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Buying supports corn-Rich Nelson

Fundamental Support: Instead of a calm day waiting for the forecast, corn found early buying which continued throughout the day. Our noon forecast was spun bearish by some, yet bullish by others. Our take was that the forecast was on the bearish side. None-the-less, light volume buying was relentless throughout the day. These buyers might be betting on a turn to worse for the Monday morning forecast or perhaps they are looking forward to a substantial lowering of the crop rating Monday afternoon. What is interesting to note is that today’s settlement was just slightly off of last Friday’s settlement of 696. Some of this buying could also be attributed to additional estimates on yield being released today, one of which was 153.6 which is the lowest written estimate to date. Bulls can enjoy the success of running this market back to last week’s settlement despite a round of slightly bearish forecasts. Those same bulls might want to stay cautious that their largest rally seen today occurred on quite thin volume. Bears will have to wait until Monday to see if the forecasts continue to improve. Next week should still focus on weather but might also pay more attention to yield estimates as we draw somewhat close to the August report. There is little doubt that volatility will be high once again so we will need to focus on the fundamentals at hand rather than the daily violent moves to show us what long term positions we want to have…Ryan Ettner

Fundamental Support: Warm pollinations are not always bad. The years of slightly warmer than normal silking, the left side of the chart, saw USDA increase yield in August. The threatening years, the right side of the chart, are where USDA typically takes action and lowers yields. In hot years, USDA always starts cutting in August and cuts again by the January summary report. 2011’s pollination is current set for the fourth hottest in the past 30 years…Rich Nelson

 

Trade recommendations:

·       Sell December 699 on a stop, risk 709, objective 670. (to be placed immediately after December trades above 700)

Cattle On Feed: Placements in June were up 4% from last year. That was a big surprise to the industry that was expecting a 7% decline! Bigger placements were made despite cattle leaving the feedlot losing $200 per head! Nine of the 11 states surveyed all put in more numbers. This is bearish to the December and February contracts.

Cattle: The bi-annual inventory survey, called Cattle, came in as expected. The overall herd is 1.1% smaller than last year. The beef cow herd was 1.1% smaller. Beef heifers held back for the cow herd were 4.5% smaller. That still shows there is no interest in expansion. Look for continued smaller beef supplies, and higher prices, for the next three years.

Cold Storage: Last month’s beef clearance was better than expected. Beef stocks fell by 13 million lbs when typically they increase 12 million…Rich Nelson

 

Trade Recommendation:

·       (07/22) Sell December 116 put 4.35, risk 2.85 from entry, objective 0.

·       (07/21) Buy February 118.30, risk 116.00, objective 126.10.

Working Trade:

·       (06/15) Sold February 110 put 3.10, risk to 2.50, objective 0. Closed 1.42.

·       (07/14) Sold October 120 call 2.47, risk 3.25, objective 1.50. Closed 2.15.

 

 

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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