MWC Marketing Hour Round Table Update

As you know we have our weekly marketing meetings every Wed in Onida.  It is open to anyone who would like to attend; we go threw charts, talk about fundamentals for our grain markets, and lastly do some mock trading.  Since the start of Sept our Mock trading particpates have book about $109,671 in profits.  Which is rather impressive considering the fact that most of the trades are 1 lots and most particpates make 1 trade a week if any.

We do alot of various trades; below you will find our open trades.  The first section is the futures trades and the second section is the option trades.  You will notice that do have alot of ratio type spread plays in the open options; which has helped in some of the above mock profits.

Please note that in the comment section you will find risk reward parameters for many of the trades as well as the person you have the open trade.  We try and update and adjust every week.

Here are the Future Trades

Long	# of	Futures		Futures Price	Position	Profits (Losses)
or Short	Contracts	Symbol	Price	Last	Delta (bu)	Actual	Comment
LONG	1.00	SN2	1229.750	1241.750	5,000	$600	JORDAN
SHORT	1.00	SX2	1214.000	1221.750	(5,000)	($388)	JORDAN
LONG	1.00	WH2	656.250	653.500	5,000	($138)	jordan
SHORT	1.00	CH2	649.500	634.500	(5,000)	$750	jordan - order for 2 at even money; 1 at 7 cent wheat prem
LONG	2.00	WH2	603.000	653.500	10,000	$5,050
SHORT	2.00	CH2	603.000	634.500	(10,000)	($3,150)
LONG	1.00	WH2	659.000	653.500	5,000	($275)	KEVIN
SHORT	1.00	CH2	656.000	634.500	(5,000)	$1,075	KEVIN - RISK 2500
LONG	1.00	MWH2	876.000	823.250	5,000	($2,638)	kevin - stop $2000
SHORT	1.00	MWN2	830.250	795.250	(5,000)	$1,750	kevin
SHORT	1.00	WH2	614.000	653.500	(5,000)	($1,975)	kevin
LONG	1.00	WZ2	680.000	711.000	5,000	$1,550	kevin
LONG	1.00	WH2	614.000	653.500	5,000	$1,975	jordan
SHORT	1.00	CH2	608.000	634.500	(5,000)	($1,325)	jordan
LONG	1.00	KWN2	671.750	724.500	5,000	$2,638	kevin risk 1500
SHORT	1.00	KWZ2	709.000	754.500	(5,000)	($2,275)	kevin
LONG	1.00	MWH2	800.000	835.750	5,000	$1,788	dan - RISK 8.09 obj 8.44 1/2
SHORT	1.00	KWH2	697.000	709.000	(5,000)	($600)	DAN - RISK 7.05; OBJ 6.50
SHORT	1.00	WH2	641.250	653.500	(5,000)	($613)	MIKE AH - RISK 10 - OBJ 40 CENTS
SHORT	2.00	KWH2	697.000	709.000	(10,000)	($1,200)	KEVIN RISK 7.00 ; OBJ 6.82
LONG	1.00	MWH2	813.000	835.750	5,000	$1,138	KEVIN - ADD 2 AT 8.05; OBJ 8.30; LONG 4 7.95; RISK 7.90

