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 1^st  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.

Thanks

Jeremey Frost

Grain Merchandiser

Midwest Cooperatives

800-658-5535

800-658-3670

605-295-3100 (cell)

605-258-2166 (fax)

jeremey.frost@chsinc.com

www.midwestcooperatives.com

http://grainmarketingplans.blogspot.com/

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
800-328-6530
651-355-3792
www.countryhedging.com

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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.

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.

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 12^th corn has only traded a 43 cent range and since the 1^st 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 11^th 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 15^th.  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.

Thanks

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.

Different Day - Same trade update

another update; yesterday's bounce allowed me to get some more orders filled on my scale corn trade; with the break in the markets i am once again exiting again this time for an 1800 profit; once again i will re-place all the orders

Trade Update

Another trade update for Jeremey.

Monday morning with outside markets under pressure; my corn scale trade has allowed me some profits. This market still feels like a sideway's market so I am going to get out at 6.38 1/2; and replace orders to re-sell the Dec corn.  It books me a profit of 4,275; part of me thinks I should reverse and go long but i think i will stick with the original trade.

Trade update for Jeremey

With corn under pressure this morning I am going to add a stop to ensure that I can lock in a profit on the open corn scale selling trade that I have on.  I presently have 12 short Dec corn; that i started selling at 6.43, I then sold 1 at 6.47, 2 at 6.50, 3 at 6.55, and 5 at 6.60.

I am going to place a stop in at 6.40  1/2 ; while orders back to re-enter original trade if I get stopped out.

Basically this market has traded sideways for some time; so my thoughts are perhaps there is a decent chance it continues until new news finally moves it one direction or another.  So in the mean time try to take what the market is giving us.

Here are a couple charts to help show my thoughts.

Grain Market Comments Closing 10-24-11 Another poor corn close?

Markets closed mixed to firmer today.

Corn was up 2, beans where up 14-15, KC wheat was up 12, MPLS wheat was down 1, CBOT wheat was up 10-11 cents, crude was up nearly 4.00 a barrel, equities where firmer with the DOW up 105, and the US dollar is presently weaker 200 at 76.198.

Technically today’s performance by corn wasn’t the best as we appear to keep breaking out but yet closed well off of our highs once again.  Harvest pressure showing up someplace?

The main headline continue to be a lack of producer selling; with spreads tightening and basis firming as noted in our bids today.  I believe we firmed up nearly all of the corn, wheat, and soybean slots and this hasn’t been the first time in the past couple of weeks that this has happened.  We are quickly nearing levels where one might want to consider locking in the basis (especially for those of you with good HTA contracts out there) or at least having basis offers out there.

 Buyers are hunger in the sense that they simply haven’t got the supply that they are used to; plus going into this fall harvest pipelines where not exactly full.  Add to that the fact that most producer operations have more storage then ever, less need to sell then ever, and borderline as bullish as anytime in the past and we have very solid basis appreciation that has been happening the past couple of weeks.  When it ends who knows, in marketing 101 what is suppose to happen is basis is suppose to appreciate, then board spreads are suppose to firm, followed by a rally in the board to help pry loose the grain from the producers.  Also in theory basis and the futures offset each other in cash movement.  Which is why if one feels strongly that the board has plenty of upside room doing a basis contract or having a basis offer out might make perfect sense.  In the basis/cash/futures theory when the board goes up basis goes down; when the board goes down basis goes up.  The past couple months or so we have seen it happen where the stronger basis has helped out the weaker board; and now we appear to be in consolidation mode on the board.

If the breakout from this consolidation is to the upside then we do open the risk to basis coming under pressure in the future.   Whether basis stays strong or see’s some weakness on a rally in the board will probably demand on what causes the rally and how strong our demand actually is.  My opinion is that our demand is more of a lack of supply because of bullish producers versus super strong competitive demand. 

If you would like more information on basis contracts and how they work please feel free to give us a call.

The one market that hasn’t followed suit yet in strong cash markets has been the birdseed market.  Lack of demand or maybe it’s time is yet to come?  One thing that will hang over the sunflower market for sometime will be the big world crop.  Perhaps that is why the birdseed market is still a $5.00 or so premium to the crush market.  The huge world supplies of all of these grains along with fund money flow remain one concern when looking at the downside risk.  Add to that the fact that it feels like producers simply are not selling enough and I think we have created markets that have plenty of downside risk even though today things feel good or look good.

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

Thanks

Mock Trading and Option Assignments

This past week Wed we had another session of MWC Marketing Hour Round Table in which we placed some mock trades after looking threw some charts and talking about this week's price action and what was behind it.

No adjustment trades where made; but the following trades where placed.

