Sep 30, 2014
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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.

Soybeans about to trade single digits

Sep 04, 2014

November soybeans fell to $10.03 ¼, down 16 ¾ cents on the day on a large crop outlook as well as a strong US Dollar Index.  December corn was 5 ½ cents lower at $3.46 ½ and December wheat was also 5 ½ cents lower at $5.30 ¼.

Corn, wheat, and soybeans continue to post new contract lows which is probably forcing some long liquidation along the way down.  We know that as of last week the Managed Money and Large Reportable Spec traders were long roughly 131,792 contracts of corn while modestly short soybeans.  We see downside potential for both products as the earliest yield reports continue to run hot.  The other factor that is likely having an impact is the extreme dollar strength in the last few weeks.  The dollar index was up 93 points today at 83.82.  This put pressure on many dollar denominated assets today including grains.  We are approaching a significant level in November soybeans at $10.00.  Last few times we crossed below $10.00 was 2008 and 2009 and both of those years saw significant liquidation and price accelerations shortly after falling below this crucial level.  I have included the 2008 chart since it has some similar characteristics to 2014.  We had a limit down moving coming into that Monday, October 6th, 2008.  Granted this was during the financial crisis which certainly had an impact on commodities, but it is a good representation of how fast this market could break during a selloff.

For now we want to remain well hedged during this time since the world soybean supply looks adequate, and we are looking at record corn and soybean crops in the US.  Please call us if you have any questions about our recent hedge recommendations.  Have a great week!

November 2008 Soybeans

November 2008 Soybeans

November 2014 Soybeans

November 2014 Soybeans

 

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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 and Soybeans Close Higher for the First Time in July

Jul 14, 2014

Corn was higher on Monday, breaking its 9 day losing streak.  Soybeans also rallied, breaking the 10 day streak.  Wheat was the upside leader, finishing 11 cents higher in September and 35 cents higher to close the July contract.

The rally basically recouped the losses from Friday’s WASDE report but markets are still well off their highs for 2014.  Three months ago December corn was posting a high of $5.17 and here we are 25% below that level at $3.88 ¼.  Surprisingly the funds haven’t given up on their corn longs just yet.  Their net long position actually grew from the week prior by 5,411 contracts and sits at 107,600 using futures and options combined.  The managed money soybean long has declined sharply in the last 3 weeks however and is only 2,142 using futures/options.  Last year the managed money actually built a sizable net short corn position before the year was over, we will see if this trend repeats itself in 2014.

Most analysts are projecting record US corn and soybean crops this year which will continue to limit any upside potential until the next weather event comes along.  The problem for corn is that we have already entered the critical stages and it will be hard for any meaningful losses to occur during the remainder of the growing season.  Soybeans are still up in the air, but the June 30th acreage report has given the market plenty of cushion to still build a meaningful carryout.  The market will be watching the early August forecast very closely for direction.

Corn ratings were 76% good-to-excellent and soybeans were 72%, both very favorable.  Corn is 34% silking compared to 33% as the 5 year average.  Soybeans are 41% blooming compared to 37% on average.  For the full report please visit the following link: http://usda.mannlib.cornell.edu/usda/current/CropProg/CropProg-07-14-2014.pdf

For now we believe the path of least resistance still remains downward but we would be on the lookout for dead-cat-bounce opportunities to sell again.  We have a few gaps left above the market and still have plenty of growing year left.  For those of you who wish to catch up on corn and soybean hedging, we would put scale up orders between here and the gap fills going back to the 4th of July weekend.  That level is $4.14 ½ for Dec corn and $11.32 ¾ for Nov beans.

December Corn

December Corn

November Soybeans

November Soybeans

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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 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

 

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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

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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.


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