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.
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