CFGAG News and Views           vol. 52      December 2, 2013 

"Supply Numbers Are In, Now Demand?"

The November 8 Crop Report at first glance looked a little friendly on the corn side, with a larger cut in harvested acres due to prevented plant numbers, and not quite as big a yield number as expected. One look at the world numbers though, and it would appear that the corn market will struggle to find some traction to the upside until we find more demand or weather problems in South America. We simply have to find more demand, or the carryout grows. Some may quibble with USDA numbers, that is ongoing, but the bottom line is, unless we can significantly lower the projected carryout for next September 1, or give funds a good reason to jump into the long side of the corn market, the next few months look a little bleak. The list of negatives include:

1) Relatively small percent of this years crop sold, maybe 30% so far?

2) Political tension with China and Japan over land issues.

3) Good weather (so far) in South America 

4) Demand for feed use could be overstated in USDA numbers

 There are some positives as well, ethanol production has been running at levels that would exceed USDA projections, and there are questions about what South American farmers will plant for their safrina or "second crop". The last two years, this second crop of corn following beans has been huge in relative terms, and there is plenty of corn available in Brazil at a price that most producers find below cost of production. If they elect to follow beans with more beans, we could see the world balance sheet tighten up some in corn, but if that happens, extra pressure could be found on our new crop beans. All of this assumes normal weather of course, but stay tuned to those developments as the impact to our prices will be felt early in the new year.

Soybeans have rallied the past few weeks on good sales and inspections. Prices have met or exceeded our expectations, and feels toppy to us. Those who sold cash beans at $13 and reowned them by using July/November spread have good profits. No one knows how much rally is left, but we are in favor of banking profits on those spreads, selling cash beans, and waiting for a correction to re enter the spread. The following negatives are why:

1) Geo-political problems with China/Japan

2) Good weather (so far) in South America

3) Old crop supplies in Argentina may have to move prior to next harvest in a few months

4) China may have over booked beans from U.S. anticipating weather/logistic problems in Brazil

5) Unless something changes, world supply of beans looks plentiful.

Yes, there is always the chance that weather turns sour for the southern hemisphere, and demand for beans always seems to be there, but we like to deal with non emotional, profit driven ideas, and to us, the downside risk outweighs the upside potential at this time. Cash beans over $13.00 is a profitable price, and we like banking profits. It keeps us wanting to grow more next year.

Looking ahead, lighter holiday type trade is likely, but we could see some wide price swings that could offer some opportunity. Getting a good basis bid to move corn and beans will get our attention, especially corn, as everyone knows we have a big crop and a relatively small percentage is sold. Remember the most recent high in March futures was 4.49 1/2, and if we can carve out a bottom soon, it sets up a range to sell against that high, or buy puts, and then pick up hedges or reown futures against the lows. Call us to make a plan depending on how much you have to sell, and how much you want to reown. We like dividing the bushels into increments, and using the ranges above to get this done. Make sure we have a plan to both enter AND exit these strategies, as planning for the unexpected makes it easier to deal with.

Mar.  Corn                Support                 Resistance

                                 4.10                       4.45                                                                                                              

                                 4.02                       4.60

                                 3.90                       4.72

            
Jan. Beans               12.67                      13.72

                              12.28                      14.00                              

                              12.20                      14.60                

In conclusion, there is a lot of bearish sentiment out there in corn, and we understand it. If nothing changes, selling small rallies may be all we can expect. An old adage comes to mind, that "when the boat gets too heavy leaning to one side, look out". Remember when everyone was bullish, and prices could never go down? Markets will find a price that evens out all those extremes, and new events will drive the direction as well as the speed. We have highlighted our ideas and concerns, hopefully we will find a profitable price to market remaining grain and get some of next years done as well. Keep in touch over the holidays, as they sometimes offer some unexpected presents. Most of all, as we close out 2013 and look forward to next year, we thank you for the opportunity to work with you, and wish you a Merry Christmas, and Blessed New Year!

Important dates to remember:

 December 10th Monthly Supply/Demand Report and Crop Production 

Weekly Export Sales every Thursday at 7:30 am

Export Inspections every Monday at !0:00 am

December 20th  Cattle on Feed

Mike   Daube      888-391-6330
Allen   Gard       800-205-1700

Disclaimer: This material has been prepared by a sales or trading employee or agent of Clear Focus Hedging, and is, or is in the nature of, a solicitation. By accepting this communication you agree that you are an experianced user of the futures markets, capable of making independant trading decisions, and you agree that you are not, and will not. rely solely on this communication in making trading decisions.

There is a substantial risk of loss when trading futures and options. The thoughts and opinions in this article are those of the author, and while believed to be correct, are not guaranteed as the the accuracy or timing of the content. Past performance is not indicativeof future results, and each individual should examine their own risk capital carefully before trading.