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November 2010 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 11/30/10

Nov 30, 2010

Tuesday grains were mixed with soybeans sharply higher and a selloff in corn.  December corn settled down 8 ¼ and January soybeans settled up 8.  Chicago wheat finished unchanged. Today first notice day for December Grain Futures and there were more deliveries than expected.  Deliveries were at 1351 for corn and 4056 for wheat.  Soyoil was at 5245 and soymeal was at 538.  Overall deliveries were higher than expected and could be looked at as slightly bearish.

 

 

The US Dollar was sharply higher again today.  The funds were heavy sellers of corn and modest buyers of soybeans and wheat.  This was evident in the spreads as well since the front months were the weakest in corn and strongest in the beans.  Corn open interest was sharply lower mainly due to the option expiration but still a sign that there is some liquidation. 

 

The latest CFTC Commitment of Traders report shows the large speculator reduced net long positions by 13,152 contracts of corn using futures and options.  They increased their net long soybean positions by 2,478 contracts and decreased their ALL wheat long positions by 3,439 contracts.  We are still coming off of record high open interest in corn and soybeans.  If we see this type of fund activity going into the end of the year we could see another drop in prices between now and January.  This could also affect the old crop/new crop spreads negatively since most of the open interest is in old crop contracts.

 

Winter wheat conditions were unchanged from last week at 47% good to excellent.  More quality concerns today for Canadian and Australian wheat could be why wheat held supported even though corn sold off.

 

Something else to consider is the susceptibility of volatile market swings during the holiday season as traders wrap up for the year.  December 10th will be the next USDA production report.  This is the last major report before the end of the year.  In January we will get an influx of data that should provide plenty of direction for the 2011 marketing year.  Right now we are comfortable with the cash sales and hedges that we have in place. If you are looking to add additional protection, please don't hesitate to give your broker a call.

 

We are currently launching the newest addition of the AMMO Program. This program will allow producers to manage their complete farm operation including production costs, cash sales, hedge positions, and insurance coverage. All of the producer's information will then be used to compile a profitability matrix so that the farmer has a clear cut picture of where their farm stands. Please give us a call to learn more about the AMMO Program.

 

 

 

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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 11/23/10

Nov 23, 2010

Tuesday grains continued trading at high volatility with corn trading down to new lows for the move and then back up to 13 ¼ cents higher on the day.  Soybeans were also sharply lower but finished 17 ½ cents higher in the January contract.  December wheat finished 3 ½ cents lower.

 

Grains were surprisingly strong today given the weakness in the outside markets.  The Dow Jones was down over 130 today, while the US dollar was up sharply after more concerns in the Euro zone.  GDP was out this morning and slightly better than analysts were expecting, but still below what is projected to start lowering the unemployment rate. 

 

The strength is mostly just rebound activity from last week’s break.  There was not a whole lot of fresh news that prompted such a sharp turnaround today. Once corn got towards $5 opportunistic buyers came in to support the market.  Gold and some other markets were sharply higher so it may be a jump to tangible assets over currency concerns.

 

 

This week volume may be light due to Thanksgiving.  Friday is option expiration day for December Grain Options.  Open interest for December $5 corn calls was at 41,042 coming into today.  Many times the market moves towards high open interest strike prices on expiration, so short term we may see some more pressure.  As we come to the end of the year we could see more liquidation from the market.  January we will get an influx of data and should provide plenty of direction for the 2011 marketing year.  We like staying with current hedge recommendations.

 

 

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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 11-16-10

Nov 16, 2010

Tuesday grains fell sharply along with outside markets.  Almost every commodity and equity index was in the red by the end of the day.  December corn and November beans were down the limit for part of the day before settling down 29 cents for corn and 66 ¾ cents for soybeans.  December wheat finished 46 ½ cents lower.

 

Once again the market has flipped from being incredibly bullish to a liquidating market, and these sharp swings very well may continue.  In an aftermarket report, it was estimated that the funds sold 40,000 contracts of corn, 12,000 contracts of soybeans, and 14,000 contracts of wheat.  The US dollar has rallied back to its September levels and the Dow Jones fell over 178.  For corn, December managed to fill the gap set after the October WASDE report at $5.28 ¼.

