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Hedging Corn and Soybeans

RSS By: Howard Tyllas, AgWeb.com

Howard Tyllas is currently a member of the Chicago Board of Trade and registered with the Commodity Futures Trading Commission as a floor broker and as a Commodity Trading Advisor.

December 2012 Corn & December 2013 Corn Daily Numbers & Trade Ideas for 9/19/12

Sep 20, 2012

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This report was sent to subscribers on 9/18/12 4:30 p.m. Chicago time to be used for trading on 9/19/12.

December 2012 Corn

After the close recap on 9/19/12: My resistance was 7.54, .00 3/4 from the actual high, and my pivot acted as support and was 7.40 1/2, .01 from the actual low.

December 2013 Corn

After the close recap on 9/19/12: My resistance was 6.42, .00 1/2 from the actual high, and my pivot acted as support and was 6.34, .02 (.01 in open outcry) from the actual low.

All charts and numbers for 9/20/12 have already been sent to subscribers at 3.30 pm .

December 2012 Corn


7.58 ½
7.54
-----------7.40 ½ Pivot
7.27 ¼
7.04 FG

5 day chart.... Down from last week same day
Daily chart ... Sideways
Weekly chart ... Up
Monthly chart .... Up 6.16 is the 200 DMA
ATR 18 ¾ Ex. Oversold 1%

For 9/19/12: Daily numbers is resistance; $7.40 ¼ is now pivotal, and the daily numbers are support.

Chart updated on part 2: Last bar on the right is the start on tonight's session.

In my daily December 2012 corn numbers on Tuesday my resistance was .04 ½ from the actual high; my support was .01 ¼ from the actual low.

December 2013 Corn

6.51
6.46
6.42
-----------6.34 Pivot
6.26
6.13 ½
6.01 ½ FG
5 day chart.... Down from last week same day
Daily chart ... Sideways
Weekly chart ... Up
Monthly chart .... Up 5.72 is the 200 DMA
ATR 10 ½ Ex. Oversold 7%


For 9/19/12: Daily numbers support and resist.

Chart update part 2: Last bar on the right is the start on tonight's session.

In my daily December 2013 Corn numbers on Tuesday my pivot acted as resistance and was .03 (only .01 in open outcry) from the actual high, my support was .00 ½ from the actual low.

9/19/12:

Grains: Corn filled the gap at $7.40 ¼ closing near there and is pivotal today. I looked at headlines on a site but did not read the stories, but the headlines where bearish. We are at our support, and if you are hearing bearish views from people, who were bullish until this week, look to buy something and risk a little on the idea. We have seen many $.95 breaks in corn after bullish reports (let alone the bearish one just posted) and so this $1.10 break down to our support is an opportunity to buy something. Do not get me wrong, I am still bearish, but I could see a correction up to $7.69 where I would take profits and look for a place to get short again. The bounce off of this gap might not get past my first resistance number, and I might be more willing to sell there than but here. If you are looking for a place to buy, here it is, but make sure you use a stop to protect the idea. If you are looking to sell, $7.54 to $7.58 ½ is the first place to do so, I would be more aggressive near $7.69.

It is a matter of the quick $.50 two day break down to our support of $7.40 ¼ keeps me from pressing the short side without some kind of bounce to sell it again. The same reason why the bulls could not take it past $8.49 without more confirmation is the reason I would not press the downside at this support.

Same goes for soybeans breaking $1.10 in two days but not down to a support yet, but in a congested area we traded in July and August. The market is up near my resistance number of $16.69 as I write and I have no problem taking a sell near there using a $.08 buy stop to protect. $17.02 I would be more aggressive to take the sell.

The world is a dangerous place, and they buy a lot of grain from us in the Middle East and Asia, and disruption in our shipments would be very bearish because you would have less supply actually being exported, and much more costly to do so. Soybeans should be sold in the next month or two because as I have talked about, November is $1 more than what you can get if you sell the late spring months. Funds still have a huge position, and my producers tell me they harvest the worst acres first, so better corn and soybean yields should be seen as the harvest progresses. I want to sell rallies; the only thing bullish is that the "brokers" want to sell it. USDA stocks report next Friday and then the October report should answer a lot of questions to what supply and demand could be, and will be enough for the market to get outside my current parameters.

I want to trade the numbers without bias today and risk $.06 in corn and $.08 in soybeans using a stop to protect.

9/18/12:

Grains: As the grain bulls learn that there is more to a market than unknown supply and demand numbers, we already know that all we need is a chart and a strategy that does not care what makes the pendulum swing, and we risk little to make more than what is being risked. My producers have learned that it is like deal or no deal, and it does not matter the $.40 they pay for locking in a $1 spread, it is the $.60 they know is no longer at risk and is "banked", that $1 of the total price is "game over".

I have said everything I could have the last few weeks to encourage locking in what the market gave you, and told farmer and speculator alike to not get caught up in emotions, not listen to any service or radio show that calls for $10 corn and $20 soybeans based on their guesstimates on damage to the crops, and instead let the chart be your guide to where support and resistance is, and be patient and wait for the pendulum to swing to a chart level to execute your trade idea, and make sure you have a stop or use a known risk strategy to limit a loss on any one trade idea.

I asked you if I was the only bear, and now I want to know when all those bulls decide that the market is going down more, so I can cover my shorts and get long. Being always wrong is as good as someone who is always right, and since they were so wrong about $10 and are still long risking more now than what they would have made, when they sell I want to buy, preferably at a chart support. I am serious when I say that, when the people who were talking about sky high prices will come, when they say sell, it should be close to a bottom even if it is just for a bounce before the next leg down.