Dan the man bought KC March wheat at 7.20 with rather aggressive objective of 8.90 while risking to 6.90.  Awesome risk reward ratio if he can let a winner ride that long.

Jordan bought some volatility as he went long the 6.40 Dec corn call as well as the 6.40 dec corn put; spending about 55 cents total.

My self (Jeremey) placed an aggressive ratio calendar type play in beans.  I bought 9 of the 13 jan bean calls, sold 10 of the 13.50 calls, sold 1 of the Nov 2012 bean puts, and purchased 1 of the 11.70 Jan bean puts.  Bottom line a bullish bean trade.

We did book some losses this week as some of the Nov options expired and with that we took some futures.  Jordan is now long 1 Nov bean at a net of 13.70 and 1 at a net of 13.00

I decided to offset my what would have been long Nov bean contract and exited my three leg trade booking a loss.

Since our new fiscal year started we now have overall winners totaling about $49k with losers totaling about $12k.

Net open positions total are down about 2k; most of which is Jordan's bean longs down about 11k.

We hope to see you next week at our meeting!

Opening Grain Market Comments 10-19-11

Markets are called mixed this a.m. behind a choppy mixed overnight session and outside markets that are on the quite side of things.

In the overnight session corn was up 2 cents, beans where unchanged to off a penny, KC wheat was up 4-5 cents, MPLS wheat was firmer by about a nickel, and CBOT wheat was up 5 cents.  At 9:20 outside markets have the US Dollar weaker down about 290 at 76.848 on the cash index, European wheat is up a little over a ½ of a percent, equities are near unchanged also with the DOW up about 30 points, while the S & P is near unchanged, and crude oil is up about 30 cents a barrel.

Overall another day with out a lot of fresh news to effect our markets.  The biggest thing remains the overwhelming world supplies of some of our grains versus tight domestic stocks, and a lack of producer selling at a time when seasonally it is at it’s highest.  Basis continues to firm on the row crops in many areas and spreads have tightened up on the row crops as producers are able to store more then the market thought.  Longer term my personal opinion is we are going to run the risk of having too much supply sitting on top of the market; but only time will tell as demand overall for grains is good and even though eventually producers have to sell or move product; end users eventually also have to buy product.  So it really appears to be coming down to a game and right now producers are more in control then normal.

Don’t forget that we do have our MWC Marketing Hour Round Table this afternoon in Onida at 3:30.

Watch outside markets for direction and see if we ever see some selling pressure from this year’s row crop as we go forward.

Thanks

new Trade for Jerermey

After getting stopped out of my scale wheat trade last week; I decided to try another scale type trade.  This time on corn; as my chart I posted on Friday I thought looked like a selling opportunity.  Plus I think that this year's harvest still hasn't seen the producer selling that I think happens at the tail end of harvest.

My new trade is off of Dec corn; it is also a scale trade.

Sell 1 at 6.43

Sell 1 at 6.47

Sell 2 at 6.50

Sell 3 at 6.55

Sell 5 at 6.60

Sell 8 at 6.70

Risk to 7.00

Objective of 5.85; with plans of moving stop up if I can lock in a winner or adding option leg to protect profits.

To add a little complexity I am also selling 2 of the 6.00 puts for 12 cents a piece.

Which turn into covered puts if I get my first couple of orders filled.

Dec corn Chart

Here is a quick look at a Dec corn chart.

market comments 10-14-11

Markets are called firmer this a.m. behind a firmer overnight session and supportive outside markets.

In the overnight session corn was up 4 cents, beans where 7 higher, KC wheat was up 7, MPLS wheat was up a nickel, and CBOT wheat was up 8 cents.

At 9:20 outside markets have European wheat up about 2 %, crude is up a little over 2.00 a barrel, and US dollar continues it’s weakness with the cash index down 445 at 76.550, and equities have a little bounce going with the DOW up 108 points.

This morning we did have export sales out and they where good for corn while in line with expectations for wheat and beans.  Corn came in at almost 50 million bushels for the second week in a row nearly 2 times what we need on a per week basis to meet current USDA expectations.  Beans also came in above what is needed on a per week basis to meet current projections but only inline with trade estimates and they continue to lag last years sales seen at this time; they came in at 24.7 million bushels.  Wheat came in at 17.8 million bushels.

Keep in mind that the latest USDA report is showing decreases rather heavy year over year for exports for the three grains.

Not a lot of other news out there; harvest continues to happen at a good pace but producers continue to be storing not selling so most of the grains are seeing basis firming up.   With harvest being bigger then expected for some look for basis to be rather volatile as we go forward.  If places get full it might not matter that producers really don’t want to sell; we could see basis under a little pressure in some areas for fall harvest.  Overall the recent news out there with China buying some corn should be long term friendly to basis; but we really need the trend of demand better then expected to continue.

