Thursday, December 22, 2011

Grain Market thoughts opening comments

Markets are called steady to better this a.m. behind supportive outside markets and a mixed overnight session.

In the overnight session corn was up a penny, beans were 2 better, KC wheat was up 2, MPLS was unchanged, and CBOT wheat was also unchanged.  At 9:00 outside markets have the equities higher with the DOW up 50 points, crude is up a dollar, and the US Dollar is about unchanged.

The driving forces in the market the past week or so has been dry weather in South America and parts of Ukraine/Russia.  Ethanol production has been solid and some cold weather/snow in the south has helped out our demand for feed a little bit.

Export sales this a.m. were in line with expectations for beans and wheat, while corn numbers where slightly above.  Corn came in at 28.1 million bushels about 7 million above what we need on a per day basis to meet current USDA projections.  Wheat sales were at 13.3 million bushels which is a couple million more then we need on a per week basis to meet current projections.  Beans came in at 24 million bushels which is about 10 million more then what we need on a per week basis to meet current projections.

Volume has been light and will likely remain light threw the holiday’s; short covering should be the theme as we move forward.

Technically many of our markets have done a good job of building support or support bases.  That isn’t to say that the bottom’s are for sure in; but we have at least moved away from them for the time being and the further we get away from the support zone the more likely that the bottoms have been made.  Fundamentally the January crop report could change how things shake out for the next several months.

A couple good things that our markets have done technically is the fact that most of them have moved to the highest level in a couple weeks and most have also moved past 10 and 20 day moving averages; another good sign. 

On the flip side of things we are getting close to overbought and some of the analysts that we follow are close are have started to issue sell signals because of this.  With the huge amount of unsold inventory that producers have we have a risk of having plenty of selling above the market.

Basis is weak across the board; but part of that is the fact that we are in holiday mode and many are already gone.

Please give us a call if there is anything we can do for you.

Tuesday, December 13, 2011

Are you protecting your grain marketing risk? Closing Grain Market Comments for Tuesday

Markets closed firmer today.

Corn was up ½ on the nearby, NC 2012 corn was up 7 cents, beans where up 7 cents, KC wheat was up 4, MPLS wheat was up 6-7, CBOT wheat was up 6, the US dollar is firmer with the cash index up 730 at 80.310, crude was up a couple dollars a barrel, equities where weaker with the DOW off 67 points nearly 200 off of it’s highs.

Overall another decent day for the grains, the disappointment was we made our highs in the first few minutes of trading for most of the grains.  But we also managed to hold yesterday’s and Friday’s low’s while closing higher for all of the grains.

As for new news for the grains today was another dull day; dryness in South America was noted once again; Egypt bought 180 tmt of wheat; but once again none of it was US wheat and there Ukrainian announced that they would have an additional 2 mmt of grain to export (so much for the dry concerns)

Basis remains on the weaker side of things; but not due to heavy producer selling more so due to a lack of competition and freight/logistics not having their typical seasonal struggle.

Technically I thought holding the lows like we have the past couple of days sets up the stage that we might be trying to form some sort of bottom on the charts.  I hope it isn’t just my hope; because fundamentally we have plenty of grain in the world.

As for marketing I like being patient in hopes that this will be the start of some sort of rally; but over the next several days, weeks, and months there is just huge downside risk.  In the form of outside markets, big world supplies, and just ECON 101 (the high prices we have had over the past year indicate that we will grow more (weather permitted) and curve demand which we can see by our lack of exports and our export basis versus last year).  How ugly things could get should a perfect storm hit with acres, yield (weather), along with outside markets and growing world supplies, should the outside markets and economies of the world take another set back is so scary it is unreal.  To think that there is no risk at the prices can’t go down from these levels is just not true.  Hopefully they do hold and hopefully the future black swan events are positive to our prices; but they don’t have to be; nor do our prices even have to be at levels that allow one to be profitable.  Keep this in mind when you are doing your risk management, risk diversification, and overall grain marketing plans.  The worst thing about selling at profitable levels is you could have sold for more if you would have held up if we go up.

Don’t forget we have our marketing meeting in Onida tomorrow at 3:30; it usually lasts until 5:30 as we will go over some charts and do some mock trading.  We hope to see you then!


Monday, December 12, 2011

Closing Grain Market Comments

Markets closed mixed today despite the very weak outside markets.

Corn closed unchanged, beans were up 5-6 cents, KC wheat was off 9 cents, MPLS wheat was off 4 cents, CBOT wheat was off 2 cents, equities had the DOW off 163 points, crude was about a dollar and a half lower, and the US dollar is 900 firmer with the Dec dollar at 79.590.

Given the outside markets today’s price action for the grains wasn’t the worst in the world; given the negative report on Friday and the negative outside markets today I thought the price action was good for beans, MPLS wheat, corn, and CBOT wheat.  KC wheat was a little negative; but it did at least hold Friday’s lows.  You know they say a trending market is one that makes new lows or highs for the move; and at least for today the weakest of our grains didn’t do that.

As for other positive news out there; it is lacking.  Dry weather concerns in South American and wet weather concerns that might possibly leading to quality issues for Australia’s wheat crop where noted today; but overall markets are rather quiet and seem to be in holiday mode.

Basis is defensive for wheat as we simply have too much supply for the demand we have out there.  The winter we have had so far hasn’t helped basis out or slowed supply nor freight either.  Typically winter basis rallies happen due to supply slowing because producers can’t move product or the railroads are not able to move trains.  I am not so sure that this hasn’t been the best winter (so far) that we have seen in terms of rail cars at our locations. 

