Evening Report -- Advice (VIP) -- September 26, 2012

September 26, 2012 10:05 AM
 

CORN PRODUCERS: INCREASE 2012-CROP CASH SALES... With harvest continuing to advance at a record clip and macro-economic concerns building again, corn futures are rolling over more aggressively. Plus, the price structure in the corn market is giving you no incentive to store corn. Corn hedgers are advised to make a 40% cash sale for harvest delivery to get to 100% sold in the cash market on 2012-crop. Cash-only marketers are advised to make a 15% sale for harvest delivery to get to 75% sold on 2012-crop.

Corn hedgers should hold the Dec. $6.50 put options that were purchased on 40% of the crop as a crop insurance hedge.

 

 

NC FIRMS SIGN DEALS FOR 750,000 MT OF IMPORTED CORN... Hog and turkey producer Prestage Farms Inc. and two other livestock companies have signed deals for 750,000 metric tons (MT) of Brazilian corn, according to John Prestage, senior vice president of Prestage Farms. The purchases were made jointly by Prestage Farms, Murphy-Brown LLC (a subsidiary of Smithfield Foods Inc.) and poultry company Nash Johnson & Sons' Farms Inc. -- partners in Wilmington Bulk LLC. Prestage says the companies are trying to buy more corn and other feedgrains from South America and other sources amid tight U.S. supplies and the high costs of moving grain via rail into the Southeast.

 

 

TRADERS GEARING UP FOR KEY USDA REPORTS FRIDAY MORNING... USDA will release its Quarterly Grain Stocks Report and Small Grains Summary on Friday at 7:30 a.m. CT. With little change expected to the wheat crop, traders' focus is on the stocks data, especially since it will set 2011-12 corn and soybean carryover.

Quarterly Grain Stocks Report

Avg.

Range

June 1, 2012

Sept. 1, 2011

in billion bushels

Corn

1.126

0.887-1.261

3.149

1.128

Soybeans

0.132

0.115-0.152

0.667

0.215

Wheat

2.281

2.159-2.533

0.743

2.147

 

Surprisingly (at least to us), traders expect USDA to set 2011-12 corn ending stocks at 1.126 billion bushels. Earlier this month, USDA estimated 2011-12 carryover at 1.181 billion bushels. Given the early start of harvest this year and slower demand in the last quarter of the marketing year, we're surprised many analysts expect the data to reflect Sept. 1 stocks tighter than USDA estimated in the September Supply & Demand Report. In that report, USDA said, "Based on state-by-state production forecasts from the September 12 Crop Production Report, nearly 1.2 billion bushels of new-crop corn are estimated to have been available for use before the end of the old-crop 2011-12 marketing year. This is up more than 700 million bushels from a year ago. Early new-crop corn use is expected to displace use of 2011 old-crop corn and boost old-crop inventories on September 1."

The average pre-report guess for soybean stocks is 132 million bu., which is 2 million bu. above USDA's September carryover estimate.

Traders expect a slightly larger wheat stocks situation than last year, with the average pre-report guess at 2.281 billion bushels.

In its last estimate of the 2012 wheat crop, traders expect USDA to raise the size of the crop slightly to 2.27 billion bushels. USDA is expected to get there by lowering the all winter wheat crop estimate by 6 million bu. and raising the spring wheat crop by 7 million bushels. The durum crop is expected to be unchanged at 86 million bushels.

Annual Small Grains Summary

Avg.

Range

USDA Aug.

2011

in billion bushels

All wheat

2.270

2.247-2.286

2.268

1.999

All winter wheat

1.677

1.655-1.694

1.683

1.494

HRW

1.009

1.000-1.018

1.012

0.780

SRW

0.432

0.420-0.439

0.435

0.458

White winter

0.235

0.228-0.238

0.236

0.256

Other spring

0.507

0.485-0.529

0.500

0.455

Durum

0.086

0.081-0.090

0.086

0.050

 

 

PF MIDWEEK MARKETING GAME PLAN UPDATE...

CORN: Hedgers are now 100% sold on 2012-crop production in the cash market -- 90% for harvest delivery; 10% for March 2013 delivery. We'll manage risk the remainder of the 2012-13 marketing year on the board. Hedgers should hold the Dec. $6.50 put options which were purchased on 40% of 2012-crop for 31 1/2 cents as a crop insurance hedge. Cash-only marketers are now 75% priced on 2012-crop production -- 50% for harvest delivery; 10% for March 2013 delivery; and 15% for May 2013 delivery. Get current with advised sales.

BEANS: Get current with advised sales. Hedgers are 100% sold on 2012-crop production for harvest delivery. Hedgers also hold Nov. $14.00 put options which were purchased for 42 3/8 cents on 25% of 2012-crop as a crop insurance hedge. Cash-only marketers have 75% of expected 2012-crop forward sold for harvest delivery.

WHEAT: The wheat market continues to hold up relatively well in the face of pressure on corn and soybeans. Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Get current with those sales levels and be prepared to increase cash sales if futures signal a technical top is in place. Hedgers may also add hedge coverage to protect downside price risk if there are signs of a top.

COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold for harvest delivery. Get current with advised sales as futures are rolling over, but no additional sales are recommended at this time.

CATTLE: Live cattle futures have put in a short-term top, but fed cattle producers should continue to carry all risk in the cash market as downside risk is limited. Feeder cattle buyers and sellers carry all risk in the cash market for now.

HOGS: Futures are signaling a short-term low is in place. But the upside remains limited to corrective buying given hefty supplies. Be prepared to add hedge coverage on an extended price bounce as supplies will remain heavy through winter and futures are trading at a premium to the cash market.

FEED: The price break in corn and meal futures will eventually be an opportunity to extend feed coverage. But remain hand-to-mouth until futures signal short-term lows are in place.

 

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