Current Marketing Thoughts
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Might Be Time To Make Some Cash Sales
Dec 03, 2010
I wanted to make a quick post letting my followers know that I have banked some big profits in Wheat this week and have also made some cash sales in my 2010 and 2011 corn, bean and wheat.
I hope you are getting my daily e-mail updates, if not make sure you get signed up below. I will try and give you a quick summary of why I am thinking this could be a good time to make a few cash sales and some option plays you could consider.
I certainly don't think this is the top, but I am concerned about some of the recent developments:
- Wheat has made an amazing run higher on fears of massive rains in Australia, also on fears of colder temps in Russia in areas with little or no snow cover. In addition traders in the EU are worried about possibly getting "oversold"...prices have rallied significantly in an attempt to curtail demand in the EU and add in premium for quality losses in Australia. The Asian importers who generally look to Australia this time of year are forced to buy from the US. I have predicting all of the details in the daily reports. I am now looking to reward the markets and take some big profits off the board. I am hearing the rains in Australia may subside by late this weekend and early next week. Traders may take a little premium out of the market. I will now be about 50% sold in 2011.
- I am also looking to make some sales in the bean market. I reported last week that the crush margins in China had fallen negative and the processors had slowed down. Just yesterday I heard confirmation that the same is happening here in the US. Processors were living of beans bought back in October and early November, as demand has slipped the margins have pulled back. Now as they look to buy beans the numbers simply don't pencil, several crushers closed the doors early this week and don't look eager to return until prices subside. the funds could certainly push us higher, but at some point the margins have to pencil. Look to reward more rallies next week by getting yourself 15-20% sold.
- I have also been talking to producers about beans that are in the bin. One great play right now is buying a $13 put to establish your floor and selling (2) July $16 calls to finance the floor. It is a great play for guys with beans in the bin. If the market rallies to extreme highs you are essential entering an HTA at $16 short the board. If the market falls apart you have a floor in at $13. If you need help with this just give us a call.
- Corn certainly has me worried, simply form the sense that exports have not been as good as I would like to have seen. Don't get me wrong I am still bullish this market I just want to make sure we are able to make some descent cash sales. I am looking to get to 205 sold on the rallies. One thing you may want to consider for your old crop corn in the bin (similar to the bean play) is buying an at the money put and selling (2) higher up calls. You can buy a July $5.70 put and sell (2) $7.00 calls for even money. It gives you a floor and a strong cash sale above $7.00. You can do the same on any unsold bushels in 2011 by purchasing the Dec 2011 $5.50 puts and selling the Dec 2012 $6.30 calls. I am just a little worried that ethanol production has slipped and we could lose the blenders tax credit, causing some of the big funds to pull profits off the board.
Reward the market make some small sales or make a play on the board to create an HTA. I provide much more insight and information in my reports...I encourage you to signed up by following the link.
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