Here are the Option Trades - 

Long	# of	Option		Option Price	Notional		Position Equivalent				Profits (Losses)	Days to Expiration	Expiration
or Short	Contracts	Symbol	Price	Last	Position (bu)	Delta	Delta (bu)	Gamma (bu)	Theta / Day	Vega	Actual	Actual	Date
SHORT	1.00	SX1300C	49.000	65.000	(5,000)	(0.41)	(2,038)	(8)	$8	($201)	($800)	273	26-Oct-2012	jeremey
SHORT	2.00	SX1500C	31.250	25.875	(10,000)	(0.19)	(1,943)	(10)	$13	($292)	$538	273	26-Oct-2012
SHORT	1.00	SX1000P	37.000	16.250	5,000	0.13	629	(4)	$4	($111)	$1,038	273	26-Oct-2012
SHORT	1.00	SX1200P	99.500	82.500	5,000	0.42	2,077	(8)	$8	($202)	$850	273	26-Oct-2012
LONG	1.00	WH660C	47.750	22.000	5,000	0.48	2,384	32	($22)	$36	($1,288)	28	24-Feb-2012	jeremey
SHORT	1.00	WH730C	24.000	4.125	(5,000)	(0.14)	(675)	(17)	$12	($20)	$994	28	24-Feb-2012
SHORT	1.00	WH600P	22.125	5.250	5,000	0.16	806	(20)	$13	($22)	$844	28	24-Feb-2012
LONG	1.00	WH730C	0.750	4.125	5,000	0.14	675	17	($12)	$20	$169	28	24-Feb-2012
LONG	1.00	CH600C	38.500	45.000	5,000	0.73	3,650	26	($18)	$29	$325	28	24-Feb-2012	jordan
SHORT	2.00	CH700C	9.375	5.000	(10,000)	(0.16)	(1,628)	(41)	$27	($44)	$438	28	24-Feb-2012
SHORT	1.00	CH700C	8.125	5.000	(5,000)	(0.16)	(814)	(20)	$13	($22)	$156	28	24-Feb-2012
SHORT	1.00	CH575P	23.000	2.750	5,000	0.11	533	(17)	$8	($17)	$1,013	28	24-Feb-2012
SHORT	10.00	CH500P	4.500	0.125	50,000	0.01	306	(14)	$9	($17)	$2,188	28	24-Feb-2012
SHORT	1.00	CH550C	56.625	85.375	(5,000)	(0.93)	(4,626)	(6)	$6	($11)	($1,438)	28	24-Feb-2012
LONG	1.00	CH650C	13.000	16.500	5,000	0.41	2,064	33	($20)	$34	$175	28	24-Feb-2012
LONG	10.00	CH500P	4.250	0.125	(50,000)	(0.01)	(306)	14	($9)	$17	($2,063)	28	24-Feb-2012
SHORT	1.00	CH550C	47.250	85.375	(5,000)	(0.93)	(4,626)	(6)	$6	($11)	($1,906)	28	24-Feb-2012
SHORT	2.00	CH620P	45.375	11.250	10,000	0.36	3,569	(83)	$30	($66)	$3,413	28	24-Feb-2012
SHORT	2.00	CH620C	19.875	31.500	(10,000)	(0.61)	(6,130)	(63)	$41	($67)	($1,163)	28	24-Feb-2012
SHORT	5.00	CH650C	15.750	16.500	(25,000)	(0.41)	(10,320)	(167)	$101	($171)	($188)	28	24-Feb-2012
SHORT	7.00	CH580P	19.000	2.500	35,000	0.11	3,735	(134)	$54	($116)	$5,775	28	24-Feb-2012
SHORT	2.00	CH600P	23.750	6.500	10,000	0.22	2,220	(60)	$26	($53)	$1,725	28	24-Feb-2012
SHORT	4.00	CH660P	46.250	34.250	20,000	0.69	13,789	(151)	$58	($124)	$2,400	28	24-Feb-2012
SHORT	3.00	CH680P	45.875	53.000	15,000	0.76	11,396	(79)	$47	($82)	($1,069)	28	24-Feb-2012
SHORT	5.00	CH680C	18.375	8.000	(25,000)	(0.24)	(6,026)	(133)	$82	($138)	$2,594	28	24-Feb-2012
SHORT	7.00	CH600P	10.250	6.500	35,000	0.22	7,771	(211)	$91	($185)	$1,313	28	24-Feb-2012
