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Market eyes world corn exporters

09/14/2012 @ 3:30pm

Closing Corn Commentary 

Broker Perspective: Early buying was seen in the market. This was thought to come from both Friday profit taking as well as a supportive European story. The story suggested the EU is going to approve more GMO corn from the US for import. While it is likely true that some corn could get approval it might come far short of what some early trade talk suggested. Currently, the EU imports 3.0 million tonnes of corn. This story had some speculators thinking as large as 8 – 12 mt. Obviously this is a little more than can be believed at first. Argentina announced today that they allocated an additional 2.75 mt in corn export permits. This will bring their total exports for the year to 16.45 mt. USDA suggests they will end with 18. Additional late buying was seen which can be attributed to more end of week profit taking. Next week brings this market back to reality. This market will eventually find a price that importers find attractive it is just impossible to know what that price is right now. Resistance is 794 and 800 going into next week with this week’s low of 759 1/4 being an area of first support.

US is Not Price Competitive: USDA’s corn ending stocks number, taken at face value, would imply 798 December corn. The trade is now pricing in another increase in stocks in October. Demand problems will likely overshadow next month’s lower harvested acres. We see December corn down to 7.50 by the end of the year.

Trade recommendations:

(8/29) Sell December corn 835, risk 843, objective 800.

Working trades:

(7/16) Sold December corn 1000 call 10, risk 30, objective 0.

(9/4) Sold October 815 straddle at 42, risk 64, objective 0, closed 49 1/4.  

Lean Hogs Commentary 

This week marked the seventh week in a row of massive over-marketing from producers. The kill is actually the third largest in history (Dec 22, 2007 and Jan 12, 2008). While this is one of the biggest weeks for supply, of the seasonal buildup from summer to winter, it may have also confirmed a bullish turning point for trade psychology. The confusing point right now is that average weights are really not dropping. Are we really pulling numbers ahead, which should lower average kill weights, or simply numbers that are finishing out quicker than expected. Keeping it simple, it does not matter. We expect that the days of big surprises in hog slaughter, compared with Hogs and Pigs report projections, are mostly behind us. Producers have brought in extra hogs and we feel the available hog supply is now drying up. Certainly by October 14, when the nearby futures contract expires, we should be dealing with the deficit end of marketings. We may have made a mistake with our bet that October will be the contract to gain the most. That contract may not really get going until cash hogs really get that bottom confirmed. After an expected September rally we will revisit the bear side.

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