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March 2011 Archive for 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.

EHedger Closing Grain Commentary 3/21/11

Mar 21, 2011

It was another choppy two-sided trade today in the grains.  December corn finished 11 cents higher at $6.09 ½, November beans finished 11 cents higher at $13.45, and December wheat finished ¾ of a cent lower at $8.26.
 
Coming in from the overnight session, grains were called higher from outside market strength and a fresh corn sale announcement of 116,000 MTs to an unknown destination. 
 
Last Friday we received Informa's acreage estimates which would generally be considered bullish.  They have corn acreage pegged at 91.8 million and bean acres down to 75.3 million.  This is especially surprising for soybeans considering the increase in prices this year.  We won't know what the USDA will write down for acreage until the March 31st report but with such large price increases in most commodities we can assume we will see a large increase in overall acres.  The big winners (relatively) would likely be corn and cotton.  Informa is projecting total cotton acres at 13.1 million, which is a fair estimate given the price rise we have seen.  We will probably see more double crop soybean acres as well, possibly affecting overall soybean yield. 
 
Last week was particularly volatile for grains.  Tuesday we were limit down, and Thursday corn was again limit up.  The weakness started from outside market uncertainty and we can see by the open interest charts and by the COT report that the funds were heavy sellers into this timeframe.  Using futures and options, the funds reduced their net longs by over 54,000 contracts of corn and over 30,000 contracts of soybeans.  When we got the rebound the headlines were mainly from increased corn demand on Thursday's weekly export report and the Informa estimates on Friday.  Also during this time frame we are again having problems with a collapsing US Dollar which has certainly helped most commodities receive a price boost.  With all the information at hand we have to decipher how the market will respond.
 
A few things we know that still pose downside risk:
The funds are still very long leaving the possibility of more liquidation.
Crush continues to be below expectations.  This leads to question corn feed usage as meal demand has been lowered.
Corn supplies are tight, but we are seeing some of the Asian countries switch from corn demand to cheaper feed grade wheat.
Major technical MA's still lie well below the market.
Market expects USDA to raise overall acres on Mar 31st report. May see more liquidation from longs before the report for this reason.
 
On a bullish note, there is always the potential for weather scares.  With how wound up this market is traders will likely buy heavily into a weather problem.  Also with all the unrest in the Middle East, oil price rises brings ethanol back into play.  We want to keep upside in the market using call spreads, but we don't want to let these reasons prevent us from selling at these levels.  If you need to get caught up to our recommendations, please call your EHedger broker to discuss your individual operation.
 

 

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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. 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 E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.

 

EHedger Closing Grain Commentary 3/16/11

Mar 16, 2011

Wednesday grain markets finished mixed with beans finishing higher and old crop corn sharply lower.  May corn was certainly the downside leader today down 19 ½ cents on the day.  December corn actually finished higher on the day up 1 ¼ cents.  This was mostly from liquidation as many of the bigger traders are bull spread and they were selling the front month and buying the back months.  For soybeans the opposite happened, the front month was the market leader and the back months were lagging.
 
Outside markets were again sharply lower over uncertainty of the nuclear situation in Japan.  At one point the Dow Jones was 300 points lower on the day.  This is the second day in a row we had a major selloff in the stock market and already the overnight equity futures are lower. 
 
We are still seeing investment money flow to "quality" assets like the US Dollar and Treasuries and out of equities/commodities. The big question is how much more will the funds liquidate?  They are still holding sizable positions, and plenty of room for the market to move lower if they continue to sell.  I have included a chart of May corn and December corn with their 200 day moving averages.  This is to show where major underlying technical support would likely rest.  Just looking at these for indicators shows us that for old crop we have potentially another 60-75 cents worth of downside risk, and another 50 cents for new crop. 
 