SHORT	5.00	CH610C	18.500	41.500	(25,000)	(0.66)	(16,415)	(128)	$115	($161)	($5,750)	28	24-Feb-2012
SHORT	8.00	CH590C	20.000	54.000	(40,000)	(0.77)	(30,604)	(175)	$146	($215)	($13,600)	28	24-Feb-2012
SHORT	9.00	CH600C	28.625	45.000	(45,000)	(0.73)	(32,852)	(235)	$163	($261)	($7,369)	28	24-Feb-2012
SHORT	7.00	CH630C	15.375	25.250	(35,000)	(0.55)	(19,167)	(238)	$143	($243)	($3,456)	28	24-Feb-2012
SHORT	13.00	CH605P	18.375	6.750	65,000	0.24	15,711	(441)	$165	($359)	$7,556	28	24-Feb-2012
LONG	10.00	CH500P	0.125	0.125	(50,000)	(0.01)	(306)	14	($9)	$17	$0	28	24-Feb-2012
SHORT	10.00	CH610P	12.375	9.500	50,000	0.29	14,624	(344)	$152	($303)	$1,438	28	24-Feb-2012
SHORT	10.00	CH620P	19.875	11.250	50,000	0.36	17,847	(415)	$149	($328)	$4,313	28	24-Feb-2012
SHORT	10.00	CH630P	20.625	14.500	50,000	0.44	22,143	(468)	$148	($346)	$3,063	28	24-Feb-2012
SHORT	8.00	CH635P	21.125	21.125	40,000	0.49	19,438	(302)	$150	($279)	$0	28	24-Feb-2012
LONG	1.00	CH700C	9.375	5.000	5,000	0.16	814	20	($13)	$22	($219)	28	24-Feb-2012	jeremey
SHORT	1.00	CH600P	32.750	6.500	5,000	0.22	1,110	(30)	$13	($26)	$1,313	28	24-Feb-2012
LONG	1.00	CH550P	14.000	0.625	(5,000)	(0.03)	(157)	7	($3)	$7	($669)	28	24-Feb-2012
SHORT	1.00	CK620P	46.500	24.000	5,000	0.38	1,884	(22)	$9	($58)	$1,125	84	20-Apr-2012	kevin
LONG	2.00	CK560P	20.375	7.750	(10,000)	(0.15)	(1,537)	26	($13)	$74	($1,263)	84	20-Apr-2012
SHORT	2.00	CH570P	21.000	2.250	10,000	0.09	897	(31)	$15	($29)	$1,875	28	24-Feb-2012	scott
LONG	2.00	CH600C	28.000	45.000	10,000	0.73	7,301	52	($36)	$58	$1,700	28	24-Feb-2012
SHORT	2.00	CH650C	19.000	16.500	(10,000)	(0.41)	(4,128)	(67)	$41	($68)	$250	28	24-Feb-2012
LONG	2.00	CH570P	13.000	2.250	(10,000)	(0.09)	(897)	31	($15)	$29	($1,075)	28	24-Feb-2012
SHORT	2.00	CH700C	16.875	5.000	(10,000)	(0.16)	(1,628)	(41)	$27	($44)	$1,188	28	24-Feb-2012
SHORT	1.00	CN650C	33.000	50.000	(5,000)	(0.52)	(2,582)	(15)	$9	($80)	($850)	147	22-Jun-2012	van
SHORT	1.00	CN600P	28.500	26.500	5,000	0.31	1,565	(15)	$7	($72)	$100	147	22-Jun-2012
LONG	6.00	CH500P	5.375	0.125	(30,000)	(0.01)	(184)	8	($5)	$10	($1,575)	28	24-Feb-2012
LONG	1.00	CH540C	54.125	95.125	5,000	0.93	4,642	4	($6)	$11	$2,050	28	24-Feb-2012	kevin
SHORT	2.00	CH580C	30.125	57.875	(10,000)	(0.86)	(8,630)	(37)	$20	($38)	($2,775)	28	24-Feb-2012
LONG	1.00	CH660C	7.500	13.250	5,000	0.35	1,757	32	($20)	$33	$288	28	24-Feb-2012
LONG	1.00	CH620C	9.125	31.500	5,000	0.61	3,065	32	($20)	$34	$1,119	28	24-Feb-2012
SHORT	1.00	WN600C	66.876	94.875	(5,000)	(0.78)	(3,882)	(12)	$6	($62)	($1,400)	147	22-Jun-2012	jeremey
