Jul 12, 2014
Sign UpLogin


EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

Corn and Soybeans Close Higher on Late Day Short Covering

May 28, 2014

Corn and soybeans retraced some of Tuesday’s losses to close modestly higher while wheat was lower again.  The crop progress report showed corn at 88% planted and soybeans at 59%, both at or above the 5 year average.  Despite the rebound in planting pace and a favorable forecast the market found late-session buy orders flood the market to close the products higher. For corn today’s close marks a continuation of the lower lows and lower highs pattern we have seen for the past 3 weeks.  We are coming to a point where we could see another decent market move on a breakout of the pattern.

December Corn Chart

December Corn

While December corn looks like it is on a path to take out the contract low at $4.35, November soybeans are still trading near their 2014 high. New crop soybeans have steadily gained on new crop corn since the March 31st Planting Intentions Report despite the favorable outlook for soybean acres.  The current ZSX14/ZCZ14 ratio is 2.65 to 1, historically very high for this time of year especially considering the USDA carryout projections.  This is not to mention that there were still unaccounted for acres in the March report which means we could see another 2+ million bean acres add to our abundant carryout projection before it is all over.  The reason for this spread "anomaly" is not exactly known other than we are coming off of a very tight supply situation in the US this year and the market looks at November soybeans as being "cheap" to July.  The flaw in that theory is that they are in completely different crop year and supply situations.  As we have discussed before, world soybean carryout-to-use ratio is projected by the USDA at nearly 30%.  US carryout is projected at nearly 10%.  We have never had world stocks this large and the last time the US carryout was listed above 7% we were trading near $9 a bushel.  Of course the growing season will have to remain normal for us to achieve these numbers but that should mean risk premium will start to come out of the market if normal weather prevails.  For now our outlook remains negative especially for the soybean complex given the USDA projections and favorable conditions.

For more commentary from EHedger, please sign up using the link below. Or call an EHedger broker at 866-433-4371, have a great week!

November Soybeans / December Corn RatioNovember Soybeans / December Corn Ratio

 

Sign up here!

EHedger | 866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

45+ Years of Ag Brokerage Expertise

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.


 

December Corn at Lowest Settlement Since March 28th

May 14, 2014

The day session started out slow but found heavy sell pressure led by the wheat contract.  July wheat closed 19 cents lower at $6.90 ¼.  The negative wheat trade also spurred selling in the corn market.  Funds were estimated to be heavy sellers of both at midday while total volume was light.  December corn closed 6 cents lower at $4.89.  July soybeans managed to rally nearly 20 cents off the session lows to finish +3 cents on the day at $14.86 ¾.  The resiliency of July soybeans continues to surprise many traders since there is no news event to spur sudden fund inflows or outflows.

Tomorrow we will get export sales at 7:30am CST.  The average guess is calling for 0 – 50,000 MTs of old crop beans and 200,000 – 350,000 MTs of new crop.  Old crop corn is expected to be 200,000 – 400,000 MTs and new crop at 50,000 – 250,000.  Wheat sales are expected to be between 250,000 – 600,000 MTs, all 14-15.

We still maintain that the path of least resistance is lower for the next 30 days. We just had a bearish WASDE report, pollination is a ways off, we are back to an average planting pace, and we continue to import soybeans at a strong pace from South America.  When planting finally wraps up, there could be a lag of bullish information to "feed the bulls".

The December corn chart doesn’t look very pretty.  We still have a gap above the market from the weekend.  We have settled below trendline support and the 50 day.  The next support is the 38.2% retracement level of $4.86, and then below there at $4.76. 

December 2014 Corn

For more commentary from EHedger, please sign up using the link below.  Or call an EHedger broker at 866-433-4371, have a great week!

Sign up here!

EHedger | 866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

45+ Years of Ag Brokerage Expertise

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.


Wheat Higher on Dry Forecast

Apr 24, 2014

Grain markets were mixed with December corn closing 1 ¾ cents lower at $5.02 ¾, November soybeans 3 ½ cents higher at $12.31, and July wheat 13 ¾ cents higher at $6.96 ½.  Wheat was strong from a hot and dry weather forecast for the next 10 days in the Southwestern Plains.  This helped rally corn early but corn eventually found sell pressure before the close.  Old crop soybeans were negative for most of the day before rallying into the close.  The May – July soybean spread is down to only +2 cents, it had been as high as 36 ½ cents on April 1st.  It appears this spread is on its way to repeating what the March – May spread did into first notice day in late February (see chart below).

Soybean Spreads

It is rather interesting to see substantial spread weakness heading into first notice day when we are supposed to have the tightest stocks/use carryout on record.  Interior soybean basis levels are also averaging below a year ago.  The re-routing of cargoes originally bound for China which are now heading for the US may have a larger impact on our final carryout than the USDA currently has projected.  There was a sale out of Argentina today bound for China for July delivery.  Their prices are at a substantial discount to US gulf FOB which should be a limiting factor for price.  With the massive unwinding of these CCFD’s it will be interesting to see how the funds react over the next 30 days (For more information about the Chinese Commodity Funding Deals please visit the following link http://www.zerohedge.com/news/2014-04-21/how-chinas-commodity-financing-bubble-becomes-globally-contagious )

The funds are still massively long old crop soybeans and corn.  If we see favorable weather and more unraveling of South American soybean purchases there could be more downside risk to the market in the short run than previously thought.  The outliers are still the drought conditions for wheat in the US and the Ukrainian situation.  If weather is favorable and the eastern European tensions subside, look out for downside market pressure.

US Drought Monitor

Sign up for our Market Commentary for our hedge recommendations.

EHedger | 866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

45+ Years of Ag Brokerage Expertise

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.


