Expect Tight Trading Range for Corn
Feb 13, 2014
We expect the corn market will give some weight to The Ag Forum’s [USDA conference] expectations about the 2014 crop. The tone seems to be that, while acres will be reduced, carryover will still be burdensome but not excessive. This should allow some upside price strength in the new crop "IF" any type of spring delayed planting occurs. However we are very concerned that the USDA has overestimated exports for next year, in that, China’s imports are really high already. This means other buyers will have to step up to the plate.
We still expect lead month futures will find it difficult getting back above $4.70 by early June, but it will be just as difficult getting below $4.20. To breakout to either side of this price range the market will need decisive decisions about planted acres and crop prospects. Even with this rather timid upside price potential, we strongly urge everyone to exercise good risk management strategies [by using only limited cash flow risk positions between April and June]. This implies being long [buying] in-the-money puts and resist selling cash or futures until we get closer to July.
The soybean market was surprised by a neutral to bearish February supply/demand report, but has been able to claw the March and May futures back above $13. We still feel this is just about the limit to the upside of the old crop market. Attention will soon start to turn to South America’s big harvest and the possibility of a big U.S. soybean crop.
We still expect the old crop soybeans will stay rather firm which will help the bull spreads and sell deep-out-of-the-money puts that are used to pay for the Nov options.
We still see limited reason for speculative ownership of soybeans unless there are some strong opinions about adverse weather conditions affecting yields. Unfortunately, the soybean market will first have to deal with spring weather. If it is cold and corn plantings are delayed in any way, it only makes the potential increase in soybean acres only more negative.
BOTTOM LINE: Continue to bull spread the soybeans and strive to get a limited downside risk strategy in place for the expected 2014 soybean crop.
The wheat market got a little too bearish in January on big wheat supplies in India and Canada. The bounce we have seen recently is more of a technical reaction to an oversold condition plus a little concern about winter injury kill in the western states. While we would love to tell everyone that it is clear sailing well above $6.25 [in July wheat]; frankly it does not look good. If anyone has a large amount of inventory to sell, sell it on every 5-cent bounce and plan to have close to 75% of expected 2014 inventory sold by the end of March.
2014 WHEAT STRATEGY: Start selling in 10% increments based on time. Since the market is oversold, the first 10% will be done via a short Dec 2014 call at the lowest price one would like to be short wheat.
If anyone feels they need to put structure into their risk management decision-making and would like to discuss marketing strategies, call Bob or Laura (1-800-832-1488). We will also try to answer questions in upcoming blogs and we welcome emails to email@example.com or firstname.lastname@example.org.
THIS MATERIAL HAS BEEN PREPARED BY A SALES OR TRADING EMPLOYEE OR AGENT OF UTTERBACK MARKETING SERVICES, INC. AND IS, OR IS IN THE NATURE OF A SOLICITATION. THIS MATERIAL IS NOT A RESEARCH REPORT PREPARED BY UTTERBACK MARKETING SERVICES, INC. BY ACCEPTING THIS COMMUNICATION, YOU AGREE THAT YOU ARE AN EXPERIENCED USER OF THE FUTURES MARKETS, CAPABLE OF MAKING INDEPENDENT TRADING DECISIONS, AND AGREE THAT YOU ARE NOT, AND WILL NOT, RELY SOLELY ON THIS COMMUNICATION IN MAKING TRADING DECISIONS.
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
THE RISK OF LOSS IN TRADING FUTURES AND/OR OPTIONS IS SUBSTANTIAL AND EACH INVESTOR AND/OR TRADER MUST CONSIDER WHETHER THIS IS A SUITABLE INVESTMENT. PAST PERFORMANCE, WHETHER ACTUAL OR INDICATED BY SIMULATED HISTORICAL TESTS OF STRATEGIES, IS NOT INDICATIVE OF FUTURE RESULTS. TRADING ADVICE IS BASED ON INFORMATION TAKEN FROM TRADES AND STATISTICAL SERVICES AND OTHER SOURCES THAT UTTERBACK MARKETING SERVICES, INC. BELIEVES ARE RELIABLE. WE DO NOT GUARANTEE THAT SUCH INFORMATION IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. TRADING ADVICE REFLECTS OUR GOOD FAITH JUDGMENT AT A SPECIFIC TIME AND IS SUBJECT TO CHANGE WITHOUT NOTICE. THERE IS NO GUARANTEE THAT THE ADVICE WE GIVE WILL RESULT IN PROFITABLE TRADES.