SHORT	1.00	WN600P	51.875	23.875	5,000	0.24	1,216	(11)	$8	($67)	$1,400	147	22-Jun-2012
SHORT	1.00	WN600P	37.375	23.875	5,000	0.24	1,216	(11)	$8	($67)	$675	147	22-Jun-2012
SHORT	1.00	WN800C	21.000	18.000	(5,000)	(0.24)	(1,205)	(11)	$7	($67)	$150	147	22-Jun-2012
SHORT	1.00	CN640P	60.625	47.500	5,000	0.44	2,217	(16)	$8	($80)	$656	147	22-Jun-2012	jeremey
LONG	1.00	CN590P	35.500	24.750	(5,000)	(0.29)	(1,436)	14	($7)	$69	($538)	147	22-Jun-2012
LONG	1.00	CN670C	41.250	39.125	5,000	0.45	2,264	15	($8)	$80	($106)	147	22-Jun-2012
SHORT	1.00	CN780C	16.375	13.500	(5,000)	(0.20)	(1,000)	(11)	$6	($58)	$144	147	22-Jun-2012
SHORT	1.00	SN1220C	82.000	81.500	(5,000)	(0.57)	(2,850)	(11)	$11	($152)	$25	147	22-Jun-2012	jeremey
SHORT	1.00	SN1100P	26.000	18.125	5,000	0.18	881	(7)	$8	($103)	$394	147	22-Jun-2012
SHORT	1.00	CN750C	24.000	18.000	(5,000)	(0.25)	(1,266)	(12)	$7	($65)	$300	147	22-Jun-2012	scott
SHORT	26.00	CN800C	6.000	11.125	(130,000)	(0.17)	(22,124)	(246)	$147	($1,359)	($6,663)	147	22-Jun-2012	jordan
LONG	10.00	CH590P	16.500	4.875	(50,000)	(0.17)	(8,589)	247	($116)	$227	($5,813)	28	24-Feb-2012
SHORT	1.00	MWH800C	27.750	40.750	(5,000)	(0.80)	(3,985)	(30)	$11	($33)	($650)	28	24-Feb-2012	kevin
LONG	3.00	MWH860C	9.000	14.500	15,000	0.36	5,414	92	($62)	$130	$825	28	24-Feb-2012
LONG	10.00	MWH1000C	0.375	0.875	50,000	0.03	1,498	44	($46)	$83	$250	28	24-Feb-2012
LONG	15.00	CH650C	4.000	16.500	75,000	0.41	30,961	501	($304)	$513	$9,375	28	24-Feb-2012	jeremey
SHORT	8.00	CH650C	14.875	16.500	(40,000)	(0.41)	(16,512)	(267)	$162	($273)	($650)	28	24-Feb-2012
SHORT	7.00	CH700C	4.625	5.000	(35,000)	(0.16)	(5,699)	(143)	$93	($153)	($131)	28	24-Feb-2012
SHORT	1.00	CN650C	28.625	50.000	(5,000)	(0.52)	(2,582)	(15)	$9	($80)	($1,069)	147	22-Jun-2012	jeremey
SHORT	1.00	CN600P	43.000	26.500	5,000	0.31	1,565	(15)	$7	($72)	$825	147	22-Jun-2012
SHORT	1.00	CN720C	24.125	24.125	(5,000)	(0.32)	(1,592)	(14)	$8	($73)	$0	147	22-Jun-2012	van
LONG	1.00	CN640P	47.500	47.500	(5,000)	(0.44)	(2,217)	16	($8)	$80	$0	147	22-Jun-2012
SHORT	1.00	CN580P	21.275	21.375	5,000	0.26	1,290	(13)	$7	($66)	($5)	147	22-Jun-2012
SHORT	1.00	CK700C	15.750	17.000	(5,000)	(0.30)	(1,497)	(18)	$10	($53)	($63)	84	20-Apr-2012	jordan
LONG	1.00	CH620P	13.875	11.250	(5,000)	(0.36)	(1,785)	42	($15)	$33	($131)	28	24-Feb-2012
LONG	7.00	CH600P	7.000	6.500	(35,000)	(0.22)	(7,771)	211	($91)	$185	($175)	28	24-Feb-2012	jeremey
SHORT	1.00	CN640P	42.250	47.500	5,000	0.44	2,217	(16)	$8	($80)	($263)	147	22-Jun-2012