Corn Prices Fall from Favorable Planting Weather

Apr 16, 2014

Wheat finished with double digit losses while old crop soybeans posted double digit gains.  Favorable planting weather is forecasted for the Midwest which pushed new crop corn back below $5.  Soybean strength was a continuation of yesterday’s bullish NOPA crush report.  This latest crush number raised the pace well beyond previous estimates and suggests the need to import more or ration crush demand through higher prices.  Wheat retraced some of yesterday’s gains but the price is still well above its major moving averages.  After the grains closed it was reported that a group of pro-Russian separatists attacked a Ukrainian military base.  Escalation of Ukrainian/Russian tensions has resulted in rising wheat prices so this may affect prices on the overnight open.

The EIA ethanol report released this morning showed production up 43,000 BBL per day while stocks were down 0.5 to 16 million BBL.  This was a rather strong report but also not a surprising one given the strong margins.  Even with strong weekly ethanol numbers final demand for ethanol is not likely to change anytime soon given the blending wall.  Export and feed demand have been strong for this marketing year but we are still going to be left will between 1.3 and 1.5 billion bushels of corn carried into 2014-2015. With the potential for aggressive planting in the next few weeks we believe corn has more risk to the downside.  The technicals are starting to roll over as well.

December 2014 Corn

December 2014 Corn

Tomorrow morning the USDA will release weekly export sales at 7:30am.  Estimates are calling for -100k to +100k MTs of old crop beans, 175k to 350k MTs of new crop beans, 550k to 850k MTs of corn (old/new combined), 50k to 250k of old crop wheat and 225k – 375k of new crop wheat.

As a reminder markets will be closed on Friday in observance of the holiday and reopen for Sunday night trading.

Sign up for our Market Commentary for our hedge recommendations.

EHedger | 866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

45+ Years of Ag Brokerage Expertise

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.


WASDE Report Tomorrow

Apr 08, 2014

Grains settled higher on Tuesday with old crop soybeans leading the way.  There was some confusion toward the end of the day session when the electronic corn, wheat, and livestock futures stopped trading.  The CME group reported their technical error and motioned for the pit to handle the settlement process.  In the end May corn settled 7 ¾ cents higher at $5.07 and December corn was 7 ¼ cents higher at $5.13.  This was a large 4 cent swing in the May – Dec corn spread between the time electronic markets froze and the settlement of the pit.  Even though December corn settled at $5.13, it never traded there as far as the pit quotes are reporting, it was only a product of a spread sale on the final minutes in the pit. We expect the overnight December corn futures contract to open near $5.08 - $5.09 where they stopped trading.  Soybeans continued trading during this shutdown period and the May contract settled 18 ¼ cents higher at $14.82 ½ while the November contract was 9 ¼ cents higher at $12.17 ½.

Intraday chart of December corn:

December Soybeans

CIF basis was a bit stronger today for corn and slightly weaker for soybeans.  Yesterday the front end of the market was the weakest on heavy bearspreading, today it was the front end that led the way higher on heavy bullspreading (until the pit settlement of corn).

After the close the USDA released their weekly crop progress report.  Winter wheat conditions were reported at 35% good-to-excellent which is 1% less than they were at this time last year.  Cotton was 6% planted which is average and rice was 15% which is slightly below the average of 19%.  The USDA will start reporting the corn planting progress in next week’s report.

WASDE REPORT TOMORROW

Traders are preparing for the USDA’s WASDE report which will be released on Wednesday at 11:00am CST.  The report will include the typical monthly changes to the USDA’s supply and demand estimates but most traders will be watching for the latest South American production estimates as well as projected final soybean demand.  Getting to our final domestic soybean carryout has been the biggest unknown factor for CBOT traders.  On last month’s report the USDA raised soybean imports by 5 million bushes, raised exports 20 million, and lowered crush by 10 million resulting in a net carryout reduction of 5 million bushels.  Their total export demand estimate was 1.530 billion bushels.  Cumulative sales are already 103 million bushels more than this estimate at 1.633 billion bushels.  It is normal to expect a certain amount of these extra sales to get rolled to the following marketing year. Last year for example 46.2 million bushels were sold but not shipped.

Most project the USDA to account for the strong sales by raising their export estimate.  The recent Reuters poll has the average analyst projecting a final carryout of 139 million bushels which is 6 million less than the March estimate.  We doubt the USDA will report a dramatic change and will stick to a more gradual one as it did last month. We could potentially see another 5-10 million in imports and 10-15 million in export sales.

Corn export sales have been strong as well.  Cumulative sales are at 1.5894 billion bushels and the last WASDE report is guessing 1.625 billion.  The USDA is likely to raise this estimate again.  The average analyst believes the corn carryout will drop by 53 million bushels from the March estimate which will most likely come from higher exports.  However, any increase to exports will likely result in a drop in feed demand in our opinion since that is already inflated based on cattle and hog numbers.  Although we believe the feed estimate will ultimately drop, it may not be on this report.  The latest stocks report showed roughly 100 million bushels less than expected.  As we know from previous stocks reports these surprises can be from the amount bushels in transit at the time of count.  An accurate measure of the abundance of corn can be seen in the interior basis changes through the next few months.  At the end of the day we are still projecting a carryout near double of what we thought on this report last year.  This gives the market a larger margin of error when it comes to production changes.  This is also likely why the July – December corn spread is still below 0 when this time last year it was trading at 87 cents over!  I have included the average analyst estimates in the tables below. Have a great rest of the week!

Sign up for our Market Commentary for our hedge recommendations.

EHedger | 866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

45+ Years of Ag Brokerage Expertise

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.


Log In or Sign Up to comment

COMMENTS

Hot Links & Cool Tools

    •  
    •  
    •  
    •  
    •  
    •  

facebook twitter youtube View More>>
 
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions