Market Comments 8-17-2012 USDA report thoughts after the fact

Good morning; it is Tuesday the 14^th  around 8:30 and presently we have the grain markets slightly firmer as they try to bounce a little bit from the selloff the past couple of sessions.

Presently Dec corn is up 2-3 cents, beans are 6 higher, KC wheat is up 1-2, MPLS up 4-5, and CBOT wheat up 4.  Outside markets have the equities firmer with the DOW up 26 points, the US dollar is near unchanged, and crude is up about a dollar a barrel.

The big news in the past week has been the recent weather changes and more so the big report that was out on Friday.  The USDA report that was out last week was bullish for the row crops; but maybe not bullish enough to say that we need to go up now.  The report estimated balance sheets for corn and beans about as tight as ever but also the pegged carryout numbers came very close to trade estimates. 

Bottom line is last week’s report did a good job or started the job of defining our supply size.  Now the next thing for our market to do is try to determine demand.  Last week’s report showed corn and bean demand being cut big time.  Perhaps too much if we see a price break that adds back any demand.

I think our weather markets are nearing the end and the markets will soon focus on weather in other countries and more importantly at this time should be demand.   Good demand hopefully or lack of demand will start to lead the headlines.  It should really provide some rather volatile markets as we move forward.  Because it really is a chicken and egg thing or catch 22 thing. 

If you think about it the report out on Friday basically said that supply will be so tight and prices will go up so high that demand will be cut.  What happens to demand under basic ECON 101 if we get a price break; much like we have the past few sessions.  I know it doesn’t hurt any end user’s profitability unless their output (ethanol/ddg/etc) happened to be down more than the input this case corn/beans.  So a price breaks don’t do the job or rationing off demand. 

Really at the end of the day the report told me for the next several months we need to stay at levels that curve demand year over year and don’t bring on any extra demand from the nearly 2.5 billion bushels of demand that the USDA has cut over the past several months.  In June the 2012/2013 usage for corn was pegged at 13.775 billion bushels while on Friday the USDA pegged it at 11.225 billion bushels.  The markets job will be to make sure that we don’t go low enough to entice enough demand that we run out of product too soon.

Having said the above you can see that I have an underlying bullish tone for the market.  But it should be pointed out that each of the last couple of years we have had the USDA print carryout levels on corn around the 600-800 million bushel type carryout and by the time we were all said and done both of the last couple years ended up seeing an ending carryout closer to a billion bushels and that happened without 10.00 corn.  It happened with corn typically around 6.00-6.50 on the board the majority of the past year; while trading from mainly 6.00-8.00 the year before.  Bottom line is near the top of the markets each of the past couple years most thought the markets would need to go higher and well they didn’t.  I would agree that this drought isn’t nothing like we have ever seen before.  But I would also point out that sometimes demand can be curved faster than supply is cut.  Case in point the sunflower market the last year or so; in which we say sunflower trade at 50 cents or so; only to have the smallest crop since the early 70’s and yet prices for the majority of the year traded from 25-30 cents or about ½ of what they where a year ago before the small crop.

Bottom line is high prices curve high prices and things always look the best at what ends up being the top.  So never stop practicing good solid risk management in your grain marketing plan in a way that allows you to feel comfortable whether the next move is a couple dollar break or a couple dollar rally as either is possible and both are probably probable if you consider the volatile markets of 2008 and how this year from a fundamental standpoint could make 2008 look tame.

As for market direction as we move forward watch for yield estimates to help the market  more determine the supply.  If that supply get’s smaller more reason for us to bounce.  If we have already seen the smallest production number while then more reason to think that perhaps a top has been put in.  But at the end of the day I think it will come down to demand and that with supply should be difficult to balance out without some rather sharp moves; probably in both directions.

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

Grain Market Comments 5-22-2012 corn gets hit hard

The grain markets took a step back today behind some rumors that China was cancelling some old crop purchases of corn and soybeans.  Nothing really confirmed but plenty of China rumors.  Perhaps just another trick to buy at cheaper prices or maybe this is for real.  Some of the rumors where that they cancelled, others that they replaced with South American business, and others that they rolled into new crop.

The wheat market was the only market that held in there and only via closing above yesterday’s lows; wheat was still like the other grain markets priced lower and rather sharply lower.

Not sure if it is fear time; but we need to realize that there is plenty of downside risk to the grain prices.  So practice good risk management and have a solid grain marketing plan in place for you and your operation.

At the end of the day old crop corn lead the pressure down with the July off 32 cents, Sept was 20 lower, and the Dec corn contract was off 16 cents.  These are the last trades; not the settlements as corn’s last trades where a couple cents better then the settlement or actual close, beans a penny weaker, and wheat’s last trade price was very close to its settlement or closing price.

Beans were off 32 cents on old crop, new crop beans were down 25 cents, KC wheat was off by about 14 cents, MPLS off by about 15 cents, and CBOT wheat was off 18 cents.  Outside markets had a very strong US dollar which didn’t help our markets out at all, crude down over a dollar a barrel, and equities ended the day about unchanged.

The latest weather updates appear to have a little relief in some areas and most felt this added to the pressure; but really it seemed to be the corn market leading us down and we have seen basis feel a little weaker in some spots for corn.  I actually thought wheat held in there and consolidated like it is suppose to do following a nice run up; no red flags technically to me that it is over.  While I seen an article on beans today that had the headlines of Sayonara Soybeans!  The label of the technical article itself is rather scary; bottom line is beans have done plenty of technical damage to the charts. 

Basis for wheat is a little weaker on the run up but not really considering the huge rally the board did have.  I remember the 2010 rally and it seemed like basis was weaker penny for penny on what the board did; the recent rally has helped producers catch up on sales without damaging basis much.  Anytime basis holds in there when the board rallies it is a good sign.

The birdseed market is a little defensive on sunflowers but the millet market is now on fire. 

We recently sold a big chunk of Milo the ethanol market as well; so that commodity feels a little better or at least it’s supply and demand dynamics has changed.   

I think the wheat price action the next couple of days will be very important as well the weather and what it helps the charts do or not do.  If wheat can hold these levels with maybe some digestion on the charts or consolidating it should give us a chance to have another leg up.  The funds still remain short and if our crops have got smaller in the US and the World since the last Supply and Demand report that should only help out our prices.  Keep in mind that even though it seems like we have plenty of wheat our US and World carryout numbers are down to the lowest level since 2008.  That to me is friendly and the funds love weather stories so if we don’t get the moisture that is being called for in Russia and it remains dry down south I think wheat has the potential for a nice little bounce. 

From a pure risk management perspective keep in mind that every time wheat has bounced in the last year or so it has failed and ended up lower then where it started it’s rally at; so there is nothing wrong with pricing some grain on this rally because that is still a possible outcome and if you look at the US dollar chart you would be very nervous owning the grains right now as it’s chart looks rather friendly.

We have talked about wheat being too cheap versus other commodities for a long time now and that is another possibility that the market could do; get spreads back in line. 

As for corn outlook new crop really comes down to weather as I can paint pictures or possible price outcomes where on good yields along with poor outside markets that corn gets really cheap perhaps starting with a 3 and on the other hand bad weather or say 1988 type weather could propel corn to new all time highs.  Bottom line is that our markets have more risk and volatility then ever so the only logical thing to do is risk diversify and make sales that make sense when given the opportunity.  Today we still have the chance to make sales or get protection on to lock in profitable levels.  No guarantee that will be the same a few days from now more less a few months from now.  If you need help with your marketing or want to put in some open orders/offers please give us a call.

One thing I didn’t like today was the fact that I haven’t heard or seen one comment for corn that basis is better with the softer board.  The board going down and basis weaker isn’t a great thing to see.  Technically corn to me appears to be in a sideways market. 

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

Thanks

July 2010 all over again?

Recently the wheat market strength has had me thinking back to July of 2010.  A time when we saw wheat nearly double in a months time.

If memory serves me correct wheat and some of the other grains like corn made their low prices right before the June 30th report.  Then on the heals of a small Russia Crop, everyone bearish (very bearish) prices, and the funds massively short wheat we saw a rally in CBOT from a 4.25 low in late June to a high of 8.41 on August 6th.

The way that rally ended was most impressive and still stands in my memory.  CBOT wheat hit limit up on the 5th of August and then went nearly limit or limit up the next night only to close that session limit down when everything was said and done.

The best part of the wheat rally is what followed as it was really the start of the commodity rally in general.  The small Russia crop for wheat lead to less feed competition and helped out our corn exports and it also helped out our wheat exports.  When went from no profits in grains to good profits in a hurry.  It lead to many selling a little early as we had been down on prices since the 2008 collapse; but it really started and since lead to another leg up for the grain prices and commodity outlook.

Flash back to the here and now; we have some similarities now; funds are shorter today then they where back in 2010 which gives this rally a chance to be more then explosive and it is once again lead by weather and possible smaller crops.



Can this lead to another leg up for the grain prices?  After all since the 2010 rally wheat has been able to hold very close to the 5.50-6.00 level.  Can this wheat rally give us the support that allows 5.00 corn to now be the low for years to come?  Can it lead wheat back to the highs in 2010-2011?  Will we see butterfly effects that include new all time highs for corn and beans?

Maybe this rally in wheat is just to get things back in line; after all without it would we have had any wheat planted this fall?   Now perhaps getting wheat back in line helps keeping things in balance; helps us not see a huge swing in acres next year.

When it comes to marketing i am not going to get super bullish and not make sales.  But I am also going to remember 2010 and try to spread my risk out; scaling into sales slowly in hopes of a big bull market and I am going to remember prices just a few weeks ago for wheat.  With that in mind maybe I will look at buying some put protection and trying to create min price levels for my grain.

And that protection; i might want to get sooner then later as I don't know if this will be July 2010 all over again or just another correction in a bear market.

Opening Grain Market Comments 5-15-12

Markets are called better behind a better overnight session; while outside markets are mixed and could lead to a little pressure with ideas that the grains open a little softer then where the overnight left off at.

In the overnight session corn was up 5, beans where up 18 on old crop, new crop beans where up 15, KC wheat was up 8-9 cents, CBOT wheat was firmer by 8, and MPLS wheat was 6 higher.  At 8:50 outsides are mixed; EU wheat is up about 1 %, equities are near unchanged with the DOW up 5 points, crude is off about a dime, gold is off 8.00 an ounce, and the US dollar looks like it is making another move up with the cash index at 80.903.

Yesterday we had a crop progress report; that basically showed the majority of the row crops planted with good emergence and a good wheat crop.  We really lack weather premium right now as headlines lately have been great big crops coming.

Basis remains firm for corn and beans; perhaps firming a little bit.  Yesterday we saw open interest in soybeans go up which indicates good commercial interest and end user pricing; not bad thing to happen.

One thing that has been on the headlines lately is the issues in EU.  If it leads to more macro liquidation then the grains could struggle; if not it feels like basis and demand are strong enough that the grains have a chance to bounce from these areas.

I have heard talk of higher protein getting harvested down south.  I seen a train of 13.76 pro yesterday and heard most of 12.5.  Overall higher protein isn’t exactly the best thing.  It acts as a replacement for spring wheat if it is high enough and then it doesn’t get feed and doesn’t help our export program out.  So I think a higher pro crop down south hurts demand a little bit and I think demand is really what wheat needs if we want to have a bull story at some point down the road.  I would also have to think that a higher pro crop means yields are off a little from what was expected……typically pro and yields go hand in hand in a reverse relationship.

One thing we need to watch going forward is the inverse in the grains.  Most have a big inverse between old crop and new crop so if you are storing grain your cost is very high.  It is a good demand sign when things are worth more today then they are tomorrow so to speak but it is also a huge risk when marketing grain as a general rule you don’t want to sit on product threw an inverse.  Every day that goes by we get closer to new crop and the risk becoming greater as along as the inverse is out there.  Bottom line the markets are close to saying if you want to own the grain own it on paper as it doesn’t make sense to sit through the inverse.

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

Opening Comments Grains for 5-14-2012

Markets are called mixed this a.m. behind continued soybean fund liquidation, a choppy overnight session for wheat and corn, and rather weak outside markets.

In the overnight session corn was unchanged on the July contract, new crop Dec corn was up 2, old crop beans were down 25 cents, new crop beans were down 17 cents, KC wheat was unchanged, MPLS wheat was up ½ of a cent, and CBOT wheat was down 3.  At 9:10 outside markets are showing risk off and liquidation presently the equities are weaker with the DOW off 140 points, crude down a little over 2.00 a barrel, the US dollar up nearly 400 at 80.654 on the cash index, and gold is off about 28 an ounce.

Scary outside markets this a.m. and fund liquidation on beans is the story.  The cash story for grains hasn’t changed much; it is still very hard to buy corn and basis is still very strong.  May contracts go off the board today; but in the overnight May corn was up 16 cents. 

With the latest USDA report out of the way we should really turn into a weather type of market.  Good weather probably causes our prices to continue to erode and weather that stresses our crops maybe gives us a weather scare rally at some point.  

Beans showing weakness really doesn’t have much to do with the fundamentals as the last USDA report was not bearish.  But it shows us how important money flow is and the fact that everyone can’t be bullish and long as eventually we ran out of buyers.  Now longer term a price break that helps demand isn’t the worst thing in the world and it maybe gives us a chance to bounce later. 

Until weather or some other story gives the funds a reason to buy look for grains to have plenty of willing sellers on the bounces; as the mentality has really changed to that of sell the rally.  The outside markets haven’t helped us at all for a while either and memories from 2008 are still fresh and the reality is that with perfect weather and weak outside markets a similar fate could be in store.

Please give us a call if you need any help with your marketing plan.

Thanks

Beans get smacked! - Neutral Nick update time

Beans got smacked today so it is time for Neutral Nick to look at his positions in an effort to try and manage his risk.

He went threw all of his positions and felt good about all of the months and all of the commodities other then July beans.

For corn he felt that his p & l graphs where at good support areas and didn't feel the need to chase in which might cause a lot of whipsaw action.

Same for wheat.

Before his soybean adjustments which I will display below he has overall profits in most of the trades he has on and his expiration profits giving him a much more potential.  Those charts have changed since his last update about a week ago.  You can find them at http://grainmarketingplans.blogspot.com/2012/05/neutral-nick-update-nearly-200k-booked.html

Soybeans today broke some major support and could very well see plenty of follow threw weakness; then again if you look at the report a couple days ago you might think beans have plenty more upside.

The corn and wheat markets are at the bottom end of the ranges they have been for some time; if we don't bounce Mr Neutral Nick might have to look to adjust sometime in the near future as he does have put options sold that are now close to or in some cases slightly in the money.  As mentioned before Neutral Nick this time around is using a little bias and his bias for those markets are A we are near a harvest low for wheat and we have year over year month over month decreasing supplies and B the cash corn market has shown no weakness leaving the cheapest spot to buy corn still the board for many so he isn't wanting to adjust at this time and C the new crop corn showing a yield of 166 is a little premature; Nick and myself are in the camp that we should see a weather scare at some point.

Here are Nick's updates and his corresponding bean graphs.

His only trades this week are the sale of 50 July 13.50 puts and 100 of the July 14.50 calls.  With us getting closer to the June expiration of these options this will probably be the last time he sells any July options.  He might buy some; but one thing he has to watch out for is Gamma Risk.

How do I decide what type of protection?

I was looking today at what gives me the best protection ahead of the USDA crop report.

To answer that question one has to ask more questions; such as how long do I want protection; what type of protection do I need if we move X cents or X dollars up or down......how much do I want to spend.

So after one answers those questions the next thing to do is the what if's; for me I use position book from RJO and run various what if's.

Today I ran the example of if I want to spend $50k in protection using Dec put options what gives me the best bang for my buck.  Do i buy out of the money options?  In the money?  Deep out of the money?  Etc

So I decided to run threw some what if's using Dec corn futures and various strikes.  I believe that I want to have the trigger pulled by July 4th ish; on the cash side; so i ran what if's or theoretically values based on July 6th.

I took 50k and bought as many put options as I could using the following strikes.

5.20 or ATM puts which i figured at 41-42 cents i could buy about 24 of them
5.00 or OTM put which i figured at 31-32 cents i could buy about 32 of them
4.50 or Deep OTM puts which i figured i could buy 77 of them
4.00 or Very Deep OTM (OTM out of the money) which i figured i could buy about 286 of them.

I didn't take into account the more commissions with the more quantity; but here is what i found that gains or losses to be (theoretically based on no volatility changes) at these various futures levels on the Dec Futures

6.00 Dec Futures - all four of the trades are big losers; with the ATM losing the least at 38k loss; followed by the 5.00 puts which lose about 41k, then the 4.50 puts which loss 45k, and lastly the 4.00 puts have lost about all value down about 48k.  Now if we are a producer this is the best option if you don't have 100 % protection because it means we have rallied 80 cents and should have more then paid for the 50k paid in protection


5.00 Dec Futures...give the Higher the strike the more profit. The 5.20 would be up aprox 2500, the 5.00 strikes about 1200, the 4.50 would be losing about 4500 and the 4.00 strikes would have lost you about 14k



4.50 Dec Futures....Here is where you see them all start to make money; this time however the more puts you have the more they make; so the best performance at 4.50 on July 6th ish would be the 4.00 puts which should be up about 75k, followed by the 4.50 puts which should be up about 60k, then followed by the 5.00 up about 48k, and lastly the at the money 5.20 puts are now up only 42k



4.00 Dec Futures....this levels and below is where you really see how well leverage can work for one.....the pattern is the same you are better off having bought more out of the money puts then you are at the money puts even though we are not yet in the money on the 4.00 puts they lead by far; you would now have turned your 50k investment into about 306k profit, your 4.50 would be 176k, your 5.00 would be 111k, and your 5.20 puts would be up about 94k profit



3.50 Dec Futures.....This is where you hit the home run so to speak; turning your 4.00 puts that are worth less then 4 cents when you buy them into about 55 cents each; having bought 286 of them you are now up nearly 750,000 in profits, the others also do good; but not even close versus having the many more 4.00 puts; the 4.50 puts would have about 335k in profit; the 5.00 puts would be up about 111k, and the 5.20 puts up about 94k

Bottom line when deciding what type of coverage you are looking for don't forget to look at the what if's; also keep in mind that the what if's i am looking at are based on 60 days from now; not expiration; as at expiration 4.00 dec futures don't make you any money at 4.00 puts; but in the shorter term they could make you a lot of money

Overall it seems to make sense to buy more OTM if you plan on only holding a short term; they don't perform as well in a sideways market nor an up market; but they are in another league as for performance in a down market

Please give me a call if you have questions

and as always make sure you understand that futures and options are very risky

Here is a screen shot of the what if's that i used in the above example

Neutral Nick Update - Nearly 200k booked profits

It's been a while since we heard from our mock trading character Neutral Nick.  That is both good and bad; good in that he hasn't been over trading and bad that he hasn't done a good job following up and monitoring his positions as much as he should be.

He recently had his May options expire; in which he left most expire worthless; both the ones he owned and had sold.  But he did have some soybean options that left him long; he chose to get out of them on the close on Friday.

Net with all of his May options expiring and his now turned futures positions Nick booked $193,437.50 profit before his costs and commissions.

Under normal full service brokers he would have paid about 10,800 in commissions; discounted online brokers could have been much less.

For his new trades or updates he has plenty of them with it being some time since he has followed up.

For corn his updates are buying back all of his cheap call options sold for nice profits and selling other options to pay for them as well as some more deferred options that fit his market ideas so he did the following basis Friday's close

Bought 70 CN 700 calls
Bought 120 CN 750 calls
Sold 50 CN 600 puts
Sold 50 CU 600 calls
Sold 50 CZ 600 calls

For soybeans he sold 100 of each of the following

July 1500 calls, 1450 puts
Nov 1600 calls, 1200 puts

For wheat he bought back 40 of the July 8.00 calls that he had sold and then sold 50 of each of the following

Sept 7.00 calls
Sept 6.00 puts
Dec 6.00 puts
Dec 7.50 calls

Overall the one thing you notice is he tried to take away some gamma risk and tried to sell more deferred options; his preference is out of the money with about 5 months left.  He also bought back and placed trades that follow his bias


Below are his P L Graphs; this doesn't include the nearly 200k winner he booked above; also keep in mind that he has risk between commodities and between different months.

Following that are each commodity broke down per contract month as he is looking to book consistent winners every time an option expires via continuing to sell time and volatility and that is what the above trades are trying to accomplish.


Keep in mind that he does have plenty of risk in in strategy

Grain Market Comments 4-20-12 Did China buy US corn or not?

Markets are called mixed this a.m. behind supportive outside markets but a mixed overnight session.

In the overnight session old crop corn was up a nickel, new crop corn was up a penny, beans were up 6 cents, KC wheat was unchanged, MPLS wheat was also unchanged, and CBOT wheat was off a penny.  At 9:10 outside markets have European wheat near unchanged, crude is up about 1.80 a barrel, gold is up a couple dollars an ounce, the dollar is softer down 370 on the cash index at 79.195, and equities are firmer with the DOW up 80 points.

Not much for new news out there this a.m.  The market is still waiting on confirmation of the Chinese corn purchased that is rumored to be 400,000 to 750,000 metric tons. 

Weather is on the cool side with some very small spots called to get rather cold this weekend.  Suppose to see weather warm up a little for most of the US next week; with scattered showers.  The once drought card has took a back seat; at least for now.

Basis is a little firmer all around but we still lack competition between the domestic mill market and the export market for wheat.  If we really want to get bullish wheat we will need to start seeing some export demand at some point. 

The corn market appears to have good coverage threw May; but there also appears to be quiet a bit of June/July demand.  More demand then what the market is presently supplying thus leaving basis feeling on the firmer side.  Even new crop corn basis feels a little firmer as there is just a little more demand or there are more buyers at these flat price levels then there are sellers.

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

The birdseed market is on the quiet side.  Hard to buy product but also hard to sell.  It feels like it has found a bottom provided the other grains don’t take another leg down; but upside also appears to be limited until we see birdseed sales pick up.

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

open grain market comments - China buying US Corn again?

Markets are called better this a.m. behind a strong overnight session and talk of China buying corn.

In the overnight session corn showed good strength up 13 cents, beans were up 15, KC wheat was a dime higher, MPLS wheat was up 5 cents, and CBOT wheat was up 9 cents.  At 9:15 outside markets have equities a little weaker with the DOW off 54 points, crude is down about 50 cents a barrel, a US dollar that is near unchanged with the cash index at 79.53, and European wheat up about ½ of a percent.

We seen heavy volume last night as it appears that China is looking to buy 500,000 to 750,000 metric tons of corn.  No confirmation has been seen; but it appears that the run up last night was from Chinese interest.  Some mentioned that the Chinese Gov has standing bid that was very close to our level we were trading at.

This a.m. we did have export sales out and they were very disappointing for old crop corn, very good for beans, and ok for wheat.  The corn number failed to hit what is needed on a per week basis while wheat and beans were well above what is needed.

Overall basis feels firm as supply isn’t exactly coming out of the woodwork as producers in general are not selling or fear selling at least not yet.  Demand is overall good at these levels; but for commodities such as wheat it doesn’t feel like there is much improved demand no matter the price.  Overall I think wheat should be supported by corn and beans; but keep in mind we are just a few months away from new crop wheat harvest while there is a long time before fall harvest.  So it is possible that those grains continue to diverge.  Bottom line we really need to find some solid export demand for wheat if we want to get really bullish longer term. 

Watch the outside markets and look for confirmation on Chinese business for direction today.  Hopefully the markets have found a bottom; so with that keep in mind how we close today will be much more important than where we open up at.  The theme has been to sell the rallies and until we prove otherwise most thing that is still the way to go.

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

Opening Grain Market Comments 4-17-12 - Turnaround Tuesday in store for the commodities?

Markets are called mixed to better behind a mixed but mainly firmer overnight session and supportive outside markets.

Nearby corn was off a penny while deferred corn markets where unchanged, beans were up 5-7 cents, KC wheat was up a couple, MPLS wheat was up 2, and CBOT wheat was up 2-3 cents.  At 8:55 outside markets have equities firmer with the DOW up 94 points, crude is up about 1.50, gold off about 10.00 an ounce, the dollar is about unchanged, and European wheat is up about 1 %.

The USDA had electronically issues (fire I believe) that delayed crop progress and conditions; they are now expected to be out this afternoon at the normal 3:00 time. 