Export inspections where out this a.m. wheat came in at 16.5 million bushels which is about 44 million bushels behind last year’s cumulative exports due date.  It is was slightly above the 14.8 million bushels that we need per week to meet the current projections.  One positive that wheat should have going for it is the fact that with the cut in exports we probably don’t have much of a risk in not hitting the present export number projected. 

Beans came in at 29.7 versus the 22.1 that we need on a per week basis; the scary number is the nearly 200 million bushels we are already behind last year’s at this time. 

Corn came in at 35.7 million bushels which was also ahead of the 30.6 that we need on a per week basis to meet present projections.  Versus last year we are about 55 million bushels behind.

The next big known news will not be until the Jan crop report; keep in mind that report has really help set the price stages for several months the past couple of years.  Anyone remember the 2008 report in which we saw spring wheat shoot up towards $25 quickly after?  Or the 2009 or 2010 report in which we saw corn limit down as the numbers came in bigger than expected.  Last year it was the report that saw limit up and set the stages for us to continue the rally we started back in July of 2010. 

I would encourage one to have a solid marketing plan in place ahead of that report; which might mean having some sort of protection in place for those that are undersold.

Please give us a call if there is anything we can do for you.

Don’t forget we are still offering free delayed price for wheat

Friday, December 9, 2011

USDA Crop Report Dec 9th

Markets are called weaker this a.m. behind an overall bearish USDA report.  One that was very negative our world fundamentals.

In the overnight session we seen grains mixed with corn up a penny or two and wheat off a couple pennies.  Calls this a.m. range from 5-30 lower on most of the grains.

Here is a recap of the report.
US Carryover

Friday       Nov
            2011-12      2011-12
            estimate     estimate

Corn         0.848     0.843
Wheat        0.878     0.828
Soybeans     0.230     0.195
Soyoil       2.280     2.080
Soymeal    300,000   300,000
Rice          37.5      37.5
Cotton        3.50      3.80

USDA World Carryover

            Friday       Nov
            2011-12      2011-12
            estimate     estimate

Wheat         208.5       202.6
Corn          127.2       121.6
Rice          99.51      100.57
Soybeans       64.5        63.6
Soymeal        8.28        8.75
Soyoil         2.64        2.41
Cotton         57.7        55.0

USDA World Grain Production

                    Friday       Nov
                    2011-12      2011-12
                    estimate     estimate
China corn            191.8      184.5
South Africa corn      12.5       12.5
Argentina corn         29.0       29.0
Australia wheat        28.3       26.0
Argentina wheat        14.5       13.0
EU 27 wheat           137.5      137.5
Canada wheat           25.3       24.2
China wheat           117.9      117.0
Russia wheat           56.0       56.0
Ukraine wheat          22.0       22.0
Brazil soybeans        75.0       75.0
Argentina soybeans     52.0       52.0
China soybeans         13.5       14.0

The biggest negative is probably the wheat carryout for the US going up 50 million bushels as exports where decreased by 50 million bushels.  Versus estimates by the industry ahead of the report we seen corn at 848 million bushel carryout versus a 830 ish average trade estimate, beans at 230 verus about 215 avg guess, and wheat at 878 versus about 830 on average. 

The positive I see on the report despite all of the very weak opening calls is the fact that many of these numbers where expected.  China raised it’s corn estimate earlier this week, Stats Canada had raised their estimate, and even the Australian wheat crop was pegged bigger this week.  So personally I am not going to jump all over the very weak opening calls that some have indicated; I think the news could quickly become old or in a sense was already old going into the report.

Outside markets are firmer at 9:20 and they could add a little support.

The one thing that this report should continue to tell us is the fact that our S & D is overall bearish for the grains, it is increasing year over year and has really increased versus the tightest we have seen earlier in the past year or so.

Please give us a call if there is anything we can do for you.


Thursday, December 8, 2011

day ahead of Dec USDA report - closing grain market comments

Markets closed mixed on the eve of another USDA Supply and Demand report that will be out Friday December 9th.

At the end of the day we saw corn close down 8 cents, beans up 1-2, KC wheat off 3, MPLS wheat off 2, the Sept/Dec 2012 contracts in MPLS where down 10-12 cents, CBOT wheat was off 4, crude was off a little over 2.00 a barrel, equities ended in the red with the DOW down 199 points, and the US dollar is up about 300 with the cash index at 78.812.

Overall not a bad day for the grains with us able to close well off of their lows despite the weakness seen in the outside markets.

Here are the estimates for tomorrow’s crop report.

                        U.S. ending stocks 2011/12

                                                    Wheat   Corn  Soybeans
Average trade estimate     0.830   0.831   0.214
Highest trade estimate       0.867   0.899   0.255
Lowest trade estimate        0.731   0.712   0.165
USDA November estimate 0.828   0.843   0.195

Basis is a little defensive on most of the commodities as we lack demand and seem to have producer movement a little heavier then normal due to a nice winter (so far).  Railroads are performing well and supply is simply outweighing the demand due to a lack of export-domestic competition.

The feel in the markets is a little better then it was a couple days ago; and today’s technical price action in corn indicates that we might be trying to form a bottom on the charts.  In the last three days we have had a key bullish key reversal and then today we had an outside bullish day.  Perhaps something we can build on?  I guess tomorrow’s USDA report will likely be the catalysts that ends up pushing us higher or leads to head fakes or bull traps. 

The birdseed industry appears to be super slow; very slow in applications and bids are not easily found.  Coverage or lack thereof is one thing that we do have going for us.  Most buyers in most of the industries have very little coverage and are hand to mouth.  On the flip side of that most producers have more inventory un-priced then ever before.  Could become a cat and mouse type of poker game on basis because of this.  For the producers to eventually win we will really need some export competition to show up.

Please give us a call if there is anything we can do for you.

