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.
Labels: Beans, charts, Charts and Strategies, commodity price risk management tools strategies grains futures options money cash flow, crop conditions, Delta Neautral Trading, Leverage Optoins Futures, Marketing Tools, MWC Marketing Hour Round Table, opening grain comments, option selling, Price Management, USDA Crop Report Supply and Demand