I think that is one risk we have out there is the fact that many producers are not selling and that could create even more selling pressure later thus preventing rallies taking us as high as some feel and think they could.

The birdseed market is one market that really has showed little signs of demand and that market appears to be slower then slower.  No one seems to need or want anything.  The crush bid isn’t even close to where the birdseed bid is on sunflowers and that market to me feels much different then the bull market it has seen the past year.

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

Midwest Marketing Hour trade updates 10-12-11

Jeremey- added orders to buy kwz1 at 7.06, 7.01 and a stop at 6.95 with an objective of 7.35
- also added 1 short WN2  6.00p Put and 2 short WN2 9.00 Calls
Jordan- added orders to buy WZ1 at 6.25,6.20, 6.15, 6.10, 6.05, 6.00 stop at 5.85 on all
- also added 1 short CZ1 6.00 Call and 2 Long CZ1 670 Calls
Kevin- added spread of long KWH2 and short MWH2 at 1.1875
- also added orders to buy SF2 (Jan Soybeans)  at 12.49, 12.40 and 11.90 doubling the quantity each time.
Producer C -added 1 Short MWH2 10.00 Call and 1 Short MWH2 8.00 Put

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

Opening Grain Market Comments Monday - 10-10-2011

The grain markets are called firmer this a.m. behind very supportive outside markets.

In the overnight session we seen corn up a dime or so, beans about 26-27 cents, KC wheat was up 13-14 cents, MPLS wheat was up 10-13 cents, and CBOT wheat was up 13 cents.  At 9:00 outside markets have equities firm with the DOW up 230 points, crude oil is up 2.50 a barrel, the US dollar is getting smacked with the Cash index down 1.195 at 77.530, and European Wheat is about 1 % firmer.

The big thing in the markets appears to be the outside markets that are showing lots of strength this a.m.  Fundamentally it appears that much of HRW area got a good shot of rain and I have heard comments of the drought being broke.  The other big thing will be a USDA report which is out on Wed which should lead to some position squaring as we head into it.

Last year the USDA mentioned how the reason for the high Sept 1 stocks was due to new crop being harvested; will that be the reason this year again?  If it is will it give the bulls what they need to give our prices some life?  If not how much downside risk is there if the report comes out even more bearish then the estimates?  What about the fact that many producers have stopped selling; is there that much more that needs to be priced in the near future?

Estimates for this week’s report for yields are 148.7 on corn and 42 on beans; versus 148.1 on the Sept USDA report for corn and 41.8 for beans.  Carryout estimates are 804 million bushels for corn versus 672 last month, beans are pegged at 186 million bushels versus 165 last month, and wheat is estimated at 753 million bushels versus 761 in Sept.

With the recent drop in board basis has slowly been improving for most of the grains; but the improvement hasn’t been one that I would call a demand driven improvement; more supply cut.  That is something to keep in mind as we go forward.  If supply starts to increase we really need to have demand step up or ECON 101 says increased supply over demand gives us lower prices. 

The risk in the outside markets is still out there but most are starting to feel that liquidation is close to it’s end for the grains.  Only time will tell.

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

Mock Trades 10-5-11

Below are screen shots showing all of the open trades from our MWC Marketing Hour Round Table - MOCK Trading Session.

Please let us know if you have any questions.

Mock Trade - Bullish Trade

I decided to add a bullish trade today to help offset some present positions and simply show a trade that should be limited cost (if held short term) yet provide rather good returns if the markets pops up like some producers feel should happen.  After all the corn market is now a market that most buyers or end users are showing good returns so to make a bullish bet with decent returns and light risk (if managed correctly).

So the play I used which I am putting in our mock trading which as mentioned yesterday is now opened up with the only rule being trades need to be posted here at www.grainmarketingplans.blogspot.com

Sell 1 Dec 6.20 corn call and purchase 2 of the Dec 6.50 corn calls; net cost of about 7 cents; which is my risk in a down market.  Upside risk if held is at 6.50 which would be the 30 cent spread as well as the cost or 37 cents total.  The neat thing about this trade is if market moves up in a hurry and time value hasn't ate away it can be a good winner at the 6.50 level.

Here are a couple of graphs; red line represents today; green line when option expires.  In the second chart the red line is in 15 days after a 50 cent rally.

Note the ranges are different in each of the P L Graphs.

As for an exit strategy I plan on re-evaluating on Oct 19th; during our MWC Marketing Hour Round Table; assuming i will need to watch and manage closely if the markets are up while let the trade sit if the markets are down.

