You are here
It's hard to imagine a market setback
On Friday, corn and wheat closed mostly lower and soybeans closed mixed.
Continued strength in energy and the stock market and continued weakness in the U.S. dollar is drawing more money into commodities. With harvest still very slow, there is not enough selling to accommodate the huge inflow of money. The forecast continues to call for rains late next week and this has the market very nervous.
Soybean harvest picked up at the beginning of the week, but recent rains have stalled harvest for the next couple of days. Many cornfields are still running close to 30% moisture and this is limiting harvest. Right now, it looks like corn harvest will not finish up until late November at least.
Until harvest pace picks up, it will be hard for our markets to setback. If money continues to pour into our markets during this time, we could see corn and soybeans continue to rally. We have already rallied much further than I thought possible during this timeframe. These markets are very complicated and money is trying to find a place to go. The falling U.S. dollar and volatile stock market has Hedge funds moving large amounts of money around. This is causing extreme volatility and has quickly turned our markets into financial instruments.
As I have said before, the markets have already rallied more than I thought they would ahead of harvest, and I guess they could keep going. I still want to use this rally as a selling opportunity for the 2010 crops. Hopefully we can see a rally towards $4.50 in Dec.2010 corn and $10.50 in Nov.2010 soybeans. These are levels that should be very profitable to farmers. Input costs are down dramatically and when you can lock in large profits, you should. We have resting orders to sell both corn and soybeans if we approach these levels. Many producers will not receive any crop insurance payments and will not have any downside protection from here on out. If you fall into this category, I would certainly look at selling what you can and/or buying some protection through the winter. I know I continue to put this in the afternoon letter, but nothing has changed and I want to stress this.
Until harvest pace can pick up, it will be hard for our markets to have a large break. However, this is very similar to the rally we had last spring. The markets would not setback until the crop was finally planted and then we had a very sharp break. With many unsold bushels and a large crop, the market will have difficulty at these prices once the crop is finally harvested. I realize this will take many producers (my family farm included) until December to finish up corn harvest. Hopefully the weather will finally cooperate and we can finally get this crop out of the ground. Good luck and please call if you have any questions.
Old Crop Corn ('08): You should be 100% sold.
New Crop Corn ('09): You should be 85% protected, including cash sales, puts, and put/call spread strategies. Call if you have any questions.
New Crop Corn (10): You should be 30% sold. In addition, put orders in to sell another 10% at $4.49 Dec 2010 futures.
Old Crop Soybeans ('08): You should be 100% sold.
New Crop Soybeans ('09): You should be 85% protected, including cash sales, puts, and put/call spread strategies. Call if you have any questions.
New Crop Soybeans (10): You should be 20% sold. In addition, put orders in to sell another 10% at $10.29 Nov 2010 futures. Also leave orders to sell a further 10% at $10.59 Nov 2010 futures.
Also, on 25% of your projected 2010 bean production, you should buy Nov 2010 $8 puts then sell $6 puts and $14 calls. Pay 5 cents or better. Call us if you have questions.
Old Crop Wheat ('08): You should be 100% sold.
New Crop Wheat ('09): You should be 70% sold in your 2009 wheat
New Crop Wheat (10): You should be 10% sold. In addition, put orders in to sell an additional 10% at $6.79 Dec 2010 futures, and another 10% at $6.99 Dec 2010 futures.
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may not place an order to buy or sell commodity futures contract by e-mail. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees, or agents. EHedger LLC will not disclose anyone's position due to their confidential and proprietary nature. Recipients assume the risk of reliance on and indemnify and hold EHedger LLC harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
The contents of this e-mail message and any attachments are intended solely for EHedger LLC's customers and brokers. This communication is intended to be and to remain confidential. Any duplication or distribution without the express written consent of EHedger LLC and this disclaimer is prohibited. If you are not an intended recipient of this message or if this message has been addressed to you in error, immediately alert the sender by reply e-mail and delete this message, its attachments, and any related messages from your computer and destroy any hard copies. If you are not an intended recipient or this message has been addressed to you in error, you are prohibited from delivering, distributing, disclosing, printing, copying, or relying on this message and/or any attachments. Opinions are solely those of the author and subject to change at any time, and are not a solicitation or recommendation to buy or sell commodity futures or commodity options. Past performance is not indicative of future results.
Gavin Maguire is director of E Hedger, a commodity trading and marketing firm based in Chicago.