Published on: 17:55PM Jul 29, 2010
Corn, beans and wheat continue to bounce off technical support. Some solid exports in beans but concern about wheat continues to spill over into the corn complex. Continued concern about the Russian wheat crop has sellers on edge. The July 2011 wheat contract appears ready to test the $7 level. With the carry that currently exists in the market, the potential for solid profits is looking stronger for wheat. I’m already getting questions from producers whether they should sell next year’s wheat because wheat growers are now going to resume planting when just 60 days ago they thought they were going to stop for 2010. The end result is wheat stocks will stabilize and the corn market will have to work harder to get the 90 million acres it needs planted next year to rebuild corn stocks.
My suggestion is all wheat producers need to be looking real hard at locking up inventory. I like the strategy of buying July $6.60 puts at 67 cents, then sell $5.20 puts for 12 cents. If one assume the cost of production is around $5.50 for 65-bu. wheat. An $8 call would represent around 45% return on investment. Remember, if the market does go higher your cash is worth more which neutralizes the risk of the short call.
BEFORE TRADING, ONE SHOULD BE AWARE THAT WITH POTENTIAL PROFITS THERE IS ALSO POTENTIAL FOR LOSSES, WHICH MAY BE VERY LARGE. YOU SHOULD READ THE “RISK DISCLOSURE STATEMENT” AND “OPTION DISCLOSURE STATEMENT” AND SHOULD UNDERSTAND THE RISKS BEFORE TRADING. COMMODITY TRADING MAY NOT BE SUITABLE FOR RECIPIENTS OF THIS PUBLICATION. THOSE ACTING ON THIS INFORMATION ARE RESPONSIBLE FOR THEIR OWN ACTIONS. ALTHOUGH EVERY REASONABLE ATTEMPT HAS BEEN MADE TO ENSURE THE ACCURACY OF THE INFORMATION PROVIDED, UTTERBACK MARKETING SERVICES INC. ASSUMES NO RESPONSIBILITY FOR ANY ERRORS OR OMISSIONS. ANY REPUBLICATION OR OTHER USE OF THIS INFORMATION AND THOUGHTS EXPRESSED HEREIN WITHOUT THE WRITTEN PERMISSION OF UTTERBACK MARKETING SERVICES INC. IS STRICTLY PROHIBITED. COPYRIGHT UTTERBACK MARKETING SERVICES INC. 2010.
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