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

couple of corn charts - are you bullish or bearish from here?

Below is a March corn chart; that shows we have made a full retracement.    Will we go threw levels before the USDA report or is the recent rally just a correction in a bear market?

Grain Market Commentary - Commodity Prices Continue to move up on smaller crop estimates in South America

Markets where called mixed to weaker this a.m. behind weaker outside markets and a lower overnight session. 

In the overnight session corn was down 2-3 cents, beans where 6-7 lower, KC wheat was off 2-3 cents, MPLS wheat was unchanged and CBOT wheat was down 2-3 cents.  At 9:20 outside markets have the US dollar stronger, the equities are weaker with the DOW down 52 points, and crude is off about 60 cents a barrel.

Not much for new news this a.m.; it does appear that parts of SA now received a little more moisture then expected.

The markets did open as expected a little weaker following the overnight session; but within the first 5 min’s most had reversed and turned positive and basically kept gaining throughout most of the day.  We did close a little off of our highs and MPLS had a disappointing performance but in general the grains had another positive day as the bullish momentum continued.

Corn closed up a dime, KC wheat up 12, MPLS unchanged, beans where 2-3 higher, equities where weaker, dollar firmer, crude off about 75 cents a barrel, and CBOT wheat up 14.  MPLS spreads widened out and the spot floor was a little weaker while spread for corn firmed up showing more signs of solid demand.

Talk was in the marketplace that Russia will be placing an export tax on wheat; thus slowing down their wheat exports and perhaps leading to a little business for the US.  But those rumors where denied by the government.  Also rumored was Argentina placing some sort of restriction on their corn exports due the drought damage.

Basis firming, weather, and ideas that the funds want to jump on the bull bandwagon for the commodities continued to help our markets today.  Until exports slow down we should find some sort of support; but keep in mind the reason that our markets are futures markets.  They like to throw plenty of curveballs when we least expect it.

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

closing grain market comments Monday Jan 23rd; bull markets here we come?

Markets closed firmer for the grains today behind good demand and weather in SA.

Beans lead the way higher up 30, KC wheat was up 7, MPLS wheat was up 5, CBOT wheat was 9 higher, corn was up 9, the US dollar was down 430 points, crude up around a dollar, and the equities closed mixed with the DOW down 12 points.  Overall another good day for the grains; we opened strong last night; firmed up during the session early, then backed off midsession, and when things where all said and down closed very firm; near the highs of the day for most of the grains.  Technically the picture has turned much more positive over the past few sessions.

Export inspections at or above trade estimates as well as what is needed on a per week basis to meet current USDA projections helped show our recent increase in demand off of the price break.  Corn came in at 35.2 million bushels, beans at 35.7, and wheat at 17.1. 

Friday’s commitment of traders report showed the funds at a record short position in CBOT wheat.  Ideas are we could see some short covering that would lead the feed wheat to gain a little over our hard wheat’s.  Also it has been noted that we are getting closer to export business.  (About time we where wheat and US export business in the same sentence.)

Basis in general is firmer across the board; about the only exception would be off quality wheat and the birdseed market.  I have seen an increase in birdseed demand; but it has been more then meet with sellers; as the past month or two selling was non-existent.

Railroads are still performing very well and generally have cars just sitting around.  Perhaps longer term this ends up having a positive effect on some of our markets because I have seen many asking the railroads for freight breaks to try and take product to non-traditional outlets.  The more of this that happens now the better the chance is that the “should be buyer” ends up having to pay more later.  At least that is my view on how it has worked in the past.  Along those same lines is we are seeing the crush sunflower market slowly creep up towards the birdseed market.  I felt that the main reason that we seen a huge rally in the birdseed sunflower market last year was due to the fact that so many flowers went to the crush at harvest time; way more then normal out of our area.  (that along with good solid demand and a record snowing winter last year)  I think that birdseed prices probably due struggle until the point comes that we take some of the overwhelming supply out of the market; when that does happen it should really open the upside potential just because of the relative short crop we have in the US.  Limiting that as well as all of the grains will be the massive world supplies.  Just one reason not to be afraid to sell a little bit here and there on these little rallies. 