Tuesday, December 6, 2011

grain market comments dec 6th

Markets where called weaker this a.m. behind a weak overnight markets that saw corn break major support.

In the overnight session corn was down 9 cents, beans were off 4 cents, KC wheat was 6 cents lower, MPLS wheat was off 6, and CBOT wheat was 7 lower.  At 9:20 outside markets have the equities slightly positive with the DOW up 35 points while crude and the US dollar are about unchanged.

The markets then opened up a little weaker then where the overnight session left off; but as the day moved on we slowly gained ground and found our markets positive when all was said and done.  We left a bullish key reversal on the corn charts (a key reversal would be making a new high or low for a move and then reversing and closing the opposite) in today’s price action we saw the March corn contract get to its lowest level since last March and then we managed to reverse the day closing up 5-6 cents or about 17 cents off of its lows.

Besides corn closing up 5-6 we seen new crop 2012 corn up 2, beans up 3, KC wheat up 3-4, MPLS wheat up 1, and CBOT wheat up 1-2 cents.  Outside markets have the dollar near unchanged with the cash index at 78.519, crude also was near unchanged presently Jan is trading about 101 a barrel, and the equities closed firmer with the DOW up 52 points.

Overall a decent day for the grains; nice to see the markets turnaround from the lows put in early in the session.  Perhaps some of the bad news that we have seen recently is finally build into the prices?  (China corn crop bigger, South American crops bigger, Australian wheat crop bigger, blenders tax credit ending, massive world supplies that seem to get bigger daily, etc)

I guess only time will tell if some of the recent bearishness that has surrounded our markets has lost it bang so to speak and selling has become exhausted.

Later this week we will have a USDA report; ideas are for the corn carryout to show little changes, beans to see a small increase in carryout, and wheat to see little changes.  Overall estimates are 845 million bushels for the corn carryout versus 843 million last month, beans 211 versus 195, and wheat 830 versus 828.

Overall bias is for a slightly weaker USDA S & D report due to weak demand.  Perhaps at some point the recent price break helps out that demand but as of now we really are not seeing super great export demand; perhaps due to the big crops from our competitors.  The risk is that see our competitors continue to act like Wal-Mart so to speak in that no matter how cheap we try to sell grain for they are sitting there with so much supply that they will sell it lower.  Eventually that should end and perhaps with the Ukraine wheat crop getting projected lower it is sooner than later. 

Basis is a little defensive as many producers have done a good job locking some of it in and we simply lack export to domestic competition for most all of our grains.

Quality concerns have been talked about with the Australian wheat crop; but all that really does is create even more competition for our corn via more feed wheat. 

Don’t forget that tomorrow we will have another MWC Marketing Hour Round Table where we will go over some charts and do some mock trading. 

Also we are still offering free delayed price for both winter wheat and spring wheat.


Monday, November 28, 2011

Trade Update - Mock Trading

With a recent losing streak hitting some of our Mock trades; I am deciding to lift a profitable short position that I have on in MPLS Wheat; I am short and will lock in some profits.

Technically to me it appears that maybe the 8.00 level will hold as support; so on my scale MPLS trade I am going to get out of the 8.38 short for a little over 22 cents profit.

On the line of support holding I am going to place a buy order in at 8.15 for 1 contract, 2 at 8.10, and 3 at 8.05; with a risk to 7.95.

I will leave in my sell orders at 8.45 for 2 contracts and 8.55 for 4 with a risk of 8.63

Another update with the options expiring last week we did see Jordan pick up a short Dec corn position.   He owned both the 6.40 call and put for about 50 cents; so net he is now short 1 at 5.90

It does look like Dan locked in another winner as he had a short MPLS position that he saw his objective hit so  he locked in about 800 profit on that trade.

Grain Markets Comments 11-28-11 - Strong Black Friday Weekend leads to strength in Equities and spill over into commodities

Grain Markets are called firmer this morning behind strong outside markets.

In the overnight session corn was up 12, beans where up 14, KC wheat was up 14, MPLS wheat was up 9, and CBOT wheat was up 10.  At 9:15 outside markets are very firm with the DOW up over 300 points behind a very good Black Friday Weekend and some optimism in Europe, crude is up about 2.50 a barrel, and the US dollar is getting smacked with the cash index down 754 at 78.929.

The big thing this a.m. is the outside markets as there is not much for grain news out there.  We have extremely over sold markets that are and have been due for a bounce and today it looks like we should get one; at least to start off with.

Basis is still on the firm side; but with last week being a short week there seemed to be slightly more sellers then buyers.  The strength or weakness will probably be determined by movement from producer and freight; but things should be a little thin to start off the week after the long holiday weekend.

The one thing that I have noticed that has changed is the amount in the bull and bear camp.  It seems like most every advisory service that I listen to, watch, or read has moved into the bear camp.  I hope that is showing some fear selling as that could give us a chance to bounce out of this or find at least find a level where the selling stops.

Longer term I see both the bullish and bearish things that are out there which makes decisions tough.  First off the world has plenty of grain and we are not seeing much in the terms of exports plus we have very shaky outside markets.  On the friendly side of things we do need to get plenty of acre’s in most our grains next year as the US balance sheets are on the tight side and the world isn’t exactly getting smaller.  I do have to wonder what could happen to our prices should we get tons of acres next year along with good yields.  I have seen some balance sheet projects that have a corn carryout over 2 billion bushels.  Bottom line there will continue to be upside potential but also huge downside risk when marketing. 

If you need help with a marketing plan please give us a call.

Don’t forget that the Ag Horizon’s will have some decent meetings that cover risk management.  Mark Gold with Top Third will be there and he is one of the advisory services that I try to listen to on a daily basis.  Also this a.m. I received an update from Ed Usset’s blog; showing his updated 2012 marketing plans.  Make sure to check it out

Ed Usset along with Kevin Van Trump will be presenting at a grain marketing meeting that we are sponsoring in early February.