 

This volatility is largely based on China's decision to try curbing food inflation.  They are expected to bring more aggressive measures of anti-speculation and anti-hoarding. Obviously the market is taking this as a very negative signal.  On top of this, Ireland's debt problems are being blamed for weakening the Euro Currency and in turn have helped the US dollar.

 

In our opinion, it may be hard for new crop prices to fall and stay low for any extended period of time unless there is an unforeseen demand shift. This translates to potential firmer back month pricing between now and the March Planting Intentions report.  There really isn't much room for error in the South American production, so the market will be edgy on any major weather concerns.

 

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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.

 

 

 

For now we recommend staying with our current hedge recommendations.  Please call your broker if you have any questions.

EHedger Closing Grain Commentary 11-15-10

Nov 15, 2010

Grains rebounded sharply today from Friday's limit down move.  December corn finished up 21 ½ cents, January soybeans finished up 17 ½ cents, and December wheat finished up 3 ½. 

 

Overnight the corn market gapped higher opening at $5.41 ¾.  Funds were heavy sellers on Friday, but flipped and were once again heavy buyers today.  The market was unable to fill the previous gap in Dec corn set at $5.28 ¼. Today's general commodity rally was impressive considering the US dollar was sharply higher.

 

Export inspections this morning were below last week's numbers for corn, wheat, and soybeans but were not a major factor. Since we had a limit move Friday, limits were expanded to 45 cents allowing corn to move up and over 30 cents higher at one point in the day. Tomorrow we will go back to standard limits in the grains.

 

 

There were rumors that China is entering an agreement with Argentina to import between 4 and 8 million MT's of corn.  From what we know and have heard this process should take up to 6 months to a year to complete, since currently Argentina is not approved by China as an exporter of corn.  Maybe they are trying to speed the process along but as it stands right now we think it could be over-assumptions by the market.  Another reason why the market was higher was the lack of a Chinese rate hike over the weekend.

 

 

 

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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.
 
 

 

Pre-market sale announcements were strong this morning.  The USDA announced exports for almost every product, and this is exactly the type of export activity the market wanted to see for a demand fueled market. The market broke last week and immediately followed up with sales this week.  If the market didn't see this type of pricing on a big break it may assume that they already have much of their needs priced.

 

 

For new crop unless there is an unforeseen demand shift it could be hard to break the back months between now and the March Planting Intentions report.  Until more is known about the S. American crop, 2011 corn will likely have a hard time staying below $5 and 2011 soybeans will have a hard time staying below $11.  There really isn't much room for error in the S. American production, so the market will be edgy on any major weather concerns.

 

The Commitment of Traders report was delayed until today due to Veteran's Day last week.  The report shows the large speculator decreased net long corn positions by 11,556 contracts using futures/options.  They actually increased their long soybean positions by 3001 contracts.  Traders have also been anticipating today's Winter Wheat Crop Condition report.  The good to excellent category jumped one percent to 46% but is still quite lower than the 10 year average of 58% good to excellent.

 

The lower end of the December corn gap is still seen as support at $5.28 ¼.  We recommend remaining with our current hedge recommendations.  Please call your broker if you have any questions.

EHedger Closing Grain Commentary 11/11/10

Nov 14, 2010

 

Grains fell sharply today dropping "limit down" for corn and soybeans.  The weakness coming from outside markets pushed Dec corn down 30 cents today and January beans down 70 cents.  Synthetically they were trading a few cents below their settlements.  December wheat followed lower finishing down 34 ½ cents.

 

This selloff was mostly attributed to news that China may be raising interest rates in the near future to fight inflation.  Overnight the Chinese markets traded limit down at one point before finishing sharply lower.  This of course quickly spilled over into our markets and in the overnight session grains fell abruptly. 

 

At noon the funds were net sellers of about 20000 contracts of corn and 12000 contracts of soybeans. 

 

Exports were out today but were rather overshadowed by last night's news.   Export sales were 832,000 MT's all wheat, 628,600 MT's of corn, and 929,800 MT's of soybeans.  This was slightly lower than expected for beans and at the upper end of the estimates for corn and wheat.

 

We wouldn't be surprised to see a further setback going into the end of the year.  Many times you see a selloff between now and the holiday's as traders close out positions and lighten up before years' end.  The lower end of the December corn gap is at $5.28 ¼ and is seen as a technical target and support.  As you can see from the included chart we have started to fill the gap today. We are only 6 cents away from filling the gap so it shouldn't be very hard to reach.   

