|
CFG AG
CFH info
Market Data
Weather
|
CFGAG News and Views vol. 99, October 1, 2017 While the title sounds easy and simple, we are now doing just that by trying to find the best way to market grain in the least costly, (and risky) way possible. With the Quarterly Grain Stocks Report behind us on September 30, (slightly friendly corn and beans, negative wheat) and early yield reports on the high side of expectations, the market is preparing for another big crop and large carry out for next year. Just how big will likely be answered on October 12 with the all important Supply/Demand and Crop Production Report, as well as the updated FSA data on final acreage. With the funds now holding a fairly large short position in corn and a small long in soybeans, it will likely take some major movement on yield and acres to move the market. From the field we are hearing some surprisingly good yields on early planted corn and beans, but later planted may fall short as stress from adverse spring weather and a dry finish to the growing season may have cut into the potential we had earlier. Even if we do cut the yield slightly, there is still plenty of supply of all grains to keep the market comfortable at least for the next few months. Our next opportunity for a good rally may rest with South American weather and crop conditions, as they have not had an ideal start, and are faced with the same low prices felt here. The good news is world demand is very strong, and at these prices is likely to stay that way. Our challenge now is to set realistic sales goals, keep storage costs to a minimum, and if sales are made, construct a plan to re own those bushels with as little risk as possible. Most producers we talk to are more willing to move soybeans off the combine and store as much corn as possible. This may put a harvest low in beans relatively soon. If you are in that group that wants to move beans, basis in your area is the first concern. Selling cash and re owning is always advised if basis is good. If not, the first question is when will it get better, and is the cost of storage, either on farm or elsewhere worth the cost? If sales are made, or if you have unsold or unprotected bushels, consider March puts. Buying a March put protects the downside from the strike price selected, and if cash beans are sold, offer a good area to buy futures. This limits the risk of re ownership to the cost of the put, and offers a wide window of opportunity should South American weather go sour. Long range forecasting is suggesting that Argentina and Southern Brazil may indeed see a hot dry summer, the opposite of what is going on now, with Brazil too dry and Argentina too wet. If the weather spark gets the funds to buy, a good selling opportunity may ensue. This is what we mean by realistic goals. Looking at a November bean chart, 9.80-9.85 would be a good first target, with March about 20 cents higher. By using puts and futures, you may be able to trade a range if it develops multiple times over the next 5 months, trying to add value to the sales price while keeping risk limited. Owning calls is also an option, but making a decision on when to sell is difficult at best, and if calls are purchased, set a goal and stick to it on any profit earned. For corn, we have been is such a narrow range for so long, it would seem that there is no hope for calls, yet we still would own $3.60 December calls for about a nickel to see what October 12 brings, and if a rally to 3.80 happens, would be able to sell cash, add profit from the calls, and not be far off from $4 corn, or at least be able to sell cash, and exercise the calls into futures if South American weather is seriously threatening. Cash flow is another concern, and making cash sales when you want to rather than when you have to is much preferred. Using the futures and options gives you the flexibility to maintain ownership as well as cash flow when you need it. Make sure you call and go over a plan in advance so as many variables can be examined before execution. We have found many "good deals" at the elevator not exactly on paper what was advertised or understood verbally. Our bottom line is simple: staying in control of your grain, either on paper or in your own bin is much preferred to transferring ownership and hoping for good things to happen later. Standing in line for a bankrupt elevator, or falling victim to under described charges for basis contracts, rolls of those contracts and others are not thrills we like to have, and have experienced them ourselves. Call for specific horror stories, and how to hopefully avoid them. Going into the heart of harvest, watch for any of the following possibilities that could move the market: 3) Fund short covering or selling 4) Chart support and resistance, November beans around 9.20 and 9.80, December corn 3.44 and 3.62 5) US harvest weather and updated yield reports as we get into later planted crops later this month.
Right now, with harvest weather favorable, and no real threats from frost or heavy rain, the market is comfortable that grain will move. We also know that attitudes can change quickly, as all of us have observed over many years of farming. Its only much later that we look back and say "oh yeah, the market did a about face on Friday and never looked back." Planning with flexibility to adjust while staying realistic with an eye firmly focused on profitability is where we want to be.
-- 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. This material is not a research report prepared by Clear Focus Hedging Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Gard Trading Services believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. |
|
|