On a more positive note, liquidation is likely to slow early next week as traders gear up for the March 31st report.  On the report, nobody truly knows what the USDA will write down, but the consensus is that we will see an increase in acres, mainly in corn and cotton.  We can also speculate that they may increase stocks.  We have a good idea of what ethanol use will be, but we don't have a real solid reading on what feed usage will do.  So, downside market risk can be associated with increased acres, as well as increased carryout. 
Now that we are well below the spring federal crop insurance levels, we want to concentrate on re-owning more of the sales we have made.  We are nearing the price we have set to get the second round of call spreads bought. If you are behind on the current recommendation, or are unsure about where you stand, please call your broker to go over Ammo and help devise a plan before making any quick decisions to sell.  In some cases, it may make more sense to wait to make extra sales due to the amount of crop insurance, price, etc.  Please contact your broker to get a more specific recommendation for your operation.

 

1764

 

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 Free trial 1[1]

Click icon above for a Free Trial of EHedger Premium Research package and watch the AMMO Demo video.

 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. 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 E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.

 

EHedger Closing Grain Commentary 3/8/11

Mar 08, 2011

Tuesday grains had a large setback as traders liquidate positions ahead of the March Supply and Demand report.  The old crop contracts had the largest drops with May corn losing 12 cents, May beans down 13 cents, and May wheat down 21 cents.  This is especially significant for wheat given the May-Dec Chicago spreads are hitting new lows at 86 ¼ cents under.


The USDA did announce the sale of 300,000 MTs of hard red wheat to Iraq for 10-11 delivery.  Despite this sale announcement wheat was the downside leader today. 


The January and February USDA S&D reports have both been rather significant market movers.  The February report showed another decrease in expected corn carryout from an increase in bu for used for ethanol.  The February report also kept the expected soybean carryout unchanged at 140 million bu.  For Thursday analysts guesses are averaging 141 million for beans, with the high end of the range at 181 million.


We could see changes in US numbers from the demand side of the equation, but surprises (market movers) could more likely be attributed to changes in South American production.  Everyone is still wondering what they will write down for Argentine and Brazilian corn/bean production.  Currently the market is expecting an increase in production from Brazil and may have been part of the reason for the recent resistance.  If we do see large production numbers confirmed out of South America this should take some pressure off the US acreage battle.  For now traders still have plenty of uncertainty premium built into this market and we like to secure these prices for guaranteed bu.


From a technical standpoint, the longer term moving averages are still well below the market.  First retracement for New Crop Corn is at $5.31 (see chart).  If the technicals start to turn bearish, we could see fund liquidation.  Comparatively the market has plenty of room to move if we get a bearish report or something to trigger long liquidation.


For those producers who are behind on cash sales we continue to recommend getting caught up before Thursday's report and re-owning the market using bull call spreads.  Each producer should plug this strategy into their AMMO program to see how it would affect their farm's profitability. If you have any questions please don't hesitate to give us a call and we will be more than happy to assist you.

 

1745

 

 

 

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 Free trial 1[1]

Click icon above for a Free Trial of EHedger Premium Research package and watch the AMMO Demo video.

 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. 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 E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.

 

EHedger Closing Grain Commentary 3/7/11

Mar 07, 2011

It was a slow start to the week as corn, wheat, and beans all settled lower on Monday. May corn settled 10 ¾ cents lower at $7.17 ½ while December corn settled 1 cent higher at $6.10 ½. May soybeans settled 19 cents lower finishing at $13.95 and new crop November beans settled 6 ¼ lower at $13.54 ¾. Chicago May wheat settled 31 ½ cents lower at $8.00 ¾  while December settled 22 ¾ lower at $8.80 ¼.

 Before the markets opened this morning the USDA announced the sale of 150,000mt of corn to Mexico and also 300,000mt of wheat to Iraq. Also announced this morning was the end of the port workers strike in Argentina.  This coupled with the improved weather for the Chinese wheat growing areas as well as better than expected forecasts for the US Plains all contributed to the sell-off that we saw today.

Export inspections were lower than expected for beans this morning, corn exports were solid, and wheat was in line with estimates. The USDA Supply/Demand and Production report will be released on Thursday morning at 7:30am. The trade still seems to be focused on the March 31 acreage report.  The consensus is that beans are going to receive the short end of the stick in the acreage battle, which has been providing support to the bean market.   However, if we do see large production numbers confirmed out of South America this should take some pressure off the US and potentially help offset a lower acreage number. As we saw today it wouldn’t be a huge surprise to see some lightening up of positions as traders wait for Thursday’s report.

