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No news is negative for corn

Once again a lack of news resulted in very small changes in corn price today. As has been the pattern over the last 3 sessions, the corn market did continue the higher highs and lows to keep the very slow bounce going. December made a move close to 430 hinting that it might expire a large amount of 430 puts worthless but when that pulled back at mid day, corn was right back with nothing big left to trade. What was surprising today was that corn was unable to manage any amount of a bounce despite beans trading over 20 higher for most of the day. While it is true that beans had news overnight and corn didn’t, it would still be expected to see corn follow at least a little. Bottom line for the corn today is that no news means not much of a reason for active movements here. Bulls continue the very slow bounce on small volume while bears are likely waiting for a bit more profitable area to start selling aggressively. What is most interesting to note about this week is that March corn started the week at 430 and ended up closing at 429 3/4, meaning a weekly change of being down just 1/4 penny. Short term outlook continues to suggest a very slow bounce while longer term outlook calls for a grind lower until more bullish news is found.

Trade Recommendations:

  • Sell March at 439, risk to 455, objective 430
  • Sell March at 449, risk to 455, objective 430
  • Bought March at 425, risk to 415, objective 435



Cattle Commentary


The afternoon Cattle on Feed can be construed as very slightly bearish. Total number of new calves and feeders entering into feedlots in October, totaled 9.8% higher than last year. Young cattle placed in October will finish out, and hit the slaughter market, from second half March through early August. This was slightly higher than the average analyst guess of an 8.7% increase (ALDL +4.2%). As we noted before though, you should have expected this one to “sound” bearish. Keep in mind this number is being compared against 2012 when we had a record low October placement. Also, before this report we had suggested that previous months of placements insured we were set for a small supply of cattle from December through March. The heavyweight group of October placements was only 4% higher. That is the group that will finish from late March through mid-April. It was the 6# and 7# numbers which saw the big increase in placements. That hits the May and June timeframe. As it stands right now the total feedlot population on November 1 totals 5.7% smaller than last year. We contend this market is lined up for some extremely small supplies in Q1. Market ready numbers will be more available into summer. Our $140 February target still stands. If PED numbers hit the hogs as bad as some suggest we may consider revising that number even higher. On the other hand if consumer demand is hurt in Q1 due to Fed tapering, federal budget, and debt ceiling debates we may consider lowering our number. For the period after that we are not at all bullish. How June futures are running a $9 premium over last year is beyond us. In other news the Cold Storage report showed 443.6 million lbs. of beef in storage at the end of October. This is 3% over last year, an improvement over the 5% larger stocks at the end of September. For general price expectations we see the remainder of November as being a sloppy ugly timeframe where consumer resistance holds beef in check. As we get into December, and those smaller slaughters begin, we expect clearly higher prices to develop.

Trade Recommendation:

  • (11/22) Buy Feb cattle/sell Jun cattle 4.70, risk 1.20 from entry, objective 8.50.

Working Trade:

  • (8/14) Sold Feb 128 put market 1.65, risk to 1.25, objective 0 Closed 0.80.
  • (10/15) Bought Feb cattle/sold Jun cattle 4.92, risk to 3.32, objective 8.42. Closed 4.77.
  • (11/15) Bought Feb cattle/sold Jun cattle 5.50, risk to 4.20, objective 8.50. Closed 4.77.
  • (11/21) Bought February 132.57, risk 130.12, objective 138.22. Closed 132.17.
  • (11/22) Sold Feb 131 put 1.42, risk to 2.72, objective 0. Closed 1.42.



Rich Nelson

Allendale Inc. 


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