 

 

For Sunday as it stands right now it looks like we will open lower, of course many things can change over the weekend.  Corn and soybeans will both have expanded limits Sunday night and Monday.  Corn limits will go to 45 cents and soybean limits will go to $1.05. We recommend remaining with our current hedge recommendations.  Have a great weekend!

 

 

 

 Corn Chart

 

 

 

 

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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 11/10/10

Nov 10, 2010

December corn and November soybeans both finished 9 ½ cents lower while December wheat finished 11 ¾ lower.  Coming into the grain session open the US dollar was at its day highs approx 700 points higher.  This on top of corn’s key reversal yesterday helped spur weakness across the board.

 

Tomorrow the weekly exports will be delayed until Friday due to the holiday.  We will have normal trading hours for grains.  I will have the export estimations out in tomorrow’s afternoon letter.

 

The market was expecting the WASDE report to show bean yield at about 44.6 and it came out at 43.9.  The carryout was also sharply below estimates at 185 million bushels.  This was the main cause for soybeans’ strength yesterday and puts beans in an edgy situation.  The more bullish information coming in for soybeans, the more touchy the market will be to the upside.  This puts extra emphasis on South American production, so any major changes in S.A. weather will be watched closely. 

 

For corn the USDA yield was 154.3 which was right in line with what the market was projecting.  The average estimate for corn carryout was 840 million bushels but the actual was 827 million. Yesterday’s reversal in corn was on record volume and record open interest.  Even though the fundamentals remain strong for corn it wouldn’t take much imagination to see a selloff from here.

 

For now the markets seem to be following the inverse of the dollar and taking a breather.  Front month corn contracts are taking the brunt of the weakness while the back months will likely remain supported to keep acres for next year.  One thing to watch is cotton.  Cotton has been on an unbelievably sharp rally since this summer.  Today was a major key reversal in cotton and since it will be competing for acres with beans next year it will be one to watch in case of a major switch in the trend. 

 

Another reason we wouldn’t be surprised to see a setback going into the end of the year is many times you see a selloff between now and the holiday’s as traders close out positions and lighten up before years’ end.  We recommend staying with our current hedge recommendations.

Corn Chart

 

 

 

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EHedger Closing Grain Commentary 11/8 /10

Nov 08, 2010

Monday grains traded both sides of the market ahead of the November WASDE report. At settlement Dec corn was down 2 ½ cents, Nov beans were down 9 ¼ cents, and Dec wheat was 7 ½ cents higher.

 

Tuesday morning the USDA Supply and Demand report will be released at 7:30 am.  The average analyst estimates corn yield at 154.4 bpa and production at 12.545 billion bu.  They are estimating soybean yield at 44.6 bpa production at 3.426 billion bu.  From customer reports we wouldn't be surprised to see the bean yield closer to 46, but nobody is guessing that right now. 

 

The November WASDE report is especially important for soybeans since we will have yield estimates that were gathered after the belt was mostly harvested.  At this time of year it is expected to be a more accurate estimate.  In case the report is a bullish surprise, or the dollar continues to free fall, we have upside protection in the call spreads (please see recommendations) and remain sold in the cash market.

 

Monday's reports included crop conditions for winter wheat as well as export inspections.  Inspections were not a market shocker but were below last week's levels as well as below year ago levels for corn, beans, and wheat.  Crop conditions for Winter Wheat dropped another percentage point to 45% good to excellent.  The anticipation for a drop in this category may have been the cause for today's wheat strength.

 

Below I have included a chart of December Corn.  Even though technically this market has a lot of momentum to the upside, the support levels are well below the market.  The thirty day moving average is just above the gap level at $5.43 and the 50 day is all the way down at $5.22.  We like having upside potential but that is why we are going with the call spreads and keeping hedges in cash sales.  Please check with your broker for a specific recommendation for your operation.   If you need to get additional protection please call your broker.

 

 

 

 

Corn Chart

 

 

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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 11/4/10

Nov 04, 2010

Thursday corn, soybeans, and wheat all closed sharply higher mostly due to the Weaker US dollar.

