Tuesday, July 26, 2011

Market Comments and Info on Types of Contracts


Below are market comments as well as some info to better help one make a decision in regards to how to market the crop.


Markets ended the overnight session in positive territory with most of the grains up 2-5 cents.  Talk still remains centered on weather which isn’t as hot and dry as it was the last couple of weeks and that has a little pressure on the grains.  The other big thing is the possible debt default by the US and it’s possible effects on the outside markets and markets and economics around the world in general. 

At about 10:50 we the markets trading both sides; corn is up 3-4 cents as it appears to really be consolidating especially versus the type of moves we had been seeing over the past several months, MPLS wheat is off a penny, KC wheat is off 2-3 cents, CBOT wheat is off a nickel and beans are up 14 or so. 

Outside markets have a weak US dollar with the cash index at 73.604, crude is up about 20 cents a barrel well off of it’s lows and the equities are struggling with the DOW off about 70 points.  Trading action has been on the choppy side with ranges that are tight versus what we have been seeing.

We did have an announcement that Egypt once again bough Russia wheat because of cheaper prices.  That has help pressure the wheat a little bit and reminds us that we are not exactly the only seller in town anymore.   We do appear to need wheat acres for next year; but right now that doesn’t seem to be a big concern.  The spring wheat crop tour is happening and we should be seeing updates threw out the week.  With the crop behind development it will be interesting to see what the tour comes up with.

The markets did manage a nice little turnaround as at 1:30 last trades (not closes) are showing corn up 13 cents, beans 17 better, KC wheat 10-11 higher, MPLS 10 better, and CBOT wheat up a nickel or so.  The outside markets haven’t changed much in that the equities are slightly weaker with the DOW off 43 points, dollar under pressure and crude 40 cents better.  As for the reasoning on the bounce for wheat that only thing I have really seen has been corn’s strength, the weak US dollar, and dryness in the south as it relates to planting ideas and next year’s acreage.

Technically today’s bounce didn’t do much for either the bulls or the bears; as we continue to have chart patterns that look sideways or in consolidation mode waiting for a new catalysts to determine breakout direction.

Basis feels softer today on the wheat markets; spring wheat in particular as it appears we have the inverse starting to work out of that market.  Winter wheat is seeing pressure from South Dakota harvest and we appear to be lacking the freight concerns and export business that was a major part of the rally/basis appreciation seen over the past several months.

We have started to see more scab and vom in wheat coming into the elevators; please make sure to turn the combines up to try and blow as much out as possible as high levels can make the marketing of that wheat very difficult. 



**********************************Info on marketing and types of contracts********************




Below is a power point file that also has some information on basis contracts, min price contracts, and min max price contracts.  The 1st thing that I would recommend before deciding which tool might be best for you is to determine one’s outlook on the market.  Based on that outlook you look at the slide above on marketing strategies and see which strategies fits your outlook and the lastly you consider the risk/reward if your outlook is correct or if your outlook is wrong and use that information to help you make a good risk management decision.  If one is risk diversifying then doing a combination of cash sales, basis contracts, min price contracts, and min-max contracts is what probably makes the most sense to do.  Then again if one is pro-active hopefully one has done the marketing that they want to have in place before the elevators go cash only which seems to happen each year.

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

Thank you









Below are slides showing the different type of moves possible depending on one’s outlook in the market; as example we are cash/contract only for winter wheat right now.  If one expects the futures price to go up then possible action includes a basis contract, min price contract (of which we offer a couple different kinds), Sell cash and buy calls, or sell the cash and buy futures.  If one is bearish then one simply sells the grain and uses no sort of hedging or one writes a contract









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