Mock Trading Update!

Here is a quick recap of last week's mock trades from our MWC Marketing Hour Round Table.  Which we have every week in Onida on Wed at 3:30; hope to see some of you there.

New Trades

Jordan 

Sold a 6.00 March Wheat Put and a 9.00 March CBOT Wheat call; used that to purchase a Dec 6.25 Wheat Put.

Jeremey

Purchased 3 of the 13 Nov bean calls; while selling 1 of the 12.20 NOv bean puts and purchasing 2 of the 11.00 Nov bean puts; net cost about a nickel a bushel.

Adjustments

Jeremey Sold 1 6.00 Dec put and purchased 2 of the 6.80 Dec corn calls

Jordan moved stop on his oats-corn spread.

Here is the updated P L on booked trades; both Dan and Kevin where gone last week and didn't enter any new trades;

PERSON          DATE  PROFIT/(LOSS) Booked

Dan        14-Sep  $            2,037.50   

Dan        14-Sep    $            (750.00) 

Kevin     14-Sep  $              500.00 

Kevin      21-Sep    $         (1,000.00) 

Dan        21-Sep    $            (200.00) 

Jeremey  28-Sep  $            2,900.00   

Jeremey 28-Sep  $            1,500.00      

Jeremey 28-Sep  $            1,000.00   

Dan 28-Sep    $         (1,000.00) 

Jeremey 28-Sep  $              850.00   

 Kevin 28-Sep  $            7,925.00       

Also our old rules stated that adjustments could only be made once a week;  We have changed that and will now allow adjustments anytime provided they are posted here at www.grainmarketingplans.blogspot.com

So hopefully that will liven up our action.  If anyone who can't attend would like to enter a mock trade feel free to drop one of us an email or simply post the trade as a comment.

To start off I will add and adjustment to an open trade; I will place a buy stop on a close of 4 contracts of Dec corn - on a close above 6.05 1/2 ; this is to reverse out of present position that was a couple long Oct 7.00 puts that has now turned into short Oct futures from 6.94 (strike price minus option cost)

A couple of Dec corn charts - What do they tell you?

Here are a couple of Dec corn charts..........do they say bear market?  Or maybe the bulls will say that it is just another bear trap that our volatile grain markets like to give us.

Another Classic USDA Head Fake or are we now entering Bear Market Mode?

Did today's USDA Sept quarterly stocks report with small grains summary represent another head fake by the USDA (comic strip as some call them) or was it an indication of more bear markets to come in the days, weeks, and months ahead?

The one saving spot or bright spot has been spring wheat as it has managed to bounce back into positive territory.

Below is a link to Country Hedging info on the USDA report; be sure to check out there thoughts.

(Copied from email)"

Commodity Comments

By Tim Emslie

The USDA surprised the market with much higher corn and wheat stocks in today’s Grain Stocks report, implying more feed rationing than expected.  Lower spring wheat production on the Small Grains Summary report offset some of the bearishness 

·         Video comments

·         Grain Stocks and Small Grains Summary slides"

It looks like might have spoke too soon in regards to the Spring wheat strength as it is now 20 cents off of it's highs.  I suppose that is why they said trade wheat sleep on the street's when I started this job about 10 years ago.

As for the market outlook i think we need to find some reason how we see herd sizes for livestock as big as they are while we have implied feed usage for corn and wheat as low as it has been for years.  Is it more DDG's or what is scoop there?  Perhaps the answers to the feed usage will provide direction to what fundamentally our markets are actually telling us?

Bottom line watch for some rather volatile markets as we move forward; keep in mind 2008 and the crash we seen then; but also keep in mind last Sept report and the following Oct report where the USDA found bushels or used the new crop theory.  Both seem possible while neither really seem probable given the price action over the past several months.

Rolling a Call Option - MWC Marketing Hour Strategy of Week

Here is copy of power point that we will have during today's MWC Marketing Hour Round Table

Grain Market Opening Comments 9-21-2011 ....what will the Fed do today?

Markets are called mixed today behind mixed outside markets and a mixed overnight session.

In the overnight session KC wheat was 3 lower, MPLS was off a penny, CBOT wheat was up ½ on the Dec while the deferred month’s where weaker, beans where up 2, and Corn was up 3 cents.  At 9:15 outside markets are choppy as they perhaps wait for a fed announcement at 1:15 right when the grain markets close, presently the DOW is up 10 points as equities are close to home, crude is off about 50 cents a barrel, the US dollar is firmer by a couple hundred with the cash index at 77.253, and European wheat is near unchanged.

