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A 2012 net acreage increase

Profit-taking pushed beans lower Friday, after a big rally yesterday. The dollar found some strength and had investors taking some positions off, ahead of the weekend and the end of the month. 

With light volume, spreaders were in control with corn finishing higher and beans lower. Funds sold 7,000 contracts of beans and bought 7,000 contracts of corn. 

News is limited but continue to watch the dollar for direction Sunday night. The news out of Europe this week was friendly for commodities as investors increased their appetite for risk. We feel beans will stay supported on breaks and should stay in the sideways range we have been in for the last few weeks. 

We took profits this morning and will look at buying a break Sunday night. We have a chart showing a breakdown for next year’s acreage ideas. Total acreage of corn, soybeans, wheat, and the other 25, has fallen by 8.6 million in the past three years due to problematic spring plantings. 

Available for 2012, we have these missing acres + another 1 to 2 million from the lesser 25. There is room for a net acreage increase between the top three for 2012. Early thoughts are a 700,000 acre increase for corn, beans could increase by 1 to 2 million, and wheat could see a 2 million acre increase.

Soybean Acreage: Acres for the top three crops will easily increase next year. The only question is the allocation. Profit projections for 2012 planting still favor corn over beans. However, producers are reporting some fatigue with multiple years of corn on corn. We see a 1 to 2 million increase for soybeans as producers are clearly wanting something easier to handle and the profit, though less than corn, is still right.

 

Working Trade:

·         (10/21) Buy January beans 1220, risk 1195, objective 1250, closed 1226

·         (10/21) Bought January beans 1225, objective 1248 ∏ filled 10/28 for +$1,175.

·         (10/6) Bought December 310 meal call/sold December 340 meal call at 8.00, risk 0, objective 30.0. Closed 9.45.

This morning, Bill Biedermann asked us about the world situation.  As a whole, USDA expects 2012 US beef production -4.9% from this year. That is even more than Allendale’s -3.8% estimate. USDA feels others, notably Brazil, Argentina, and Australia, are in moderate expansion. We feel the beef situation is certainly a US supply issue. For short term issues, this week’s cash cattle trading was interesting. Sales on Thursday ranged from $120 to $123. Action today was solidly $120. We even had some clients tell us they were hearing of $118’s. It is clear, for the short term, this market may be a little overpriced. Our target for December futures is $117.

Working Trade:

·         (09/07) Sold 2 April 118 puts 2.57 each, risk to 3.00, objective 0. Closed 1.95.

·         (09/26) Bought 1 February 124 call/sold 2 116 puts +.72, risk to -1.00, objective +1.50. Closed +0.10.

(10/27) Sold 2 Dec 122 calls 1.85, risk 3.05, objective 0.

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Rich Nelson 

Director of Research 

Allendale Inc. 

4506 Prime Parkway 

McHenry, IL 60050 

815-578-6161 

Hypothetical performance results have many inherent limitations, some of which are described below.  No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.  One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.  In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading.  For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results.  There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

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