Let's look at the charts now and review them once again. You know the December corn gap at $7.40 ¼ I consider longer term support, and I will continue to believe that until the market closes below there. If it does close below there a couple of days, you know I believe the next big support is at the bracket line and gap of $6.74 ½, and the resistance becomes $7.40. If the market does hold $7.40 ¼ then I would look for a retest of $7.69 and I would want to sell some upside and buy some downside with it, even if it only buys "at the money" $.20 or $.30 put spreads. Buyers should risk $.06 at a support, and producers can adjust calls like buying some short calls back if they are worth less than $.06, and if we rally sell calls once again but maybe a closer to the money strike making it worthwhile.

Soybeans closed below the low of the last 4 weeks, and at one time we traded $.07 below limit down, tonight we traded $.14 ½ below the limit down settle. Damage has been done, and the resistance levels are clear starting with $17, but support is yet to be determined by the market, but my chart levels are clear with the uptrend line near $15.80 being the first long term strong support, and worth the $.08 risk getting long.

Now that corn is at a support I would trade without bias today and risk $.06 in using a stop to protect any idea. Soybeans have not established support near here yet, so I would trade without bias but prefer to sell at $17, and risk $.08 using a stop to protect any idea. Interesting to note, November 2013 soybeans are up $.18 right now, November 2012 is down $.04. 2012 is about $3.20 over the 2013. December 2013 corn broke the uptrend line so I want to market some more 2013 corn. I did have a few who did some last week, I recommend selling any resistance number or especially when near the uptrend line near $6.55.

9/17/12:

Grains: November soybeans closed $.02 ½ higher for the week, December corn closed down $.17 ½ which at best reflected the friendly report for soybeans but negative for corn. Now that the report has been digested, soybeans and corn went nowhere outside my parameters that are still in force. Both bull and bear camp are awaiting further harvest reports before committing more money to their cause. This makes good sense, for months I have been telling you it is impossible to know what production is on 90 million acres in a year like this. My producers have all been surprised or even in shock by what production are coming from their fields. Every one of my producers is getting much more than they thought before combining. One told me he was expecting a yield of 140 BPA the day before he combined, it really came in at 182, he hedged it by buying the December $7.80/7.40 put spread and sold the December $8.10 call and collected $.08 for the 3 way spread.

Yield swings of 20 to 40 BPA from what was guessed by the farmers 24 hours before who best knows their fields, is a statistic I never thought possible. The implications is that the final verdict after all is harvested in the January report, we could easily have 500 million bushels more or less than what was expected, and since everyone is still bullish and expecting worse yields, the market is poised for a huge drawdown on much larger crop than what is expected and being "bet on". Yes, never look at what is inside your fence posts and think the rest of the world is like you, a trait that seems inherent in the farmers I have known for decades, so this year anything is possible including much lower yields and acres harvested. My bet would be on higher production than what is expected at this time.

This looks like the second year in a row that most or all of my producers will have either record or windfall profits. Crop insurance will be set next month, and producers with a shortfall in production will do just fine even if we are at $7.40 when it is set.

Most of my producers have around $8 locked in and have at least $1 or $2 protection to the downside right now, and they are long above there for the most part until $8.50 ....Subscribe now! Just as each person is in control of what they do, each has different upside potential, and protects what the market has given them depending on how bullish or bearish they are. What I remind them and speculators, when you are making money that is one thing, but when the amount gained is not protected and at risk of being lost, you should always reduce the risk to a level you are content losing on the gamble to pursue more. It is no longer the price of the grain; it is the risk in your position that comes with gains in a position not "closed" or have options to protect it. Maybe $10,000 is not worth protecting, but when it becomes $50,000 you would think that is too big a risk for a million dollar account on 1 idea.

If you have November 2012 soybeans coming out of the ground you should have a plan to market it by year's end. November/January spread is $.01 and worth keeping until then if you feel you have a basis play, but holding until March (.38 under January) makes no sense to me at all let alone holding to May ($1.18 under the January contract). If you sell the November you can buy an option spread such as the May $16.20/$17.20 call spread for $.33, but there is no need to buy anything if you are a producer, you are suppose to be selling what you grow, the rest is speculation.

December corn has a flat price and could be held into 2013, the risk is not buying enough put protection. You all know from previous years that you can make more money if the market goes up, and sometimes when it goes down too. You will start off buying SUBSCRIBE NOW and selling the.... As in 2012 it looks like you have until June to play that option game as you seek higher prices and a better basis. Always remember, if the market rallies it is always a good time to market your cash and lift your option strategy, but if the market comes down you most likely will need to wait for the market to get closer to expiration for the short call to lose all its premium, and the put spread gets to its intrinsic value (meaning sometimes we are below the put spread but it is not close to full value because of the time left).

There is only 6 weeks left before the November options expire, 10 weeks before the December options expire.

In regards to the 2013 hedge, I continue to recommend since we are at good price levels to lock in what should be a very good income, and if you are holding off that is your decision, but when the uptrend line breaks I would do something then.

Want to know what I think for tomorrow and going forward?

The markets now covered daily are Soybeans, Corn, and S&P's.

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Howard Tyllas

Put yourself in a position to make money, use the daily numbers service!

Email: dailynumbers@futuresflight.com
http://www.futuresflight.com/

Tel.1-312-823-9189

Disclaimer: No guarantee of any kind is implied or possible where projections of future conditions are tempted. Futures trading involve risk.In no event should the content of this be construed as an express or implied romise, guarantee or implication by or from Howard Tyllas, that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.


 

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