By: Bob Utterback
, Farm Journal
Bob Utterback has more than 26 years of experience and offers producers a disciplined approach to marketing.
Grain markets mixed due to outside markets and weather
Apr 22, 2009
The outside markets are showing some signs of stability today. T-bills have broken back to support at 122 level in the June contract and concern earlier in the week has been that the banking industry may be in worse shape than anticipated. The stress test that is coming out will indicate whether banks are in trouble but overall the banking system is not in a melt down mode. This helps ease concern that the fed would not be easing credit immediately. It however is becoming apparent that many global players are going to be forced to ease credit and potentially come up with a global stimulus plan since economic weakness prevails. Bottom line: Everybody is looking for the U.S. to come out of the slump. They want the economic game plan to work but many have grave doubts.
The dollar bounced off major overhead resistance. It's going to be very difficult getting the dollar above 88 and a correction back to the 80 level is still anticipated by late fall. This should be helpful to corn exports from the fall into the spring of 2010.
Corn: In regards to corn today it was a choppy day. It opened firm on a little spiller over positive action from yesterday’s gains but could not hold and went negative mid-day. Expectation is growing that a significant improvement in the planting completions will be seen next week. Additionally, some weather forecasters are calling for a enough good weather for a significant portion of the Ohio to Illinois area will get planted. While there will be solid field work I tend to believe that the wet areas will not get planted until we are well into May. This makes the potential for concern about pollination pushed well into the last of June to first of July. The only play I see for December corn getting back to $4.50 now is we have to turn from cool and wet to hot and dry during pollination. Right now it’s only a hope, the weather boys will not really be able to tell us for sure until we get into the Memorial Day weekend. So for now, bulls can gain control of the corn complex and the bears are content to sit and wait knowing with all the inventory in farmers hands, it’s only a matter of time. Bottom line: the pressure now is solidly on the bulls to prove their case, time is on the bear side.
Soybeans: The market has cooled. The uncertainty as to how much more buying China is going to accumulate still has the old crop bulls willing to hold position. Equally, the new crop bean market continues to show solid overhead resistance below the $9.35 to $9.50 level. Nobody really has interest in buying new crop and a lot of sellers are interested if we get close to $10. Our basic bias continues to be negative to old crop and positive to new crop. This is why we like the bull spread in beans. As for hedging we have to suggest continue purchase of at the money puts and roll up. We would refrain from selling short calls unless we get an aggressive overbought situation.
Wheat: Choppy market at best. It’s too late and too low to be a new seller even though I do believe there is downside risk into the late-July to August time period. The primary action right now is to hold onto your hedges and look to start moving to the sidelines as we near harvest. The real action is for end users. It’s time to start thinking about how aggressive you want to buy the harvest lows. Right now you could look at some calendar call spreads. I’m not really interested in buying calls out right or long futures until we are well into the late July to early August time period. So if you’re an end user of wheat you need to be calling us now to develop your reownership game plan.
If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at email@example.com or firstname.lastname@example.org. Tomorrow we will talk a little about the bonds, gold and crude oil.
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