 
Grain’s strength can be mostly attributed to follow through buying from the FOMC report yesterday which is helping most things Dollar based including stocks and commodities. Corn and soybeans both made new highs for the move. Export sales this morning were strong for soybeans, but rather weak for corn and wheat.   Soybean weekly export sales were 1,616,200 MT’s, while corn was at 461,600 MT’s and wheat was 605,600 MT’s. 
 
The market is looking ahead to its next report on Tuesday November 9th for further direction. Average analyst estimates put the corn yield at 154.4 bpa with production at 12.545. Average estimates for soybeans put yield at 44.6 and production at 3.426. Of course the US Dollar and other outside market forces could continue to have a large influence on grains. 
 
For wheat the bullish attributes are the crop condition. The good to excellent category for wheat was at 46% which is well below the average for this time of year. On the negative side exports haven’t been that great. This should hold wheat range bound unless we see a further decrease in crop condition on Monday’s report.
 
We like remaining with the strategy of being well sold with spring call spreads for upside potential.   Please call your broker if you need to get more protection on before Tuesday’s report.
 
 
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EHedger Closing Grain Commentary 11/2/10

Nov 03, 2010

Wednesday corn and soybeans closed stronger after trading both sides of the market.  Wheat closed lower.

 

Grains set wide ranges ahead of the FOMC report.  The report came out after the grain close around 1:15 pm putting the outside markets into a volatile mess.  The US Dollar posted a new low for the move at 75.235 (Dec Futures) within a minute of trading before trading back towards unchanged.  The day ended with the Dollar down only about 350 points.  This weakness could provide support for grains in the overnight session.  If the dollar continues this downward trend it could provide support to all things dollar denominated, giving a boost to our markets.

 

Tomorrow weekly export sales are expected to be between 350-700 for corn, 400-600 for wheat, and 1 - 1.5 Mill for soybeans. The next major report is the USDA Supply and Demand on November 9th.  FC Stone is estimating corn yield at 154.1/production at 12.523. They are estimating bean yield at 44.9/production at 3.449.  Informa is estimating corn yield at 155 and bean yield at 44.9. 

 

There is plenty of uncertainty in the outside markets right now. We have already witnessed the funds lowering their net long positions in grains in the last Commitment of Traders report.  We like remaining with the strategy of being well sold with spring call spreads for upside potential.

 

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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.

 

 

 

EHegder Closing Grain Commentary 11/2/10

Nov 02, 2010

 

Tuesday grains closed mixed with the calendar spreads making large moves. December corn finished 1 ½ cents lower, November beans finished 1 ½ cents lower, and December Wheat finished 8 ¼ cents lower.
 
Coming into the day the night session was stronger and the dollar was sharply lower. Yesterday FC stone released their estimates for the November 9th WASDE report. They are expecting corn yield to fall to 154.1 with production at 12.523. They are projecting bean yield to increase to 44.9, with production at 3.449. Informa’s estimates were released at 10:30 am Tuesday and were not a major market mover like their previous estimates were this year. Informa is projecting corn yield to be 155 and bean yield at 44.9. 
 
The market saw heavy bear spreading today in the grains. A lot of this was the funds rolling their longs out of the front months (December Corn/December Wheat) and rolling into the back months. Deutsche Bank’s roll started today and other funds will be rolling as well. Bean’s front month weakness could be attributed to following corn and wheat but it is also a seasonal move to see the spreads widen at this time of year.
 
Crop conditions for wheat fell another percentage point to 46% in the good-to-excellent category. This is well below the 10 year average of 60% and could help wheat hold support especially compared to corn and soybeans.
 
There is plenty of uncertainty in the outside markets right now. The Fed announcement tomorrow is expected to be a large market mover for all things dollar denominated. This could prompt some investment money to exit riskier investments such as long commodities in the short term. We have already witnessed the funds lowering their net long positions in grains in the last Commitment of Traders report.  We like remaining with the strategy of being well sold with spring call spreads for upside potential.
 
 
 
 
 
Get More From EHedger.
 
Our commentaries are just one part of our whole risk management service. Please go to http://www.ehedger.com/getmore.html for a free two-week trial of our full member website that gives you access to all our hedge and marketing recommendations, educational tools, market snapshots and much more.
Also learn about our acclaimed AMMO Program that helps producers optimize their marketing strategies using the premier tools and insights in the industry.
 
Get Organized. Get Ahead. Get EHedger
 
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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