Monday, November 21, 2011

Opening Comments 11-21-11 - Weak Markets!

Markets are called weaker this morning behind a weaker overnight session and weak outside markets.

In the overnight session corn was off 7 cents, beans where down a dime, KC wheat was off 5-7 cents,  MPLS wheat was off 1-2, and CBOT wheat was 6-7 cents lower.  At 9:10 outside markets have the equities under pressure with the DOW down 230 points, crude is a dollar forty lower, and the US Dollar is firmer with the Dec at 78.585 up 330. 

Today appears to be another risk off type of day and with Friday’s CFTC report showing that the funds are still long over 100,000 contracts of corn their would appear to be some risk out there of further liquidation.  The funds also own a large percentage of MPLS Wheat which could leave the market that has held in their the best susceptible to some sort of risk off sell off.  Technically most of our markets are looking rather ugly; be careful trying to catch a fall knife might be the term used.

Their has been talk that we should see some increased end user demand/pricing down towards these levels.  Many think that China will be buyers in the 5.75-6.00 range; I guess that really remains to be seen.  Longer term a little price break to help demand is great.

I think one major risk that we have out there is that producers are longer then they typically are or maybe should be.  What happens if we start seeing some fear selling?  Most think that won’t happen until after the first of the year. 

The market’s movement the past week and more so the past couple of months really should tell us that risk management is very important.  After all we have seen corn go from 8.00 on the board down to about 6.00; a 25% dip.  The 2008 meltdown saw Dec corn go from 8.00 all the way down to about 2.90; so we haven’t been under as much pressure as that but we have seen plenty of opportunity slip by.  Does that mean that many are in the hope stage of marketing?  If so could their still be more downside risk then upside potential in the days and months to come?

Bottom line is yes there is plenty of risk out there; so if you need help writing a marketing plan please give us a call.  The biggest thing I think we need to remember is that the worst case in selling levels that make you money is you don’t make as much as you could have.  The other side of the coin is potentially finding one’s self in a position where you are selling at levels that simply don’t work; then what happens if a have to sell situation comes up.

I don’t want to promote fear selling but rather risk management and thus risk diversification.  One tool that might work good with us having a decent to strong basis would be a Min Price or MIN-MAX price contract. 

With this week’s Holiday we will be moving our MWC Marketing Round Table to Tuesday; same time and same place.  In Onida at 3:30; we hope to see you there.

Thursday, November 17, 2011

Closing Comments and Charts for 11-17-11 as the grain markets fall apart!

Markets where hammered today as the selling pressure accelerated as liquidation was seen from the funds; adding to pressure was a little bit of producer fear selling.  When everything was said and done we saw corn down 28, beans where down 20, KC wheat was off 21, MPLS wheat was down 9, CBOT wheat was off 24, the stock market was under pressure with the DOW down 135 points, crude off nearly 4.00 a barrel, and the US dollar is firmer.

Also pressure to our markets was the fact that we had just horrible corn exports we even had a cancellation of some corn that was sold to unknown (which is typically China).  Corn exports where only 8 million bushels; driving around South Dakota it is pretty easy to find that and much more on the ground. 

Ethanol margins remain very good nearby; but we continue to miss export business and today that along with outside markets ended up being too much for our markets to bear.  The fact that we have been range bound for a month or more didn’t help anything out; as we broke threw some technical levels that seemed to accelerate the downside as we hit sell stops.

The technical picture has changed a little bit; hopefully it is just a head fake or a bear trap but technically there now appears to be more downside risk then upside potential.  Fundamentally we simply lack export to domestic competition and our biggest fundamental is also moving against us right now.  The funds just don’t seem to have a reason to own anything; with the MF Global issues and shaky situations in Europe no one has much interest in owning commodities right now.  As long as money wants to flow out their remains tons of downside risk.

The good thing is that despite the poor exports and poor demand we are not exactly in an overwhelming or burdensome supply situation.  We have seen supply cut year over year; so in theory we still should have chances to see a bounce at anytime should some demand show up or even if we have the outside markets stabilize.  Adding to that thought would be the longer term picture that says we need a lot of corn acres next year; so perhaps that gives us a chance to sell higher prices sometime in the spring.  But proper risk management should be telling us not to wait that long; especially when we are still at good historical values. Levels that make good returns; plus what happens to our markets if we do plant 95 million acres of corn and continue to have more then ample world supplies.

The price action seen today reminds us of 2008 all over.  With volatility down doing contracts like min price, min-max or even simply buying some puts to help protect one from a complete melt down.

Attached are a couple of charts that show we broke threw some key support area’s today and really opened up some down side risk.

Please don’t forget we still have free delayed price on both winter wheat and spring wheat.

Wednesday, November 16, 2011

Another Mock Trading Session in our Marketing Hour Round Table at MWC in Onida

Today we held another MWC Marketing Hour Round Table meeting; in which we discussed current issues, looked at various charts, talked a little on basis, and then did some mock trading.

Here is a recap of our mock trading.

First Dan was stopped out of a long KC wheat position for a small profit; as that was the only booked trade that was closed today.  It leaves us with about 75k profit on our winners with about 25k losses for a net of around 50k profit since we Sept 1st.  

On the futures side of things Kevin added stop for his MPLS-KC Spread; in which he is a little bit behind. I added a stop and placed an objective on my long corn while adding more length at today's close.  Basically a trade that is a scale buy trade.  

Dan then moved his risk on his long MPLS March wheat up to help GTD that he locks in another winner; while opening up the upside; figuring a break threw of 9.00 could quickly accelerate buying.

