Walsh Commercial Hedging
Mar 22, 2012
The grain complex closed mixed with wheat leading the way for a change. May Wheat finished up a dime at 646 1/4 as short-covering emerged after early weakness in the market. Talk of the oversold condition of the market after a 44 ¼ cent break from Monday’s highs helped fuel the support. May corn finished up 2 ½ and new crop Dec. was up ¾ at 556 ¾. Corn had a choppy two-sided trade for most of the day. Weekly export sales for corn added support to the market before the opening. Sales for old and new crop came in at 917,100. The trade was looking for 650-850. May beans finished down 5 ½ at 1349 ½ and new crop Nov. was down 6 cents for the day.
The SX12/CZ12 ratio has moved from a low of 2.0 in early November 2011, when the South America soy production was indicated to be substantial, to the current ratio of 2.35. Historically, soybeans are considered cheap to corn whenever the ratio is below 2.0. The recent climb in the ratio does not provide any guarantee there will be more soy acreage. Enticing acreage into soybeans ultimately rests in the producer’s break-even price ratio (BEPR). We won’t know whether soy acreage will be boosted until the release of the USDA’s Prospective Plantings report next Friday. From what I’ve been hearing from producers, the BEPR remains tilted in corns favor. As always, however, Mother Nature will prove to be the final arbiter. I would greatly encourage producers to hedge their corn using Put options in the September and December contracts. Give us a call for specific hedge strategies based upon your operation at 800.993.5449 or email me at email@example.com.
Futures and options trading involves substantial risk. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. In no event should the content of this letter be construed as an express or an implied promise, guarantee, or implication by or from Walsh Trading Inc. that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided in this correspondence is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. The risk of loss in trading commodities can be substantial. You should carefully consider whether such trading is suitable for you in light of your personal circumstances and financial resources. Only risk capital should be used.