Export inspections or shipments were delayed yesterday but did come out after the markets closed.  Wheat came in at 25.7 million bushels which is about 10 million bushels more then we need on a per week basis to meet current USDA projections.  Corn also came in very strong at 42.9 million bushels well above the 33 million bushels we need on a per week basis to meet current projections.  Beans came in at their lowest level since late Sept/Early Oct; but at 18.1 million bushels they are still well ahead of the 11.5 that they need on a per week basis to meet projections.  All in all rather good export performance for our grains with the corn and wheat numbers sticking out a little bit on the bar charts while beans show a clear slow down trend over the past several months.

Ideas for this afternoon’s crop report are around 15-20 % corn planted. 

Look to see if our markets can have a turnaround Tuesday; cash markets remain strong for corn and beans while weather has been more ideal.  If we continue to see ideal weather there could be more room to the downside; but I have to personally think we could and should see some sort of weather scares as we move forward.

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

Neutral Nick Update 3-11-12

Neutral Nick updated today; first time in nearly a month.

I hope to post more screen shots of his present positions later in the week; one thing he is trying to do is not trade as much as last year and watch his gamma exposure a little closer. He also isn't getting caught up in selling just one certain month of options.  I.E. last year he was mainly selling July options and didn't sell any later then that; towards the end of his run his gamma exposure was just too much; that is part of the reason you see him in options that are near term all the way to some that are out in Dec.

MWC Marketing Hour Round Table

I put up an interesting trade this week in our weekly mock trading session.

It was a hedge trade......well kind of

the trade was buying 2 May 6.00 Corn puts and sell 1 8.00 Dec wheat call

below is some of the thinking i had on in the agweb.com marketing old and new crop discussion thread


http://discussions.agweb.com/showthread.php?14346-Marketing-Old-Crop-and-New-Crop-2012&p=225650#post225650

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one strategy that we looked at in our marketing meetings this week was selling dec wheat calls to buy may and july corn puts

based on theory that dec-dec corn-wheat spread has corn well under valued versus wheat.....so selling a call in wheat instead of corn in hopes that if it turns into a HTA corn has gained some of the 1.20 or so discount that it presently is

i think the level we used was buying 2 6.00 may corn puts and selling 1 dec 8.00 wheat call for a small credit

the reason we used may instead of july or dec is protection cost of only 14-15 cents or so; plus if market breaks i don;t think new crop breaks nearlly as hard; i think breaks or rallies will be lead by old crop corn.........so if i want to protect a price break i want to protect the area that has the most risk......in this case old crop corn

it is much more risky and tricky to manage then using the same month and same commodity but it does have some reasoning behind it

any thoughts on the trade

selling 1 dec 8.00 to 8.50 cbot wheat call to buy 2 6.00 ish may corn puts......as protection against corn.....and a sale on top side for corn

Neutral Nick Update

Well it's been a couple week's since Neutral Nick jumped back on the scene; so it is about time for an update.

Below you will see some screen shots showing Nick's updates and projections; keep in mind this time nick is much more diversified into the months he has options sold and purchased.  Generally he has purchased a few nearby options and sold deferred options. He also has used his idea's on where spreads go to decide how to position himself.  His goal is no longer to stay 100,000 delta short.  His system this time is trying to make about a million dollars in each of the grains; without huge margin exposure; watching his gamma risk and not building such a huge and unrealistic mountain if you will.

Check out his info below.

The above graph on his delta position is really one thing that needs to be managed.  A couple of reasons.  A) so he doesn't swing too direction bias and stays "neutral" so to speak  B) So he can help control his margin cost.  What is his plan to do that; take a little off the top side via near term closer to the money options that have a big gamma advantage over other options he has sold or is selling.

Mock Trading Update

last week we did add a few trades during our Mock Trading session;

I adjusted my long 6.00 march puts via selling a 6.40 march corn put

I also adjusted my short July put via the sale of a 7.00 July corn call

Other new trades that where placed include Kevin with a long soybean contract versus 2 short wheat contracts

Scott went short some CBOT wheat at 674 with a stop of 6.85 and an objective of 6.50

Duane went long 2 March Wheat with a stop at 6.55 while going short 3 March corn

Please stop in Onida this Wed if you would like to join in on the fun; as it is great for learning.

