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Outside money flows into grains on outside market breaks
Corn, beans and wheat all closed lower on the day (Friday). The overnight trade actually ended on a firm tone. However, the unemployment report came in more positive than most traders expected.
This sent the dollar sharply higher and put gold sharply lower. This outside market action put a weak tone on the grains throughout the session. We have seen breaks off these weak outside markets a number of times, but as soon as the outside markets stabilize it seems like the money flows back in and the grains rally back.
However, if that money does stop flowing in, the grains could have a significant downside break from these levels. That is why producers need to continue to use these prices to market their grain. If we do see a decent setback from these levels we will be looking to put in place some option strategies to protect the upside on sales that we have made.
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 40% 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 40% sold.
Also, on 25% of your projected 2010 bean production, you should have Nov 2010 $8 puts, then sold $6 puts and $14 calls. Call us if you have questions.
New Crop Wheat ('09): You should be 70% sold in your 2009 wheat crop. Re-own cash sales by selling March $4.40 puts and buying March $6 calls.
New Crop Wheat (10): You should be 20% 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.
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Gavin Maguire is director of E Hedger, a commodity trading and marketing firm based in Chicago.