I then had an open order to buy MPLS at 9.00 on a buy stop; decided to place a sell at the market with a 20 cent objective and changed my buy stop to a risk and reverse against my short MPLS March at 8.90.  Bottom line i remain friendly but look for the market to congest a little bit before trying to make another leg higher.

Chris then placed our first non-grain trade; he shorted crude oil at 101.69; with a risk to 103.00 and a reverse objective at 95.00.

Dan then went long corn on the march; risking to 6.42 with an objective of 6.71.

Lastly on the futures bought 1 jan bean at the close; placed another order to buy another at 11.85; with a risk of 11.79 and an objective of 12.25

On the options side of things the only adjustment made was Chris putting in an order to sell 1 MPLS March 8.50 put if we close the MPLS March Futures above 9.00; adding to his strangle that he is currently up about 2500 on.

The last trade was Jeremey purchasing an 11.50 Jan bean put and buying a 12.00 Jan bean call.  My exit is next week Wed (or at least that is the exit plan).  The reason for the purchase of both of these with a game plan of exiting soon; is simply to try and pick up a little increase in volatility as these options only have an implied volatility of about 14-15%; whereas the corn and wheat options seem to be 25-35%;   I don't want to have the theta eat me away that is why I plan on exiting in about a week; as i have it calculated that theta is going to cost about 30-35 a day; while a 10 % spike in volatility could give me a chance to make a couple thousand and a big move either way allows gamma to help my net delta position out in a hurry.  

Jordan was ill and didn't make the session; so all of his open trades are still open.  Perhaps being long all of the beans made him a little ill?

Please make sure to join us next week in Onida as we have another session.  With the Thanksgiving Holiday we might move it up a day; but if we do we will have plenty of text messages and emails out.

Tuesday, November 15, 2011

Grain Market Opening Comments 11-15-2011

Markets are called mixed to better following an overnight session that was mostly firmer with beans leading the way higher.

In the overnight session beans where up 15 cents, KC wheat was up 3, MPLS wheat was up 2-3, CBOT wheat was up 1, and corn was up 3-4 cents.  At 9:15 outside markets have equities weaker with the DOW off 33 points, crude up 60 cents, the dollar is up about 342 with the DEC at 78.08.

Yesterday we had export inspections out that had beans well above what is needed on a per week basis while corn and wheat continue to lag what is needed on a per week basis to meet current USDA projections.

Basis is hit and miss on the grains; as we simply don’t have enough export to domestic competition for basically all three of the major markets.  Corn basis is firm; but we lack exports, wheat basis is also firm but spot was weaker yesterday then it was last week.  Some to arrives are also weaker; late last week I sold a 15 pro to arrive train and yesterday the bid I got for the same quality was 50 cents lighter then what I sold Thursday/Friday last week.

Bottom line is the small spike we seen to start last week caused a little movement in some of the grains thus has lead to basis being rather choppy because there is plenty of room everywhere, rail freight isn’t tight, and we simply lack export to domestic competition.

Markets have now opened and about 10 we have the markets weaker then where the overnight session left off.  We started off a little firmer then where the overnight session left of but currently we have beans up 10-11, corn down a penny (6 cents off of it’s highs about 30 mins ago), KC wheat unchanged, CBOT wheat up 1, and MPLS wheat up 1.  Look for the rest of the session to be choppy and probably range bound like most of our markets have been for the past month or so.

Technically many markets are flirting with support after testing resistance last week.  The biggest thing our markets don’t have going for us is we don’t have much money wanting to flow into grains; outside markets and the problems in Europe have lead to a lot of risk off type of investments.  Perhaps making the chances of taking out last years highs lower then many expect is the fact that risk doesn’t want to flow into our markets, the world seems to have solved many of it’s supply issues, and we simply have farmers sitting on a lot of product at a time when the exports are suppose to be coming from us and that could be leading to a shifting of demand to other areas in the world that seem to have ample supply.

Don’t forget that we have our weekly meetings every Wed in Onida.

Also with the nice winter we have had don’t be afraid to take advantage of our free delayed priced program for both winter wheat and spring wheat.

Please give us a call if there is anything we can do for you.

Wednesday, November 9, 2011

USDA Crop Report Nov

Below is a forward from our main Country Hedging Rep and opening comments.

Markets are called mixed this a.m. behind a USDA report that is overall probably neutral to slightly negative; outside markets are under extreme pressure and that leaves overall thoughts negative.

In the overnight session we saw corn off a penny, KC wheat was off 8, MPLS was off 8, CBOT wheat was off 7, and beans where off about  8 cents.  At 9:20 outsides are under pressure with crude down 2 a barrel, equities very weak with the DOW down 285 points, and the US Dollar making a new move for the recent high with the Dec up 1.289 at 78.05.

Here is a recap of report

The markets have now opened and been rather volatile during the 1st  hour or so of trading.  We opened under pressure with the grains lower then most had thought; corn was down about 10-14 on the open, wheat was down 20ish, beans where also twenty or so lower.  Now about 11:00 we have seen some massive improvements.  Spring wheat lead the way higher as it has been up 5-10 cents, and we now have the other wheat contracts only down 5-10 cents so a good dime off of their lows in both KC and CBOT.  Corn has also managed to pull back in positive territory up about 2-3 cents and beans are off about 8 cents.

Winter wheat basis feels firm and maybe firmer; I did notice bids today are showing inverses bid for nearby now ahead of JFM.  Spring wheat feels a little weaker on the basis side of things because of an increase in country selling.  Part of the firmness in winter wheat basis over the past couple of months has been the spread between MPLS and KC; with it making another leg up firmness in wheat basis shouldn’t go away overnight.  BUT today’s carryout numbers are not exactly bullish for wheat; so when the supply starts moving…………watch for basis to come under extreme pressure.  Keep in mind buyers are like producers in the sense when things start going their direction they typically try to pick tops or bottom’s; thus when prices are going up it is hard to buy grain some days because everyone jumps on the bull camp.  The opposite is true when things start going down; it becomes hard to sell because all of the buyers are afraid it is going lower. 