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

Opening Grain Market Comments - Chinese New Year

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

In the overnight session corn was up 6-7 cents, KC wheat was up 5, MPLS wheat was up 5, CBOT wheat was up 7, and beans where up 15-16 cents.  At 8:40 outside markets have the US Dollar under a little pressure down 465 at 79.753 on the cash index, the equities are basis unchanged with the DOW up 4 points, and crude is up about 90 cents a barrel.

Firmness in the overnight session was partially due to SA weather where they didn’t get as much rain coverage nor amount as what was expected over the weekend. 

Basis has started to firm since the USDA report; so much so that it has spilled over to help out the board and the spreads.  Export sales have also picked up on the price break and now some are talking that we could see balance sheets tighten up a little as we move forward.  I even seen one tidbit that mentioned China had bought some US corn last week.  The more of this that happens that better for us longer term for our fundamentals.

Most of the Asian markets are closed this week for the Chinese new years.

There is sort of a debate out there as to why basis is firming and what is really what with our markets.  The two main arguments are that A) producers simply are not selling as they don’t need to and B) is that the product just isn’t their; that some of those that forecasted our yields much lower then the USDA are actually correct.  Either way I think that the market as a whole needs to be careful not to price themselves out of the market longer term as the world really does have plenty of supply.  I think our market as a whole needs to take a little advantage of the fact that South America is struggling to get product out.

Don’t forget about our upcoming Grain Marketing Workshop that we are sponsoring Feb 2^nd.  Also each we are still doing our weekly MWC Marketing Hour Roundtable meetings each Wed at 3:30 in Onida in which we go threw various charts, fundamental news, option strategies, and mock trading; everyone is invited!

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

Limit down.........BEARISH USDA Crop Report drives prices down hard on commodities...

Below are closing comments as well as a forward from Country Hedging with a recap from today’s USDA report.

Markets closed down hard behind a bearish??? USDA report; corn lead the way with old crop down the limit of 40 cents, new crop corn was down about 22 cents, beans where down 20 or so; which was a good 30 cents off of their lows, KC wheat was down 29, MPLS was off 9, CBOT wheat was off 36, crude was down over a dollar a barrel, equities ended higher with the DOW up 22 points, and the US dollar was weaker down 503 on the cash index at 80.842.

Below is a recap of today’s report.  You will notice a couple things;  first the market was anticipating neutral to friendly numbers; second we got numbers that from last month or last year where neutral for the most part.  Year over year corn is still at a decrease in ending stocks; and even from last month we are at a decrease.

So why limit down?  Because the market was expecting a cut of 100 million bushels and that didn’t happen.  Now there seem to be a lot of holes in the USDA’s numbers; but they are the numbers and they are what the trade will watch and follow as we go forward.

My personal view is that this report is exactly what we need if we want to have a chance to have rallies as we go forward.  So I will point out a couple of the bright spots from today’s price action and report.  First off demand didn’t get hurt at all by today’s report or price action; as a matter of a fact I have had more feed buyers of corn call to price corn today then I did in a long time.  Secondly the wheat acres up versus last year and versus trade estimates give us a chance to have an acre war as that 1 million acre increase means 1 million less acres available for row crops.  3^rd the Brazil corn crop was left unchanged; perhaps leaving the door up to future cuts and that could lead to some demand for the US at some point.  I don’t want to sound bullish as today’s report was anything but; but I do see at least a little hope that we might be able to bounce out of this.

Now weather we do or don’t probably depends on the direction of the US Dollar, the South American weather, and then in the coming months our weather. 

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

Thanks

opening grain comments a couple days ahead of USDA report Tues Jan 10th

Markets are called mixed this a.m. behind a choppy mixed overnight session, pre-report trading, and supportive outside markets.

