Weekly Ag Spreader Report by Jim Pooler and Pat Lyons January 9, 2015
With many traders returning from the holidays, technical and fund buying was the feature early this week. By midweek, corn and wheat gave up those gains while beans maintained relative strength on the back of continued good export sales thanks to a return of the U.S.`s best customer, China.
The demand strength did not extend to the meal market which continues to see cash values weaken and that has been reflected in the spreads. Jan/Mar meal had a heavy feel all week, despite no deliveries against the Jan. contract and March/May under pressure and well off it`s highs. Board crush was off almost a dime in the March. Our bias is that this pressure on the meal spreads continues, especially with soft demand and the index rolls just a few weeks away.
The oilshare trade put in a nice performance as the market responded to constructive fundamentals for bean oil and an exit of long meal-short oil positions. We are friendly to the oil spreads in general and to the spread from a long term perspective. Corn spreads were content to maintain recent trading ranges despite the outright market breaking 25 plus cents from it`s recent highs, which may be a supportive sign as we await the USDA release on Monday at 11:00 a.m. CST.
On Friday CONAB released their monthly production estimates for Brazil and beans and corn saw slight increases from from the USDA`s December estimates, although bean production is up from last year and corn is down. The continued dollar strength should make it difficult for bean and meal exports to compete during Jan. and Feb.
The average estimates for Monday`s USDA #`s are as follows:
42.5 mln. acres
It is important to note in this report that limit moves frequently in recent years and risk should be adjusted accordingly.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
Patrick Lyons, Senior Agricultural Analyst at Walsh Commercial Hedging Services. Patrick began his career at the Chicago Board of Trade in 1987 with Iowa Grain working as a runner in the summers. After graduating from college, Patrick began working for Cargill Investor Services eventually becoming the trading manager at their soycomplex desk. After 9 years at Cargill, Patrick left to become an independent trader/broker.
Patrick has traded in all the grain and soycomplex pits, holding a top step soybean deck, and trading his own account over the past 12 years. He has leaned to approach the markets with a blend of technical and fundamental analysis. Patrick's experience in handling commercial and institutional customer business while at Cargill and as a floor broker, along with his experience as an independent trader, helps him to understand client needs and help develop solutions.
Listen to Pat's Daily Agriculture Commentary James Pooler, Senior Agricultural Analyst at Walsh Commercial Hedging Services. Following Jim`s graduation from Northwestern University in 1976, Jim began his career at the Chicago Board of Trade (CBOT) as a runner for E.F. Hutton which progressed into a position as a phone clerk in the agricultural and financial markets. He received an opportunity to be trained and do research in the financial markets and was given a trading opportunity in the bond market, which progressed into a partnership. He became an associate member of the CBOT in 1980 and traded in the 30 year pit.
In 1983, Jim purchased a full membership and traded primarily in the soybean pit for 26 years as a front month trader. He also worked with large off-floor traders executing orders in the agricultural spreads. He has spent considerable time studying technical analysis and various approaches to trading. He looks forward to offering the perspective he has gained from these experiences to potential clients.