Corn to follow beans
Closing Corn Commentary
Broker Perspective: Through most of the day corn found itself stuck between a bearish bean influence and a bullish wheat influence. Right now the bean market has all the speculative and technical selling activity while wheat has all the fundamental scares from Russia. This leaves corn stuck in the middle and more than open to outside influences. In general, we anticipate the corn to follow the influence of beans as well as harvest pressure. There has been some speculative liquidation but not on the same scale seen in beans. A private estimate of 2012 acres was released today, suggesting 97.2 million which is 767,000 over the current USDA number. This coincides well with what the FSA told us earlier in the week giving trade a general feeling that acres will be increased on the upcoming October production report. Even with these additional planted acres, we still feel total harvested acreage could drop 800,000 acres but it is a major reduction from last week’s estimates of 1.2 million fewer acres. At the end of the day we did see some signs of a profit taking Friday but unfortunately it only lasted a minute when last Friday saw a whole day of buying. This week has proven that 739 is not low enough to pick up overnight sales which calls for the grind lower to continue for now. At some point December will reach a level that results in overnight sales but we have not found it yet. Bears will try to keep selling until an export is made while bulls will lightly defend the week lows of 739.
4th Quarter Exports: In preparation for Friday’s Grain Stocks report we have had to make fourth quarter (Jun to Aug) demand estimates. Last night we noted our corn for ethanol estimate came in 17 million bushels under USDA’s latest estimate. While we started our studies knowing exports would be a serious problem in the fourth quarter they actually were not that bad. Our estimate for the four quarter would imply total year exports of 1.556 billion. That is 16 million better than USDA’s latest. Ethanol was weaker than expected but balanced by this export issue. On Monday we will release the real wildcard of demand, corn for feed.
(9/19) Sell December 850 call at 10, risk 20, objective 0
(7/16) Sold December corn 1000 call 10, risk 30, objective 0.
Lean Hogs Commentary
This morning we knew our bearish expectation for this afternoon’s monthly Cold Storage report was not bearish enough. USDA released the monthly report detailing August hog slaughter (+4% over 2011) and pork production (+6% over 2011). Those numbers are each new records. The afternoon update of pork in Cold Storage was higher than the average guess and higher than our estimate. USDA found packers had stored 581 million lbs of pork in freezers at the end of August. This represents a 31 million increase over July when normally stocks are declining by 5 million! This report will give us a 25 to 50 cent lower trade on Monday. It should not derail this little short term September bounce we are on though. Though these numbers were larger than expected, it was not that much of a surprise to get a bearish report here. For other issues we are happy to say we are getting past that high production period that led into mid-September. Cash hogs gained 5.78 this week while cash pork posted an 11 cent decline. Producers have flipped from shear panic and liquidation of numbers to now, what is likely a short term deficit situation. This also fits right into seasonals very well. Expect the short term September bounce to continue into the first week of October.
(8/28) Bought October 73.20, move risk to 73.00, objective 77. Closed 75.80.
(9/11) Bought October futures 72.52/sold December 75 call 1.52, move risk to only -1.50 from entry, objective 5.50 from entry. Closed 75.80 and 2.87 for net +1.92 from entry.