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Short trading week ahead

Many will ask what changed in corn Friday to cause the rally. 

To be truthful, the answer really is that nothing changed at all. Thursday was all about funds who were selling on a technical basis. Perhaps it was due to corn being overbought and maybe they had other reasons. What we do know is that it was not based on clear fundamentals. 

As mentioned in Thursday's commentary, we were looking for buyers to move right back in if funds did not come in and sell again right away. Corn bulls saw the 29 cent break as “Christmas in September”. Trade properly waited a good 15 to 20 minutes after the opening to see if funds would sell again and when they didn’t, bulls were off to the races. New yield estimates from other firms, now as low as 143.3, refocused bull’s attention. This week is a short four day trading week that is ahead of the September Supply/Demand report. This report has a chance at keeping prices moderated. Bulls have almost all the fundamentals in their corner, as they have had for months. They are an eager group to come in and add support to this market as seen Friday. Bears only have a few technical factors to point out on their side. For the most part, a bear’s best friend will be any fund selling that can be found as it appears no one else wants to step out in front of a bull market.

Allendale Survey Focus: Over 25 states were surveyed last year and we expect something similar this year. We have collected the numbers and now begin the process of crunching the data. The worst moisture issue this year was in central Illinois where two month moisture totals are as low as 25% of normal. We expect the survey to show clear revisions in that data. Results will be out Tuesday at 730 am – Central! Also look for new Allendale yields, ending stocks, and price projections.

 

Trade recommendations:

 

  • (8/30) Sell December corn 793, risk 803, objective 740.

 

Working trades:

 

  • (9/1) Bought December corn 740, move risk up to 750, objective 775. Closed 760.

 

Weekly pork production sees as much as a 23% increase from summer low to fall/winter peak. Most of this increase, which the market is trying to price in, comes from number of head available. We must point out a part of it is from finishing weights. Though the July heat did hit the industry, we are right back to last year’s levels now that temps have moderated. For pricing, our $82 downside objective for December was reached today. Perhaps we were too conservative in our bearish expectation. Typically, this market posts a small rebound in September then resumes the pressure in October. We are not buying this market or lifting our current 75% hedged position…Rich Nelson

 

Working Trade:

 

  • (08/08) Bought April/sold December 4.45, risk at 5.50, objective 8.20. Closed 7.30.
  • (08/16) Sold 92.00 October call 1.90, risk to 3.97, objective 0. Closed .57.

 

 

 

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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.

Rich Nelson

Director of Research

Allendale Inc.

4506 Prime Parkway

McHenry, IL 60050

815-578-6161

 

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