In the overnight session we saw corn unchanged, beans unchanged to down a couple, KC wheat off a couple, MPLS wheat was down 4, and CBOT wheat was down 3.  At 9:00 outside markets have the DOW up nearly 100 points, crude up a little over a dollar a barrel, and the US dollar in the red with the cash index down 222 at 80.825.

A waiting game is what some are saying this a.m. as parts of S.A. get some moisture; the market waits to see how much and how wide spread coverage.  Forecasts are still for hot and dry after the current weather event.

More then the weather the market is waiting for the big USDA report which is out on Thursday.  Don’t forget that we did move our weekly marketing meeting to this afternoon and we plan on covering the USDA report as well as some strategies to consider heading into the report.

Here are the estimates heading into the report.  Don’t forget this report will also have the final crop yield as well as winter wheat planted.

U.S. ending stocks 2011/12

                             Wheat    Corn Soybeans

Average trade estimate       0.842   0.749   0.233

Highest trade estimate       0.888   1.020   0.285

Lowest trade estimate        0.766   0.587   0.127

USDA December estimates      0.878   0.848   0.230

Basis is defensive and likely remains that way until we see some sort of export to domestic competition.  This goes for most of the grains; and wheat and corn in particular.  We lack the export demand and the domestic demand is soft.  For corn the domestic demand should be soft if the ethanol plants are running in the red like many are saying.  Wheat mills simple feel full and know that we lack export demand (competition) and we have the rail road have one of their best performances of all time for the winter season which just adds supply.

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

Trades ahead of the USDA Crop report - for producers hedging

Producers hedging ahead of the USDA Crop report

By 

Jeremey Frost

These strategies use corn

A couple of reasons; 1st I think that corn is king and wheat is a follower

2nd I feel that the wheat grown in our area (HRW) is cheap versus corn; so if I am hedging (protecting) I would prefer to over protect what I feel is overvalued in relationship between commodity prices

3rd corn options and CBOT wheat options are much more liquid then KC or MPLS options

4th these strategies or concepts can be used in various commodities using options as a tool so the strikes perhaps are not as important as the concepts them self

For more info on the concepts please feel free to join us for our marketing meetings as we cover some of the strategies that will follow.  The next one being Tuesday Jan 10th.

Simple Marketing 101

Risk Diversifcation – are you sold where you should be?

If yes; do you feel you need to re-own should we rally?  Buy a call

If you are not sold; are you protected?  If NO then buy a put or make sales to get you to a comfort area.

Which calls or put’s do I buy?

That is and always will be preference; once again proper risk management probably means proper risk diversifcation.  Such as buying at the money, out of the money, and a variety of time slots.  Feb, March, May, July?

Really it is preference to cost and personal situation;

Myself I prefer to buy short term ones that will act like futures should I be right much quicker then the far out ones; plus if I move away from  the money the cost I feel is reasonable.  Especially given the price moves that have happened historically given in this report

Example of some corn options with their cost

Feb 6.50 puts – 20 cents / 6.00 puts 4 cents

Feb 6.50 calls 24 cents/ 7.00 calls 8 cents

March 7.00 calls 15 cents/6.00 puts 10 cents

July 6.00 puts 24 cents/ 7.00 calls 40 cents

Bottom line the longer and better protection you want the higher the cost

Simple trades

A) make cash sale and buy a call or a bull call spread or use a min price contract (strong basis) 

B) Buy a put – (weak basis)

C) Use a strike level from previous slide that fits with your operation and time period; considering the cost/reward ratio

Other types of trades

Selling options to pay for other types of options

Such as buying a Feb call/put and selling a March or July/call or put

Sometimes creating a ceiling/sometimes buying options and selling options that are looking for same direction thus minimizing risk if one picks wrong direction

Ratio spreads; selling 1 option to pay for more then 1 option

the following trades will have margin risk; unlike the simple trades above of buying an option; 

these trades as with all futures and options are risky and not suitable for most

Calendar Spread (same direction)

Purchase a 6.20 Feb put/sell a 5.70 March put (net cost aprox 3 cents)

Purchase a 7.00 Feb Call/sell a 7.50 March call ( net cost aprox 2 cents)