Don’t forget we are still offering free delayed price for both spring wheat and winter wheat.

Also this afternoon we will have another session of our MWC Marketing Hour Round Table.  We invite you to join us.


Grain Merchandiser
Midwest Cooperatives
605-295-3100 (cell)
605-258-2166 (fax)

This communication may contain privileged and/or confidential information and is intended only for the use of the individual or entity to which it is addressed.  If the reader of this message is not the intended recipient, you are hereby notified that any unauthorized dissemination, distribution, and/or use of this communication is strictly prohibited.   This communication makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.  Nothing herein shall be construed as a recommendation to buy or sell any commodity contract.  There is a risk of loss when trading commodity futures or options.

From: Fitch, Joseph
Sent: Wednesday, November 09, 2011 8:24 AM
Subject: Morning Note

Good morning,

We’ll it’s report morning.  I’ll cover the details and try to give some thoughts.

Corn yield down to 146.7 vs 148.1 last month, 1.0 less than trade guess.  Production is down 123 mln bushels.  Exports steady, ethanol steady, therefore feed usage must be falling because ending stocks fall from 866 mb down to 843 mb, which is only a change of 23 mb.  World corn is 121.57 mmt vs 123.19 mmt last month.  

Soybeans – yield 41.3 vs 41.5 last month, .1 lower than trade guess. Production is down 14 mb.  Exports down 50, crush steady, therefore ending stocks up 35 mb to 195 mb and on its way higher.  World soybeans is 63.56 mmt vs 63.01 mmt last month.

Wheat – SRW, White, and Durum no significant changes.  HRW saw a 30mb reduction in exports and must be some small upward revision to feed or domestic usage because ending stocks are up 20 mb to 318 mb vs 298 mb last year.  Spring wheat saw a production decline of 7 mb on the resurvey of the farmer.  So production was 398 mb.  Exports were raised by 30 mb to 250 mb.  This could prove to be on the high end, but raising exports seemed justified in my analysis.  Ending stocks fell by 28 mb to 129 mb so there is a small reduction in domestic usage.  Stocks to use falls to about 26%. 
World wheat was surprisingly close to steady.  Ending stocks grew from 202.37 mmt last month to 202.60 mmt.  Kazakhstan was raised 2 mmt as had been expected.  This can be a competitor to spring wheat some years.

One thing from yesterday is that deliverable stocks of wheat in Duluth declined from 12.758 mb to 12.389 mb.  One year ago stocks were 26.435 mb.  This is the wrong time of year to be pulling stocks out.  It makes me nervous because it improves the possibility of the spreads staying at inverses. 

Movement on grains was better yesterday and spring wheat seemed to be moving at a better clip.  Basis could weaken up next week with the better movement especially if spring wheat tries to head higher on the balance sheet changes. 

Corn has traded up a little in the OTC market.  Beans have 15 cents protection.  Wheat is likely mixed with spring wheat likely higher and winter wheat more dependent on corn for strength.  Outside markets are negative this morning and could influence trade.

Even though the corn yield is still moving tighter, I’m not sure that the farmer is going to get the very bullish reaction that some seem to want.  I doubt this information without further stress in the grain markets like a turn for the worse in South America weather or another large decline in the yield on a future report is going to allow this market to trade back up to its previous highs.  Farmers who are aiming for $7.50 or $8.00 corn are going to be disappointed.  I think they need to make realistic sales going forward and make some sales against production for the next year and possibly further out.  Soybeans continue to look like a sell on the bounce candidate to me.  There isn’t anything bullish there with production in SA looking like it is going to keep getting bigger and our export window getting clipped.

Joel Fitch
Market Analyst

Country Hedging, Inc.
The Right Decisions for the Right Reasons

This communication may contain privileged and/or confidential information and is intended only for the use of the individual or entity to which it is addressed.  If the reader of this message is not the intended recipient, you are hereby notified that any unauthorized dissemination, distribution, and/or use of this communication is strictly prohibited.  Country Hedging, Inc. makes no representation or warranty regarding the correctness of any information contained herein, or the appropriateness of any transaction for any person.  Nothing herein shall be construed as a recommendation to buy or sell any commodity contract.

Update on trade for Jeremey on short corn

With the USDA report neutral to friendly corn; I am going to take the chance this morning and buy back my short corn scale trade.  Presently Dec corn is at 6.48; so this allows me to lock in a little over $4,000 profit.  I am not going to re-enter this trade; but I am going to place a buy stop at 6.65 basis the Dec to go long 1 contract; if I do get filled I will then place buy orders at 6.60 for 2, 6.55 for 3, and 6.50 for 5.  But only if I first get filled by the stop.

Tuesday, November 8, 2011

opening grain market comments day ahead of USDA report

Markets are called mixed this morning a day ahead of a USDA S & D report behind another choppy overnight session.

In the overnight session corn was up 2 cents, beans where up 7, KC wheat was off 2, MPLS wheat was off 2, and CBOT wheat was 2 lower.  At 9:05 outsides are supportive with the DOW up about 50 points, crude up about a dollar a barrel, and the US dollar softer with the Dec down 340 at 76.80.

Not much for news out this a.m. and with outside markets a little on the positive side; but not really moving much many expect a quite day ahead of the USDA report.  I should remind everyone that the last time we saw a big move was the day before the last USDA report in Oct; (not the actual report) so just because everyone continues to expect choppy sideway’s price action doesn’t mean that is how it pan’s out.

