EHedger Afternoon Grain Commentary 2/19/13
Feb 19, 2013
Corn and wheat closed lower while soybeans were sharply higher. March beans closed 45 ¾ cents higher at $14.70 ¼. March wheat was down 10 cents at $7.32 ¼ and March corn down 3 ½ cents at $6.95 ¼.
The major intra-commodity spreading between the grains and oilseeds could be for a number of reasons. China is just coming off a holiday week and we already are seeing some interest for US beans. The USDA reported the sale of 120,000 MTs on this morning’s 8 am announcements. The rains in Argentina over the weekend were disappointing which has some worried about production reductions again. Also Brazil harvest delays and labor unrests are starting to create some anxiety that their export shipments will not be loaded on time. These are the market headlines but there might be more under the surface that is not public yet. We will update you with any fresh news to explain today’s soybean strength.
Export inspections were strong for soybeans and wheat but slightly below expectations for corn. Reports of strong interior corn basis still seem to be lackluster for futures strength. Corn is still in the battle of trying to make sure we ration our tight old crop supply while still pricing in the abundant new crop that is currently forecasted. Supply and Demand table estimates for new crop corn continue to forecast large carryout levels. We have the Annual Outlook on the 21st and 22nd. Although these numbers are important they aren’t always major market movers. For now we want to stay with the current EHedger producer recommendations.
Currently our official recommendations call for 30% protection in cash sales, HTAs, or futures (average price of $6.40) and 20% protection in long $5.50 December puts and short $7.00 December calls. We would like to BUY BACK those $7.00 calls and SELL December $4.50 puts for EVEN MONEY. What this does is remove the marginal risk of the trade (the short $7.00 calls) without spending additional premium. It does however limit the amount of protection you will get on those $5.50 puts capping their protection to not below $4.50. It is important to note that this trade is for those who already have the spread on AND have a healthy level of sales and insurance coverage. To go over this strategy in AgYield, please contact us today.
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