Despite the setback in the markets today we are still at highly profitable levels for most producers.  For those producers who are behind on cash sales we continue to recommend getting caught up before Thursday's report and re-owning the market using bull call spreads.  Each producer should plug this strategy into their AMMO program to see how it would affect their farms profitability. If you have any questions please don’t hesitate to give us a call and we will be more than happy to assist you. 

 

Stop Guessing & Start Marketing

 

 Free trial 1[1]

Click icon above for a Free Trial of EHedger Premium Research package and to see the AMMO Demo video.

 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. 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 E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.

 

EHedger Closing Grain Commentary 3/4/11

Mar 04, 2011

The grain market saw a two-sided trade during the session.   May Corn finished 8 3/4 cents lower at $7.28 3/4. May soybeans finished 2 cents higher at $14.05.  May wheat finished 8 3/4 higher at $8.25.  

 

Before the open the USDA announced a sale of 120,000t of US old crop beans to China.   Also, Informa released world production number today at 10:30. They raised the 2011 Brazil bean crop by 2.1mmt to 71.4 and they raised the Argentina bean crop by 3.0 mmt to 52.0.   Also, Informa dropped the 2011 World corn crop by 1.7 mmt due to lower South Africa and Mexico production.    

 

The USDA S&D report will be released on Thursday and we should see the analyst estimates early next week.  However, the trade still seems to be focused on the March 31 acreage report.  The consensus is that beans going receive the short stick in the acreage battle, which is obviously providing support to the bean market.   However, if we do see large production numbers confirmed out of South America this should take some pressure off the US and potentially help offset a lower acreage number.


Despite the bullish potential of the markets there is still are still numerous factors that could cause grain prices to quickly drop from these levels.  For producers who are behind on cash sales we recommend getting caught up before Thursday's report and re-owning the market using bull call spreads.    

 

Before making any decision producers should get in touch with their broker to go through the strategy in the AMMO Program to see how it will benefit their farm operation.

 

Stop Guessing & Start Marketing

 Free trial 1[1]

 

Click icon above for a Free Trial of EHedger Premium Research package and to see the AMMO Demo video.

 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. 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 E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.

 

EHedger Closing Grain Commentary 3/3/11

Mar 03, 2011

The grain market was strong across the board during today’s session.  May corn finished 15 1/4 higher at $7.36 3/4. May soybeans finished 17 ¾ cents higher at $14.12.  May wheat finished 12 1/4 higher at $8.23 1/2.
 

Export Sales this morning were within the estimates for corn and beans and a bit disappointing for the wheat.  The census stocks report was also out this morning with the numbers coming in near analyst estimates.  Also, there were stories that China may lower import duties on US commodities, which provided some support to the grain markets. In addition, the grains found support from the continued weakness in the US dollar. The US dollar is now near 4 months lows. 
 

At today’s close, Nov beans have rallied over 90 cents off last week’s lows and Dec corn has rallied nearly 50 cents off last week’s lows.  Even though it appears that the bull market is back on track, there is still an enormous amount of uncertainty in these market.  Numerous scenarios could quickly lead to liquidation and sharply lower grain prices. If producers are behind on sales we recommend using this rally to make cash sales and re-own the market using bull call spreads.  
Before making any decision producers should get in touch with their broker to go through the strategy in the AMMO Program to see how it will benefit their farm operation.
 

Thursday thru Saturday EHedger will have representatives at the Commodity Classic in Tampa Florida. Please feel free to stop by the booth to learn more about the AMMO Program and to discuss your individual farming operation. Hope to see you there!

 

Stop Guessing & Start Marketing 

 

Free trial 1[1] 

Click icon above for a Free Trial of EHedger Premium Research package and to see the AMMO Demo video.

 

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. 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 E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.

 

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