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RSS By: Bob Utterback, Farm Journal

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

The Grain Market Bounces on USDA Annoucements

Jul 23, 2009
I’ve been at Farm Journals 2009 Corn College near Heyworth, Ill., for the last couple of days. As you know, when you’re out in the middle of a corn field day, it’s hard to stay informed.  One of Murphy’s laws is that the most difficult things happen when you are usually distracted the most. So the USDA’s announcement late yesterday that they are going to survey 7 primary states to see if the corn and bean acreage numbers are correct must be classified as a surprise event. While I felt the June 28th report corn acres were too high and the bean acres were too low, this was a factor I thought would be adjusted closer to January.
 
While I’ve been calling for a significant low within plus or minus 5 days of the August USDA Supply and Demand report, this development really increases the odds that the market has put in a temporary low. As we move into August the fear of an acreage surprise, along with concern about cooler than normal conditions, should help to stabilize and even rally the market.
 
The problem I see developing is the last of the bulls’ argument could easily be used up by early September. Even if we lose 1.5 million corn acres or around 150 million bushels, we are still going to have carryover around 1.7 billion to 1.8 billion bushels instead of the current fear of 2.1 billion bushels. The problem then becomes the flat price level is considerably lower than producers want and corn is still stored into next year. Producers will not be able to sell the carry because they are fixed on the flat price. 
 
I strongly believe producers should be focused on selling this bounce into September. I suggest $3.80 or better basis the July 2010 should be targeted as the level to start scale-up selling.
 
On the other side of the equation if we do see reduced corn acres, be prepared for bean acres to be increased. So the only thing new crop beans have working for it is some near-term short correction. We have to suggest a move back into the $9.40 to $9.60 range must be considered aggressively. We would also note the corn/bean spreads are more than likely at their maximum level. Effective immediately we suggest focusing on buying 2 corn and selling one bean contracts if you like the spreads.
 
Yesterday’s USDA surprise is forcing us to recommend adjusting sooner and faster that we would like. Many producers are asking what is going on at the USDA. Can their numbers be trusted anymore? My answer: They continue to be the best numbers around, even with their failings. Maybe this is some of the government stimulus money at work!
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 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. 2009. 
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COMMENTS (20 Comments)

Anonymous
Thanks for the info. I think your numbers look pretty accurate. I wish price projections could be higher. I guess cost of production doesnt play into the equation. Hoping grain trade gives us a little bit of a gift with that in mind. One of those years where I might produce alright yielding crop but still not make descent return...... Oh well
8:30 PM Jul 26th
 
Anonymous
Carry overs for 1997-2001 was 1.3-1.9, 2002 1.0, 2003 958k, 2004 2.1, 2005 1.9, 2006 1.3 2007 1.6
All the info is on the Suppy and demand website by USDA.
Prices for corn was 2002-2006 ranged 2.00 to 3.30 than in late 2006 we went from 2.00 to 4.13 came back and held to 3.25 (2004 old high) and went to 7.00+.
So are we going to hold the highs of 2.70 (2002-2006) tops and resistance is the tops of 2004 and support of 2007 (3.40)? I have old charts to refer to.
11:10 AM Jul 26th
 

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