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

Mock Trades for MWC Marketing Hour Round Table

Today we had another session of MWC Marketing Hour Round Table; during these meetings we go over various strategies related to grain markets/marketing, we cover the theories behind various strategies, the technical side of our grain markets as well as the charts that go with our markets, and we have some mock trading in which we place trades every week and keep track of those trade results.

Below are some of the charts we covered in this afternoon's session

After we went threw the charts we talked about rolling a covered call.

We used the example of rolling a Dec 7.00 Call sold back in March when the market was trading in the low to mid 6.00 range for around 50 cents.  We figured that today we could buy a Dec 7.00 call for about 75 cents thus locking in a 25 cent loss; but we could now sell our corn for about 7.50 on the board (7.25 net); which was about the best case we could do when we sold the call for the 50 cents to start with.

While what if we don't want to have corn sold anymore at 7.00; after all the price is going up?  Isn't it?  Well what happens if we sell a July 8.00 Call for about 80 cents.  Answer we collect a nickel or so via rolling the short option out and we now have a top limited to 8.00 on the July Futures

Here is the Math on the trades

March Price when placed 6.30

Sold 7.00 call for 50 cents; purchased back for 75 cents; loss of 25 cents

Sold 8.00 July call for about 80 cents; now net we have collected 55 cents and raise our ceiling to 1.70 higher then the board when we opened this trade to start with.

.50 collected minus .75 bought back plus .80 collected = 80 cents that we can add to our price when we end up selling the product; in exchange for that 8.00 on the July futures appears to be the max we can get unless we use another strategy similar to this.

Last but not least this week we did some mock trades

Here are the open mock trades we have after today's session.

Jordan has a long 14.00 bean call against a 16.00 bean put on one trade; presently up rather good on this trade.

Today he purchased a 7.50 corn put (2 of them) and purchased a 15.00 bean call.

He then added a spread trade via buying oats and selling corn.

Dan had a couple future trades as he went long Dec corn at with a nickel rick and an objective of 15 cents profit.  His other trade was short KC March with a 15 cent risk and an objective of about 40 cents profit.

Dan still owns the 13-13.80-14.60 Nov bean butterfly in that he is long a 13 call short 2 of the 13.80's and long 1 of the 14.60 calls.

Kevin Went long Nov Beans and short 2 contracts of Dec corn. Kevin also had a ratio spread trade open and during the last week it hit his follow up point.

He is long a 7.00 call versus 2 short 7.60 Dec call for about an 8 cent credit.  He then rolled the 2 7.60 calls out to 4 of the 8.20 Dec Calls and also managed to do this for a credit.

Myself I added a couple of option trades via buying a 7.00 July 2012 corn call against 3 short 8.50 corn calls collecting a net of about $2100 or so.  Thus having upside room and downside potential to make some money; but VOL isn't exactly my friend; so my ratio spread will be tough to manage.

The other trade I placed was hedge type of trade via shorting 1 of the Dec 2012 6.50 corn calls and buying 6 of the 7-6.50 Nov 2011 corn bear put spreads.  A bear market bet that will return good if we have a hard breakdown; while if I look at it in a producers eyes it could be similar to a ending up in a HTA contract in 12 while getting nearby price protection.

I do have one open trade out there where I have the 7.20 Dec calls and puts purchased against the sale of 3 each of the 6.50 puts and 8.00 calls.  

Grain Market Comments Sept 7th

Markets are called better this morning behind a firmer overnight session and outside markets that are supportive.

In the overnight session corn was up 6 cents, beans where 8-9 higher, MPLS wheat was up about a dime, KC wheat was up 7 cents, and CBOT wheat was up about 7 cents.  As of 9:10 outside markets have European wheat up about 1 %, crude oil is up a little over 2.00 a barrel, the US dollar is weaker with the Cash index off 333 at 75.618, and the equities are showing a little bounce this a.m. with the DOW up about 171.

A rather quiet day for news this a.m. the market looks like it wants to consolidate into next week’s USDA updated S & D report.  Ideas have started to move to thinking that supply is smaller as yields appear to be down and coming down with most private estimates getting lower every time someone announces their estimate.  But estimates for carryout are showing that thoughts have also move to demand slipping for most of the grains.  Bottom line is there appears to be some fundamental fireworks in the month or so.

