sales, I have to suggest you get a floor in place and then spend 60 to 80 cents to participate in upside price potential if a supply reduction event occurs between now and next year. Bottom line: I’m a supply bear and demand neutral to beans next year. To get prices back to the $13 to $16 level we are going to have to a major weather reduction or a significant change in tone of the demand market.
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.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. 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. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.

Vertical call vs. Futures

Sep 19, 2008
Question from reader: Can you explain to me what a vertical call strategy over long futures is? It's been a while since I have dealt with calls, puts, etc.  We have to sell the rest of our 2008 harvest wheat and I am looking for some way to take advantage of any rise in the price of wheat.
Response: Vertical Call vs. Futures
First, let’s review futures. There is a margin on a futures contract, called the initial margin requirement, which is about $1,500 per day for corn. It can vary if the exchange believes volatility is rising and more protection is needed, as in today's market. The value of a 1-cent move is equal to $50. So today the corn market is up 15 cents; one futures trade would be up $750 per contract. And, if the market had been down 15 cents, one would have a $750 loss per contract. If one only has $1500 in their account, they would have a margin call for $750 and would be required to come up with that much money for their trading account to keep the long [bought] corn position. In summary, one has unlimited opportunity with this trade, but unlimited risk.
Let's say a vertical call strategy was bought yesterday. This means the nearby call was bought and the deferred call was sold [or received premium]. A trader is required to deposit the difference between the two strike prices.
For our example lets assume a $5.80 call is bought at 75 cents ($3,750) and at the same time an $8.00 call is sold for 28 cents ($1,400) for a net difference of 47 cents ($2,300). This means between now and the fall of 2009 one has the right to the benefit of a move between $5.80 and $8. If the position is held to the close of the contract on the last trading day, he/she would have a gross gain of $5.80 – $8.00 or $2.20 ($11,000). In our example, he/she had the $2,300 cost of the call strategy and the net return would be $8,700. 
The disadvantage of the vertical call is one is renting the right to be long. For this he/she has to pay the premium of $2,300 for a worthless trade at this time. If the market does not rally, one loses the entire $2,300. When this right is accepted, one has the potential of a net $8,700 gain with “NO FURTHER MARGIN CALL RISK."
The futures contract gives one a modest entry cost with unlimited risk for unlimited reward. Many times it is the least expensive way to get into the market, but it can be the most emotional and have the highest cash flow to manage. While the vertical call normally has a higher initial cost and long-term can have a higher net cost, it allows one to have a "known" cost regardless of futures contract price activity.
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.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. 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. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.

Stock market decline, bounce in grains

Sep 17, 2008
The decline in the stock market continues today, down at one point over 300 points. While AIG was bailed out, the concern continues to grow that more firms will eventually fall on hard times and the Fed will not bail them out too. This has pushed a lot of money into the gold market. It’s up now over $60 dollars which is an explosion for this commodity. I would not suggest this level of strength can hold once the short term panic buying ends.
At the same time we saw the crude bounce off the bottom up around $94. Everybody was talking about $80 to $85 but it was more wishful thinking rather than real potential. I’m tempted to say the rally in the outside market is more a flight of capital to investments which are perceived will hold value rather than any major bullish demand bounce. 
Never the less, the rally in the outside markets and ability to bounce off the lows has allowed corn and beans to bounce when they were on the edge of going sharply lower. One needs to be focused on getting long the market between now and the October USDA Supply and Demand report.
Long-term I would suggest cotton, hogs, and wheat are on my strong buy list. Corn is neutral and should only be bought on corrections. In regards to beans I don’t want anything to do with the long side of the market. My primary focus will be on selling the November 2009 beans on any rally that gives producers in excess of $10 cash off the combine because of my expectation of a sharp jump in acres domestically and internationally in demand tone that will be stagnant at best. If you get the cash sold and you still want the potential of a price advance I would strongly suggest buying a vertical call strategy over long futures.
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 ON INFORMATION FROM SOURCES BELIEVED TO BE RELIABLE. HOWEVER, THAT INFORMATION MAY BE INCOMPLETE AND UNVERIFIED. THERE ARE NUMEROUS FACTORS THAT CAN AFFECT THE MARKETS THAT CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF THIS EMAIL, AND RECOMMENDATIONS OR OPINIONS CONTAINED THEREIN. THOSE FOLLOWING THESE RECOMMENDATIONS/OPINIONS DO SO AT THEIR OWN RISK. THE FIRM AND/OR CUSTOMERS OF THE FIRM MAY TAKE A POSITION THAT MAY BE INCONSISTENT WITH THE RECOMMENDATIONS AND OPTIONS CONTAINED HEREIN. ANY RECOMMENDATION/OPINION DOES NOT CONSTITUTE AN OFFER TO BUY OR SELL OR THE SOLICITATION OF ANY OFFER TO BUY OR SELL ANY COMMODITY INTEREST. COMMODITY TRADING INVOLVES RISKS, AND YOU SHOULD FULLY UNDERSTAND THOSE RISKS BEFORE TRADING. ANY REPRODUCTION OR RETRANSMISSION OF THIS REPORT WITHOUT THE EXPRESS WRITTEN CONSENT OF UTTERBACK MARKETING SERVICES, INC IS STRICTLY PROHIBITED.