Neutral Nick is back

Neutral Nick our mock trading character is back; this time with a little different rules and different game plan.  Not just focused on his delta position; nor does he no longer have an unlimited checkbook.  Plus he is planing on rolling things out this time; so no real end date.

Here are his trades to start off; many off of July futures; but some off of the Dec futures too.

Farm Direction Forward - Opening Grain Market Comments soft outside markets

Below are opening comments as well as a forward from Kevin Van Trump who will be one of the speakers for next week’s grain marketing workshop that we are sponsoring in Pierre on Feb 2^nd at the Ramkota at 10:00 a.m.; Ed Usset will be the other presenter.  Please give us a call or shoot us an email to RSVP for what should be a great time.

Markets are called mixed to supportive this a.m. behind a firmer overnight session; outside markets are a little weak and most calls are slightly below where we left off the overnight session at.

In the overnight session we saw corn up 3 on the old crop while new crop was off 2, beans unchanged to down a couple,  MPLS wheat was 4 higher, KC wheat was up 3, and CBOT wheat was up 5.  At 9:00 outside markets have crude down a little over a dollar a barrel, equities are weaker with the DOW down 82 points, and the US dollar is firmer up 379 on the cash index at 80.247.

Not much for new news out this a.m.  The rumors

Exiting Some Trades Ahead of USDA Report

With our new mock trading rules that allow us to simply have to post trades or exits to this blog I have decided to square up some positions that I have open ahead of the USDA Report.

To offset some trades I am doing the following at about 11 central time on Tuesday

Selling 1 Nov bean at 12.23; locking in a profit on my long beans of $2,963

Selling 2 Dec corn and buying a 7.00 put and 6.00 put to offset an old corn trade while selling 2 of the 6.80 calls.  The net of all of this is locking in a $9,969 profit.


The last trade that I am booking profits on is long 3 of the 12.50 Nov Calls against 1 short 13.00 call;  I am exiting this for about about $1000 profit

As a reminder our MWC Marketing Hour Round Table happens each Wed in Onida at 3:30; we hope to see some of you there as we will discuss the USDA report as well as updating more mock trades.

Mock Trade Update Jordan

Booked $106 profit on short 9.00 chic wheat call and $609 on 6.25 long put of chicago wheat letting short put ride. for time being.

booking profit on long long futures positions in wz1 for total profit of $9,100

Booking profit on 2 short 14.00 bean calls of $2,938

Mock Trading from Today's MWC Marketing Hour Round Table

This afternoon we had another MWC Marketing Hour Round Table. 

First off during the past week Dan closed two trades one for about a 40 cent winner and another for a 15 cent loser.

Kevin also exited a trade with a 10 cent winner; while Jordan and myself exited no trades last week.

I posted Dan's trades/adjustments yesterday; below are the trades the rest of us did.

Adjustments :

Jordan - Sold 2 14 nov bean calls against his long 14.00 bean call and short 16.00 bean put

Against his bean corn option spread he sold 2 7.00 corn puts and bought 2 of the 7.50 corn calls along with selling 1 14.60 nov call;

Kevin - didn't adjust any trades as he left is ratio spread trade on while took profits on another trade

Jeremey - on my ratio protection spread with Dec 12 corn call sold while owning the 7-6.50 Nov bear put spread; i sold 1 of the 7.20 Nov puts and 3 of the 7.00 Nov puts

Against my July 2012 corn ratio spread I sold 2 6.00 puts and bought 1 of the 6.50 puts July puts

That was all of the adjustments made this week; but below are the trades we made

Trades of the Week :

Kevin - Sold Dec 8.00 call while purchasing the 8.50 dec call and the 7.50 Dec put; basically sold a credit spread to purchase a put

Kevin also entered a spread trade as he sold the KC March wheat 2 times against a long March corn; he had a risk of 1000 on the close with an objective

Jordan - Went short a 8.00 KC Dec put and short a 9.00 Dec Call

Jeremey Sold 1 of the Dec 7.00 corn puts while purchasing 5 of the Oct 7.00 Puts