Purchase a 7.00 Feb call/sell a 8.50 July call (net collect aprox 4 cents)

Calendar Fences

Sell July 9.00 corn call purchase the March 6.00 put for a net cost of aprox 3 cents

Sell the July 8.00 call Purchase the 6.20 March put

Sell the July 9.50 call  purchase the 6.00 Feb put

Free Ratio Calendar Spread

Sell July 6.70 call; purchase 12 to 1 ratio the 6.00 Feb Put

Sell July 7.00 call; sell July 6.00 put; purchase 7.00 Feb call/6.00 Feb put.  Ratio of 5 to 1

Sell July 7.50 call; purchase 2 of the 6.30 Feb Puts

Protection –Upside – Re-ownership

Purchase July 6.30-5.30 bear put spread/sell the July 7.50 call for even money

Purchase Dec 5.50 – 4.50 bear put spread/sell the Dec 6.70 call

Light on protection, upside potential/pay to store

Sell July 8.00 call – 16 cents

Sell July 7.50 call for 25 cents

Not want complete upside risk- sell the 7.50 call and purchase 8.00 call; net collect 9 cents; but now have limited the risk; 

Grain Market Commentary Jan 9th a few days before big USDA Crop Report; limit moves here we come again?

Markets where called mixed behind mixed to generally firmer overnight markets and mixed outside markets.

In the overnight session most of the grains saw good strength with the exception of MPLS wheat which was actually weaker by 8 cents, corn was up by 8 cents, KC wheat was 8 firmer, CBOT wheat was up 11, and beans where up 9-10 cents.  At 9:20 outside markets have the equities slightly firmer with the DOW up 30 points, the US dollar is weaker down 121 on the cash index at 81.119, and crude oil is down 50 cents a barrel.

Not much for new news out there; the main thing remains the weather in South America; talk this a.m. is that there is a chance of some wide spread coverage but the amount of moisture is less then what was expected.  After the rain event it talk is then of hot and dry ride returning.

Later in the week we will have a big USDA crop report that likely sets up the stages for the months to come. 

We did see the markets show some strength today right from the get go; we then managed to consolidate breaking a little lower; as the session pulled to an end we seen corn show a little weakness in the last 10-15 while wheat and beans closed rather well.   The left beans up 36 cents, KC wheat up 18, MPLS wheat up 9, CBOT wheat up 17, corn up 8, equities had the DOW up 33 points, crude off about 25 cents a barrel, and the US Dollar slightly weaker.

Overall a good day; a little disappointing that corn slide nearly a dime off of it’s high’s but still a good day for the grains.  Export shipments where out this a.m. and they where mixed; wheat coming in at 10.8 million bushels; which is less the 14.2 needed on a per week basis to meet current USDA projections.  Corn came in at 33.9 which was above what is needed and beans came in at 32 million which is also above what is needed.

As mentioned above the USDA report is out on Thursday and due to that we will be moving up our weekly marketing meeting to Tuesday.  We hope to go threw some strategies ahead of the report.

The average estimates for the carryout are 753 million bushels for corn, 227 million bushels for beans, and 831 million bushels for wheat.  Versus last month those numbers are all decreases in carryout; last month corn was pegged at 848 million bushels, beans at 230 million bushels, and wheat at 831 million bushels. 

The big thing that is starting to stick out in my mind is the fact that overall the market is really looking for a bullish report; I was rather shocked that that overall estimate average on the corn carryout is as low as it is.  I think the report has a chance to move our markets tremendously depending on how things shake out.  Corn carryout comes in under estimates limit up isn’t a stretch; nor is limit down should we see the carryout come in at 1 billion bushels or so. 

There are a couple things that lead me to think the USDA report won’t come in super bullish is the fact that basis has been very defensive lately and their simply is more supply then nearby demand.  Plus many ethanol plants are now running in the red; the wild card will be S.A. weather and if that leads to increases in exports and our final yield.  I have seen some think we actually have corn yields down under 145 million bushels.

Historically this report has really been a market mover; 4 out of the last 5 years I believe have been limit up or limit down.

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

Thanks