Basis remains firm on winter wheat, spring wheat, soybeans, and corn.  I like basis offers especially if I am bullish because of how the basis – futures – cash price relationship typically works. 

Overall markets feel like they are sellers markets; but I am not sure that is from super demand.  More the reason I call our markets sellers markets is the fact that producers are simply not being forced to move product at this time.  Eventually that could change and if export demand doesn’t pick up or we don’t find some type of end user competition our markets could quickly turn to buyers markets.  The world grain markets all appear to be buyers markets where the business typically goes to whoever will undercut the other the most.  I.E. we have plenty of grain in the world at this time.

Keep in mind we are offering free delayed price for both winter wheat and spring wheat.

Spread price action should be interesting and has been interesting; the tightening of spreads is an indication of demand especially if spreads tighten up during index fund rolling periods; where the index fund is selling the front end.

It looks like the USDA report will be out like scheduled Wed; despite some asking to move it back because of the MF Global issues.

Please give us a call if there is anything we can do for you.

Monday, November 7, 2011

Marketing Thoughts ahead of USDA report - Closing Comments

Markets closed about how they opened; mixed and choppy with a lack of direction as consolidation continues.

When all was said and done corn closed down 1-3 cents, Beans where down 18-20 cents, KC wheat was up 4-7 cents, MPLS wheat was off 8 cents, CBOT wheat was up 2, equities closed firmer with the DOW up 85 points, the US dollar near unchanged and crude up a little over a dollar a barrel.

Price action today was rather choppy with a lack of solid direction; about the same as the past month.  Did you know that corn since Oct 12th corn has only traded a 43 cent range and since the 1st of the month only about a 29 cent range with every day trading inside the previous days range.  Now that is consolidation at its finest especially when you consider that corn traded 45 cent range on Oct 11th the day before the last USDA report.  Now whether or not that information means much if anything is yet to be decided.  Could we move limit tomorrow much like we did before the last USDA report?  Sure.  Could it be down?  Sure it could.  Could it be up?  Sure it could.  Could we continue the sideway’s pattern and have another inside day until the report comes out?  Without a doubt that is possible as are many of the above and many other scenario’s.  The market really isn’t tell us.

To me the consolidation is telling us that we will eventually move out of the choppy sideway’s trading range; but it doesn’t exactly have to happen today nor as soon I or anyone else thinks.  Heading into the report there are many camps out there; some feel that the producer is too long and hasn’t sold enough plus they think yield is a little higher then what the last USDA report was at.  Others think demand is strong which I would have to agree the margins for many of the users of corn are having a good run, plus they think that yields are light; too much dry down on the row crops. 

So there you have it; I don’t know what is going to happen on the next USDA report; but I think I do know that proper risk management should always be used.  Does that mean one should sell some ahead of the report?  Maybe; that depends on where you are at in terms of marketing, cash flows, and future known “have to” move or sell for X reason, along with 100’s of other factors to consider.  So to me what proper risk management means ahead of a USDA report is am I comfortable if we move limit up, trade sideways, or limit down; and for more then 1 session in a row.  Now one probably should ever be 100 % comfortable with a limit move one direction or another but after you take away your personal bias do you still have “balance” in what you have left to market or “balance” in what you have already sold?

If you don’t have balance or comfort heading into the report there are plenty of options and moves that should help one out.  Maybe as simple as buying short term puts for protection or calls to help defend sales so to speak.  If you need help with a marketing plan or using futures and options in a risk management portfolio please give us a call.  Don’t forget we are a Country Hedging Branch plus we offer a variety of contracts such as Min Price, and MIN-MAX contracts the help you in your marketing plans.

Also I want to remind everyone that we are offering Free Delayed Price on both winter wheat and spring wheat.  Free of charge until July 15th.  What a deal……right?  Well yes and know; keep in mind one of the main reasons for end users to offer delayed price is they feel prices will be cheaper in the future.  Now in the case of elevators it would typically mean basis risk.  This is one of the reasons we have been heavy on promoting basis contracts lately as we feel basis is at levels where it makes sense to consider locking it in via some sort of contract for at least a small percentage of your bushels left to market.

Also don’t forget our weekly MWC Marketing Hour Round Table.  This Wed in Onida at 3:30.

Please give us a call if there is anything we can do for you.

Charts 11-7-11

Here are some charts for corn, KC wheat, MPLS Wheat, CBOT Wheat, soybeans, the US Dollar Index, and the DOW.  These are typically charts that we go over and discuss at our weekly MWC Marketing Hour Round Tables; where we also do a little mock trading.

Opening Grain Comments 11-7-11

Markets are called mixed this a.m. behind a mixed choppy overnight session as well as choppy outside markets.

In the overnight session corn was off a penny, beans where down 4 cents, KC wheat was about a nickel higher, MPLS wheat was down 2, and CBOT Wheat was up 2.  Outside markets at 9:15 have equities slightly firmer with the DOW up 33 points, Crude is up about a dollar a barrel, and the US Dollar is weaker with the Dec at 77.05.

This week is a report week so ideas are that we chop around until the report comes out on Wed a.m. and perhaps that report will give us a catalyst to break out of the recent trading range we have had.

Estimates for the USDA report are for carryout’s of 801 million bushels of corn which is down from last month, 185 million bushels of beans which is up from last month, and 819 million bushels of wheat which is down from last month.    Slight decrease to no change is the overall trade guess for corn and soybean yield.

Basis has been very strong for most of the grains.  Lately many have been doing some winter wheat and spring wheat basis contracts.  I think this might be a good move; especially if we do eventually get a run on the board as the typical relationship between futures, basis, and cash price is one where basis offset’s the moves in the board.  Basis is strong and ideally if the board starts to run basis would then weaken; especially if the rally isn’t demand orientated or lead.