Today’s break is all about liquidity

Sep 17, 2008

 

Many of the trading funds are still heavily involved in the energy markets which continue to implode. This is forcing all long players to liquidate positions because of margins. The other factor that has weighed heavily on trader’s minds today is: How strong is demand going to be in the future if the credit liquidity dries up? If the credit crisis expands and a loss of confidence is seen in demand prospects, the pressure on commodities will be lower even with the reduction in the crop size. 

Bottom line, everyone is heading for the sidelines and waiting for a base to develop before they want to be long again.

Corn and bean farmers some time forget that other crops are planted and some are in even worse situation. I would like to bring your attention to the December 2008 cotton charts. It has been in a downward trend since the February highs and today’s break could be considered an exhaustion of the longs as they move to the sidelines under pressure of losses and margin calls. I have to note we are essentially at the life of contract lows and well below marketing loan. The December 2009 cotton was down over 300 points which moves prices well below the cost of putting out the crops. Either input costs are going to have to take a drastic drop in prices or the acres are not going to get planted to cotton.

I would suggest all speculators to put cotton on their watch list of positions to accumulate. Since you are bottom picking I would be conservative in the number and amount of risk you accept per 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.

Friday's Supply/Demand Report?

Sep 15, 2008
On Friday, the market had a lot of information to digest. The Supply/Demand report came out and it surprisingly lowered rather than increased [like many advisory services were suggesting prior to the report]. The yield at 152.3 is very close to long term where we thought it would end up.
 
The problem I see developing is for whatever downward revision in supply that develops we could equally see a little lowering of demand. The real excitement for corn will start after harvest when the bin doors shut. Exactly how many of acres of corn will producers elect to produce next year when cash rents are exploding along with input costs. Right now the “talk” is no increase and acres may decrease. Bottom line: with today’s report I believe we have reduced the potential of Dec 09 corn testing below $5.50 now to very low levels. All buyers need to be scale down buying over the next four weeks. I would set your target of being completely purchased before the October Supply/Demand report. As for selling, all producers are suggested to wait until the Feb to March time period to price both old and new crop inventory.
 
Over in the bean complex the market rallied but not as much as one would think with yields being lowered to 40 bushels. They broke above $12 but were not able to hold. While the domestic supply is being reduced, global supply of beans was increased in this months report. Talk of late rains is going to help the late planted beans which will eventually help increase the U.S. bean yields. I don’t’ know if I agree but early group two bean yields in Indiana I’ve heard are coming in around a solid 55 bushel level.  My preference continues to sell beans off the combine and use strong price gains above $12 to start aggressively scale up sell of Nov 09 beans. I’m really concerned that acres are going to be up domestically and internationally next year while at the same time demand will be stable to slightly lower. This all suggests some really strong downside price pressure could develop by the fall of 2009.
 
As for wheat, there was no positive news. Production is increasing globally. The trend is sideways to lower. All producers are encouraged to sell any 30 to 50 cent price bounce between now and early December.  The risk long term looks lower.
 
 
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.
 
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. 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. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.

My thoughts on grains pre-report?

Sep 11, 2008

Crude oil and the dollar index continue to put pressure on the big index funds to liquidate their once golden holding. The investment community is getting a strong dose of reality now about commodities and it’s not liking it. I would not be surprised if we see a lot of board of directors changing their attitude about investing in commodities for a while. As the money dries up, it’s going to take more and more bullish news to keep the market stable. 
 
The Supply/Demand report out tomorrow is expected to show little to any drop in corn and bean yields, in fact I believe one must be prepared for an increase in numbers. The player who’s betting on reduced yields really has to wait now until the combines really start to run. If we don’t see any material loss from the frost later next week I believe it will be difficult for the bulls to hold ground. A final flush in the commodity sector could really be seen over the next 30 to 45 days. 
 
