Grain Hedgers Take Note

  • Posted on: March 27, 2015

March 27, 2015 Written by Chris Robinson Corn: May corn settled down ¼ cent at $3.91. New crop CZ settled unchanged at $4.14- 3/4 . Corn had a quiet day in the wake of Thursday’s punch up to 5-week highs, which had May top out at $3.97 and December top out at $4.19 ¾. For the week, CK gained 6 cents and CZ gained 5 ½ cents. The funds were quiet today, and maintain a small estimated long position of just 11,000 contracts. This pales in comparison to their earlier position this year when they were long over 250K contracts. The 5-month low posted a week ago looked like the market finally squeezed out those who were aggressively long just 3 months ago during when we saw $4.25 just a few days before Christmas. All eyes wait for Tuesday’s USDA report. Most of the herd believes we’ll get less corn acres. Some aggressively so, with the most bullish calling for 85 million acres of corn planted, while the average guess is 88.5 million acres of corn. Planting delays in Arkansas, Texas, Louisiana and Mississippi persist and stoke the argument for less corn acres under plow the closer we get to the ides of April, at which point farmers shun corn and go with more beans. Hedgers: The average move over the past 7 years on this report has been 24 cents. Plan accordingly. Wheat: May wheat settled up 8 ½ cents at $5.07 ¾. Wheat lost 22 ¼ cents on the week. Wheat can only be described as schizophrenic this week with a 6-week high posted Monday, followed up by a 42 cent swan dive to Thursday’s 2-week low at $4.98. Bulls are hoping that the psychologically important $5.00 holds on the charts. A settlement below $5.00 opens up a test of the contract low at $4.78 posted March 6th. The funds remain short 60,000 contracts. Exports were a marketing year low this week. The US dollar remains within spitting distance of its 12 year high at 100.78 posted just 10 trading days ago. Rainfall is expected here in the wheat belt, as well as in the Ukraine and FSU. Hedgers: The average move over the past 7 years for wheat has been 30 cents. Plan accordingly. Soybeans: May soybeans settled down 7 ¼ cents at $9.67 ¼. New crop SX settled down 6 ½ cents at $9.48 ¾. For the week, May lost 6 ½ cents while November lost 7 ½ cents. Exports were better than expected this week, but had no impact on flat prices, as beans had zero follow through after Monday’s 2 week high. The funds remain short 26,000 contracts of beans; balanced out by a relatively small longs of 13,000 soy meal and 8,000 bean oil. Crushers remain a non-factor with meal margins on the weak side. Exports sales are 4 mmt ahead of last year’s pace; with 1.2 mmt still awaiting shipment to China some wonder if those bushels will actually ship. With plentiful supply in South America available to the Chinese, they are in the enviable position of being the biggest buyer in a buyers’ market. Technically, new crop SX has support at last Wednesday’s 5-month low at $9.39. For now, that’s the line in the sand for the bulls and the bears. Hedgers: The average move over the past 7 years on this report has been 40 cents. Plan accordingly. This week had one thing across all the markets, VOLATLITY. As I am finishing this letter Fed Chair Janet Yellen came out with more remarks about the anticipated tightening of rates. Surely this weekend will have the analysts barking their opinions about its impact, but Sunday night when the computer trade returns it could mean, you guessed it… More Volatility. Three of the last 4 weeks have seen the Dow trade through ranges of 488 points, 508 points and this week’s 660 points. That’s the back-drop as we head into Tuesday’s USDA report. Fact are facts.. If you are a producer, you are a net long speculator, pure and simple. Can you afford to be long and wrong should the market roll over and head south in response to Tuesday’s report? Conversely, if you are over-sold and would suffer should the market head sharply higher after Tuesday, then you need to re-own those previously sold bushels now with a call option. That’s the only way you won’t be kicking yourself 6 weeks from now if prices are higher, leaving you to regret having “sold your grain too cheap”. So you see, it’s not just PUTS, PUTS , PUTS all the time here at Top Third. More accurately, its RISK, RISK, RISK. If you are concerned about Tuesday and are flying blind, call us Monday so we can help you get a plan that fits your needs and your budget. Have a great and safe weekend. CER