With the firm basis we have started to offer Free Delayed Price on both winter wheat and spring wheat until July.  The reason we offer this is a two fold reason; one is because we want to increase movement; but the other reason most end users offer delayed price is they have a bias towards the direction of the price.  In wheat’s case it is a basis bias; and that bias is that it will be wider or worse later; especially when you add the inverses that are out their in the flat price of both winter wheat and spring wheat.

Spring wheat has a flat price inverse of over a dollar a bushel versus the new crop bids.  One reason many struggle to move wheat in our area has been the off quality.  But with the inverse that we have it still makes since to move the wheat now versus sitting on it and trying to blend it off at new crop train.

As example say you have some wheat with low test weight and have VOM; flat price it might only be worth 8.00-8.50 or so today; but that is still about 50 cents to a dollar better then #1 14 pro new crop spring wheat.  So just because there is a discount doesn’t mean one should sit on it and hope to be able to blend it off next year while taking no discounts as bottom line it just isn’t the right business decision.  It would be a choice that could work out and work out well but basis on spring wheat is inverted big time as well as the board.  Those inverses more the pay for the discounts that one might see.

Add to that the fact that some are willing to take the off quality wheat now; when they where not at any level just a few months ago.  Bottom line is the market is looking for wheat, hence the strong basis, the free delayed price, and the flat price inverses that are in the market.  The question when marketing should become why are they looking for the wheat.  Is it strong demand or perhaps just bulled up owners of the product.  Do we have more supply then we do demand? I would say big time; but that supply is in hands that don’t need or want to move it.  What happens if/when that changes?

Don’t forgot that each Wed we are still having our MWC Marketing Hour Round Table.  Our attempt in this is to have some sort of Marketing Club in the future.  We hope to see you there this week.


Friday, November 4, 2011

Updates from this week's MWC Marketing Round Table - Mock Trading Session

This past week we held another session of our MWC Marketing Hour Round Table.

As always we went threw charts, talked a little fundamentals, and placed some new trades while updating or adjusting other trades during the mock trading session.

Here is a recap of the open positions after this week's session.

In the futures section of the mock trading we have the following open

Jordan - scale bought CBOT Dec wheat; Long 2 Jan beans, long CBOT Wheat versus short CBOT corn (March), Long July 12 beans versus short Nov 12  beans

Jeremey - Scale trading short side of Dec corn.

Kevin - Long KC Wheat short MPLS wheat (March spread), long Jan beans up until Thursday at that time he took profit and now has reversed to be short Jan beans, Long CBOT March Wheat versus short CBOT Corn.

Dan is long KC March Wheat

For the option trades open we have the following

Kevin has an open free trade as we speak in that he is long 7.00 Dec corn call and short 8.20 (4 of them); this was a ratio spread that he rolled out and now has profit locked unless corn shoots back over 8.50 ish in the next 3 weeks.

Jordan has a 3 way corn trade; once again after adjustments not much will happen.  He is long 7.50 puts short 7.00 puts, and long 7.50 calls; overall it appears like he is set up for a small loss.

The next trade open is one of mine in that I am long july 7.00 corn call, short 3 of the 8.50's, short 2 of the July, long 1 of the 6.50, long 2 of the 5.50 puts, and then short one of the 7.00 calls.  We do our trades using position book; so when we adjust we place the trades in the same section offsetting then move to the booked profit or loss when the whole trade is complete.  That is why this trade has both a long and short call of the same strike.  It was orginally a ratio spread trade and since has been adjusted.

next on the list is Jordan with a short KC wheat 800 put and short 900 call.  With KC wheat well below the put level he is basically long KC wheat from 8.00 minus the premium he received for the puts and calls.

Kevin is next with another adjusted trade that is now a GTD Winner.  We love trying to turn option trades into free trades when given the opportunities.  he is long the 750 put, short the 750 put, short the 800 call, long the 8.00 call and long the 8.50 call.  Bottom line is he placed the trades at the right time and has a free trade.

Jordan is long 4 of the MPLS Dec 9.50 calls, short 1 of the CBOT March Wheat 6.00 puts.

Chris is short a 10.00 Dec MPLS call and a couple of the 8.00 MPLS March puts

Jeremey is short a 6.00 put in JULY 12 CBOT Wheat against 2 short 9.00 calls

Jordan owns a 6.40 Dec corn call and put both

Kevin owns a couple Dec 6.55 corn calls against a short 6.15 corn call.

And lastly I have 3 different open option trades.  First is a a bean trade; where I am short the Jan 13.50 calls, long a 11.70 put, short a 11.20 put.  The trade at one time owned the 13 jan calls; but I liquitated them this week.  To orginally pay for the trade I sold a Nov 2012 12 put (which allowed me to own multiple call spreads 9 of them).  When the trade itself looked to be going south this week I adjusted via selling the calls I owned; keeping the puts, and further selling additional options to adjust. I sold the Jan put as mentioned above but I also sold a couple Nov 15.00 bean calls.

Next I have a short option trade for CBOT Corn in that I am short the 6.00 puts, 7.00 calls, and 7.50 call.

Lastly a bullish trade for March CBOT wheat; long the 6.60 call, short a 7.30 call, and short the 6.00 put.

Going home on Friday we had open trades that are up aprox 8,075.  As for the booked trades we have profits of $ 70,097.50 with losses of $25.784.00 for a net total of about $44k profits.

Keep in mind that past performance doesn't mean future results and we are simply doing MOCK trading with fake money in an attempt to start a marketing type club in the near future.

We hope to see more of you next week.

Tuesday, November 1, 2011