This is exactly when end users or persons looking at long term reownership should be getting prepared to buy for a long term sit and hold position.  The reality -- everybody is now getting bearish! So all feed buyers out there really need to start scale down buying December 09 corn below $5.70 and be essentially done by mid-October below $5.50 level.
 
As for beans, I believe we are approaching the last real chance for beans. If we don’t confirm yields below 40 bushel this fall, the beans are done. I want to suggest acres are going to explode domestically and internationally while demand is going to stagnate. This is a formula for long-term problems. I would strongly recommend all clients to be working hard on scale up selling November 09 beans starting at $12 plus.
 
Bottom line:  I’m starting to be very concerned that while we will get confirmation of lower corn and bean yields it’s going to be difficult to get the magnitude of the rally that we want because of  a stronger dollar, reduced levels of speculative fund money and finally a change in attitude toward ethanol government mandates. This suggests December 08 corn above $6.50, wheat above $10 and beans above $14 will now be extremely difficult to see in 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.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. 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. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.
 

Is the super bull market over?

Sep 09, 2008
The events in the outside markets continue to take the life blood of the bull from the commodity markets.  Now that it looks like Hurrican Ike is going to miss all the oil rigs, the oil market has further retreated today to 103.90 on lead month crude. Granted the dollar dropped a little today but the tone is for higher values. Overall, the outside markets are not suggestive of inflationary pressure. This would imply each commodity now must have an exceptional supply reduction event or an unexpected demand surprise to change the bearish tone of each respective commodity.
You can almost taste the concern by the bulls in that the party may be over for a while and they don’t know if they want to stand and fight or simply get to the sidelines. As I suggested in yesterday’s internet copy, the double formation in the wheat and beans is in jeopardy of being taken out! If we do this, there is a lot of room below the market before we find new technical support. 
The problem for the supply bull is this week’s USDA Supply and Demand report has greater odds of increasing rather than decreasing. I have to say the risk of a market wash out between Sept 15 and Oct 15 is much greater than an early frost event rally. The real potential for the bulls I would suggest does not shape up until we get closer to Thanksgiving.  This means if you are long and fighting the market you need to really be prepared for some rough water ahead. If your position is too big, now is the time to adjust rather than having the market force you out when you don’t have any cash flow left.
So is the super bull market over? No, it is just taking a break. In fact it may be all of 2009 but just like extremely high prices ration usage and stimulated production; prices at or below the cost of production will reduce production and stimulate usage. The interesting battle for 2009 is going to be cotton prices are now below the marketing loan and at levels not seen since the spring of 2007. So these producers are not going to be excited about expanding acres. The cost of inputs for corn producers has pushed most Midwest producers close to $5 before basis. This implies for many if the December 2009 corn gets below $5.50 one could argue they will be losing money to plant corn. This implies to me either the market rallies next spring or we create an explosive situation in corn and cotton while a very bearish situation for soybeans.
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 corn and dollar charts!

Sep 08, 2008

The corn market bounced on project (a) after the hard sell off last week but could not hold gains. This has sent a chill over the corn bulls. The question has moved now from a whisper to major concern that the great bull market of 2008 may be over! As the chart below suggest Dec corn is currently caught between $6.25 on the upside and $5 on the downside. A breakout of either overhead resistance or downtrending support would be extremely significant.
 
Over all, the pattern of seeing early August lows has everyone including ourselves hoping for a low. The problem is the demand side of the equation is starting to change.
 
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.
 
The weekly Dollar index: The weekly Dollar index chart below shows the big decline off the 2001 highs to this summer’s low. As you will note we have seen a dramatic bounce off the bottom. This in effect is starting to cause U.S. commodity values to cost more around the world. Just think the U.S. economy with 6% employment and growth rate well below 2% is now considered one of the stronger world economies!   I guess there is room for concern about the status of the world demand for the immediate future.
 
SOURCE: NYBOT  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.
 
Technically the corn charts are at a critical point. We need solid evidence that the corn yield is going to be below 152 and the dollar to retreat back towards the 74 to 76 range to get the nearby corn market excited.  My concern is the risk of a downside slide into the end of the month is higher because one really can prove yields are down until the combines start to run later in October.
 
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.
 
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. 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. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2008.

Market down Friday on long liquidation!

Sep 05, 2008
The market closed out on sharp long liquidation today. November 2008 beans broke below the important $12-level and December 2008 corn broke below $5.50 which have been impressive support levels. The noted reason today was significant liquidation of fund money in commodities across the board. It seems concern is growing the world economy is slowing down in Europe and Japan. If China and India slow down, it could really lower the markets concern about inflation. It was also noted for the corn and bean complex that recent rains have helped save a lot of the late planted beans. Add this to the recent warm temps and it all makes the prospects of an early frost look lower.
 