Another lack of news day as our markets continue to hang around waiting for the next price catalyst to help push the next big price move.  This afternoon the Fed will have a statement and that could effect the outside markets as well as our markets. 

As for our markets we have been seeing early yield reports showing better then expected yields on the early harvest reports that we have seen; perhaps a little early but so far that is the trend we are hearing.

Basis remains a little on the defensive but with the recent break in prices there are times when we have started to see a little buying interest.  Seems like the market is almost starting to act like it is suppose to in that basis firms when board drops and when board rallies basis becomes weaker just like it is suppose to in marketing.

Watch for choppy markets that really are waiting for some big news.  Next week’s stock’s report could be a key report in determining price action as we move forward over the next several months; keep in mind that the quarterly stocks report has been a limit day report many times over the past couple of years. 

As for marketing grain I think one need’s to keep in mind risk diversification; as depending on how certain factors pan out there could be rather big moves in either upward or downward prices as we move forward.  Bottom line is I really don’t want to be left undersold if markets crash nor do I really want to be oversold if we see major strength to the upside.  Things are just too volatile too get over extended trying to out guess these markets; so focus should probably be good risk management that involves risk diversification over time while focusing on making decisions or in grain marketing sales that make sense.

If you need help with a marketing plan please feel free to give one of us in the grain department a call.

This afternoon we will be having our MWC Marketing Hour Roundtable; hope to see some of you there as we go over various charts and possible trading strategies as well as do some mock trading.

Thanks

Buy the break or sell the Rally?

Are we in markets that we should be buying the breaks or should we be selling the rallies?  How much upside potential is out there if a perfect storm develops with all of the variables that are out there?  What about downside risk; is it still possible to see a 2008 like breakdown?  

I don't know for sure; nor does anyone; so if one is looking to marketing grain and have a plan the best choice is still probably risk management and in volatile markets that means risk diversification thus perhaps making sales in smaller increments then normal.

Here are a couple charts to help one decide if it is sell the rally time or buy the break time.

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

MWC Marketing Hour Round Table - Trades and Trace Concepts

We will be having our MWC Marketing Hour shortly and Dan the man won't be able to make it; but Dan did email over his trades for the week along with updates on his open positions.

Below is the email with his trades; look for an update on the other trades later.

"My Z 11 corn trade closed at 7.34 for a loss of .15

 

KWH 12 trade hit objective of 8.30 for a gain of .4075

 

Bean Butterfly Trade:  Jordan said the monarch hasn't made its migration yet..............Right on the money with nothing in the wallet...............only up $ 400...........Need to gain on my time value............. Let it ride!

 

And the trade of the week!    Drum roll please!!!

 

Long CZ11 @ 7.2425    Objective:  7.3625 Closing    Risk: 4 cents or 7.2025

 

Dan Powell"

 

 

please check back later as we will update all of the trades sometime after we have our marketing session.

USDA Crop Report - beans under pressure; corn strong wheat weaker but closes decently

opening comments

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

In the overnight session corn was off about 3 cents, beans where off about 8 cents, KC wheat was down 7, MPLS wheat was 4 lower, and CBOT wheat was down 4.  As of 9:20 outside markets have European wheat near unchanged, equities are slightly softer with the DOW off 30 points, crude is up about 20 cents a barrel, and the US dollar is bouncing with the cash index at 75.819 up 353.

Not tons of new news out there this morning.  Outside markets and consolidation into next week’s USDA report are leading the headlines.  Basis is steady on most of the commodities but the trend over the past month or so has been weaker for corn, beans, and spring wheat.  Spreads are showing signs of bear markets lately as the carries widen out or inverses become less.

Here is a run down of idea’s for report.

DJ SURVEY: US Grain, Soybean Carryout

2011-12

                                         Aug

               Average       Range       USDA

Corn (19)      0.636      0.497-0.757    0.714

Soybeans (19)  0.152      0.110-0.188    0.155

Wheat (17)     0.667      0.628-0.705    0.671

DJ SURVEY: USDA September Corn, Soybean Production Report

                                       August   2010

              Average       Range      USDA     Production

Corn (24)      12.505   11.913-12.913  12.914   12.447

Soybeans (24)   3.025    2.924-3.085    3.056    3.329

Yield                                  August   2010

              Average       Range      USDA     Yield

Corn (24)       148.8    145.0-153.0   153.0    152.8

Soybeans (24)    41.0     40.0-41.8     41.4     43.5

Yesterday we did have one of our Marketing Hour Round Table meetings.

Below are notes and attached are some of the charts we went over.

You can find the post on this at http://grainmarketingplans.blogspot.com/2011/09/mock-trades-for-mwc-marketing-hour.html

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

Thanks