I have seen that some of the early harvest reports for corn are coming in a little better then expected; but I have also seen ranges that are more then huge.  One of the articles I read today referenced a yield ranging from 60 bushels to 230 bushels all from just one producer.

Basis for the row crops and probably grains in general is weaker; perhaps winter wheat basis is steady but the rest of the commodities we handle one probably considers the basis trend weaker and idea’s are quickly becoming that basis will continue the weakening trend until it hits some sort of harvest low.

The weaker basis is a little more concerning then normal to me; because if our fundamentals are so tight for a crop like old crop corn.  How does basis do what it has done?  Also I would say that it is tough to buy grain right now; most producers are generically bullish and not many are in have to sell situations or to summarize supply isn’t exactly running the elevators over with producers looking to sell but rather the opposite.  But despite the ability for producers not to have to move much we are seeing basis weaker not stronger; because demand is simply that soft. 

Not exactly super bullish indicators.

On the other side of things there still remains plenty upside potential in our markets if things go correct and if we get a perfect storm who’s to say that the upside potential isn’t huge as whether our economy’s are growing or struggling the world population doesn’t appear to be anything other then getting bigger.

Don’t forget that we do have our Marketing Hour Round Table today at 3:30 in Onida; come and join us.

Grain Comments with charts and strategies

Markets had another rather choppy price action ride today as outside markets where stable and a big on going concern remains out there in regards to our potential tightening of our balance sheets.

Our bull markets kept going despite the weakness we showed in the overnight session.  When all was said and done we seen corn up 5-7 cents, beans where up 10-11 cents, KC wheat was off 7 cents, MPLS wheat was off 6-7 cents, CBOT wheat was down 4-7 cents, the US dollar was firmer, equities showed a slight balance with the DOW up 21 points, and crude was up about 1.50 a barrel.

Goofy price action today in that yesterday we had rather supportive information with the decreased crop conditions but last night we seen weakness in the markets as we did for most of the session; but about mid day things changed around lead by the row crops and we see corn and beans both put in new high closes to end the day.  Technically that is great price action and could lead to even more technical buying.

As for new news out there we really seem to be light on the headlines as of late; main focus has been the idea’s that mother nature is taking away yield and yield reduction along with a tight balance sheet gives us bullish fundamentals; at least until we see that projected supply and demand change.  Eventually high price are suppose to cure high prices; defining “high prices” remains a challenge and as long as end users can make money buying an end product such as corn the price probably shouldn’t be considered high.  Are we near those levels?  Perhaps as some industries are challenged and we have seen a lag in the exports; but the latest reports have been good profits for ethanol plants and they are the big dog when it comes to who’s buying our corn.

One negative that has happened lately has been the basis trends for corn and spring wheat; both of those commodities have saw plenty of basis pressure as of late; indicating a lack of end user demand.  The spreads between some of the markets and months also have shown bear market signs such as the Sept-Dec corn spread which has went from a big inverse to near full carry as our carry on corn today is very similar to what it was last year despite our balance sheet showing nearly ½ the carryout for old crop as it did last year.  That to me doesn’t add up and says there is some risk that we have under stated our 2010-2011 corn crop or overstated our demand?  Perhaps we have improved our ethanol effectiveness more then we realize thus we have been grinding less then what we think would be needed to get the type of ethanol production that we have seen reported?

Bottom line is our markets are scary and in more then one way.  Potential is out there for prices to continue to see strength because of the supply and demand along with the fact that it seems like the funds want to own grains many days.  If we are actually going to run out of corn the price should be the sky; and that is scary because things like basis could really get out of whack.  Also scary is the fact that it wouldn’t take much to see some of the mentioned possible negative factors happen thus we see our balance sheets get ugly in a hurry.

Technically we seem to have broken out of some markets; such as Nov beans.  But many of our markets still have a sideways technical picture painted on their charts.

I have attached a few charts.

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

Does the 2010-2011 corn spread price action give us any clues how we should be placing hedges for the 2011-2012 crop?