What’s it all mean? We are closing this shortened holiday week on major price pressure. I would not be surprised to see margins force a little more liquidation early next week then some consolidation before the Sept 12th report.  At this time, I believe the best the bulls can hope for is for the market to simply develop a consolidation base. 
 
Feed buyers or any client wanting long term speculative reownership should be scale down buying the market for a long term sit-and-hold position between late-September to early-November time period. My bias is to focus more on the corn market.
 
Side note: While I don’t talk about it a lot, I’m watching with a lot of interest in buying a longterm sit-and-hold position for cotton and hogs. Nearby December cotton is now well below marketing loans at 72 cents and is actually testing last fall lows. One more solid hit down into the 60 cent to 62 cent range should be viewed as a long term buying opportunity.  As for hogs, we are now nearing a level of below breakeven level for most producers. As we see a final flush of hog inventory from the U.S. and Canada producers over the next couple of months, I would be viewing it a along term sit and hold position. Since carry does exist in both the cotton and hog markets, one should keep longs in the nearby rather than deferred contracts. As always when you venture into a speculative investment you should have a predetermined amount of capital you want to risk!
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.

Soybeans in full retreat!

Sep 03, 2008
 
The soybean market is now in full retreat on the basic belief that the September heat is going to allow the late-planted beans to mature and make a good crop. 
 
With rains coming up from the hurricane intended to hit the Midwest this week, the attitude of the market is the crop is going to show solid improvement. 
 
I have to tell you I don’t agree. My bias is the beans have been hurt and the yields going to decline. The problem is I can’t prove my opinion right now and must be content to allow the beans to break.
 
I would suggest Nov. beans has the ability to break into the $12.10 to $11.80 is a solid speculative buy but no assurance with held. So anybody wanting to buy beans must recognize there is going to be a lot of market volatility over the next few weeks in beans until we answer the question: Are yields above 42 or below 40?  Any confirmation of beans yield below 40.5 must be given a lot of respect for upside risk.
 
As for wheat, the July 09 contract has now experienced a major correction over the last 6-days, which makes one only look back with amazement. The drop from $10 just six days ago to the recent $8.12 level reveals a market that’s capable of moving very fast. 
 
One would have expected wheat to remain firm until there was assurance that acres would be up but it appears worldwide supplies are solid and buyers are now going to take a wait and see attitude.
 
The issue now becomes where does wheat find price stability? We are now at a logical place of $8. One would assume we would trade here for a few days before the market attempts a couple of times to break to the downside and try to blow out the remaining longs.
 
If this does not happen, I have to believe we will see solid price recovery as we move into December. I however have to stress that getting back above $9.50 is going to be very difficult unless we see a solid improvement in the corn, bean and oil market.
 
 
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.
 
Before trading, one should be aware that with potential profits there is also potential for losses, which may be very large. You should read the “risk disclosure statement” and “option disclosure statement” and should understand the risks before trading. Commodity trading may not be suitable for recipients of this publication. Those acting on this information are responsible for their own actions. 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. Any republication or other use of this information and thoughts expressed herein without the written permission of Utterback Marketing Services Inc. is strictly prohibited. Copyright Utterback Marketing Services Inc. 2008.
 

Are we now going lower in corn?

Sep 02, 2008
The market has come back from the holiday ready to feed on the bull. It’s done a good job today in all the grains of putting the bull back on the defensive. Sharply lower crude oil values have helped put pressure on the bean complex. We were off more than 65 cents today which also put pressure on the corn complex which was almost down limit. 
 
So the question has to be asked: Is this bearishness justified, and are we now going lower? It’s a simple question but very difficult to answer in a black or white. My first shot at the question is to say I’m a corn bull after the combines start to run and get increasing more bullish as we move into next year and the market has to buy acres due to higher input cost. If I had really deep pockets right now I would start buying December 2009 at $6.05 and buy a unit every 5 cents lower, please note this is what we will be doing on the internet copy.
 
The problem I have with being a bull today is I can’t prove the corn crop is not out there. With crude oil down and rain coming, the bears are pushing the bulls out. The critical issue now becomes will we see a decisive move to the sidelines of the large speculators. I believe they have enough cash flow to survive the market and are committed to long term ownership. Therefore, I believe they will be scale down buyers rather than liquidators of positions. This essentially takes some of the steam out of the downside argument. 
 
Summary: Near term corn is going to be under pressure. The lowest price action could easily be seen in the month of September. If you have to sell off the combine you should not allow December 2008 corn to move below $5.50.
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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