December 18, 2014 Written by Chris Robinson Corn: March Corn settled up 2 ¾ cents at $4.11 which is the highest settlement in 5 months. CH has now rallied an impressive 83 ½ cents between the contract low posted October 1st and today’s fresh 5-month high at $4.11. Funds bought another chunk today after beginning the week long estimated 254K contracts. Exports were 639,500MT. Yesterday’s announcement that the Chinese lifted restrictions on several GMO varieties was friendly. However, with a 2 billion bushel carryout, the final impact on corn burn remains cloudy at best. A private forecaster pegged Europe’s corn production down 9% which is supportive as well. CH has resistance on the charts up at the gap from $4.23 to $4.26 which came after the July 4th weekend. Shifting to new crop 2015, today’s high at $4.37 ½ hit our target price for an additional 10% sale of 2015 guaranteed bushels. On this rally, we also re-owned another 25% of 2014 sales with call options. Hedgers: We are now at 30% sold of 2015 guaranteed bushels. If you had puts in place protecting these bushels, you no longer need them if you followed the cash sales. Wheat: March Wheat settled up 6 ¾ cents at $6.55 ¼ which is the highest settlement in 6 months. WH has now rallied an impressive $1.97 from its contract low at $4.80 posted on Sept 25th. This gain has clawed back almost $2.00 of the $3.00 for a 66% retracement of the break we saw which began after the 18-month high at $7.76 posted 5/6/14. A move like this is EXACTLY why we roll down puts and take value when we can during the life of the option. It’s also EXACTLY why we look to re-own cash sales with call options. Volatile markets give marketing opportunities if we stay disciplined as opposed to “overthinking” where prices “might” go. Fundamentally the world is awash in wheat; this is bearish. The US dollar’s rally makes our wheat the most expensive in the world; this is also bearish. It’s also important to note that over the last 9 days, open interest has shrunk every day. This is generally not a sign of a healthy bull market. Of course, we can’t talk this rally without thanking Mr. Putin. The sanctions against him combined with the halving of the price of oil have seriously crimped his access to currency that anyone in the world actually wants; typically US dollars or Euros. Continued worries they might curb exports was a popular bull story again today. No one knows how this will all get sorted. All we recognize is a great marketing opportunity. Hedgers: Today’s 6-mohth high in new crop WN15 gave us the opportunity to sell an additional 10% of guaranteed bushels. This gets us to 60% sold of 2015 guaranteed bushels. Soybeans: March soybeans settled up 8 cents at $10.35. This price is firmly in the middle of its 2-month trading range. The news continued to be mostly wheat and corn led. Exports were very good today with 696K MT of 2014/15 and 350K new crop 2015/2016. China is allowing a couple of varieties of biotech soybeans from the US which was seen as supportive. Now the beans are planted in South America, its little wonder that the weather bulls start beating the drums of worry. There has been ample rain up til now, but that won’t stop bulls from seizing on ANY report of dryness as a reason to talk up the bullish story. New crop SX15 settled at $10.19 ¾ well above the psychologically important $10.00 level. Technically, there is a lot of resistance above at $10.25 and then again at $10.50. Time and Mother Nature will determine if SX15 can ever take a run back at last May’s highs of $12.32. A lot of technical traders have their eyes on $10.80 as a goal, which would be a 50% retracement of the $3.04 melt down from that May high down to the contract low of $9.27 ½ posted on 9/30/14. Hedgers: No change in recommendations. The volatility we’ve seen in the markets reinforces the need to manage risk in a disciplined manner while keeping your opinions in check. Resist the temptation to look at the hedges, ( be they put options for unpriced grain or call options which replace cash sales) as an income stream. At the end of the day, we want our clients making good cash sales and we work very hard to make sure we get in that top 1/3 of available prices during a marketing year. Who would have thought with the world awash in wheat we could have seen almost a $2.00 rally from recent 4-1/2 year lows? Who would have thought with a 2 billion bushel carryout for corn, we’d have seen an 84 cent rally in spot corn, also in the wake of 4-1/2 year lows? Certainly not producers and speculators I was speaking to 2 months ago calling me up worried that corn was going to go below $3.00 by Christmas because they “heard it on the radio” or “saw it on TV”. Who would have thought this was possible with the US dollar making 5 year highs while crude oil lost 1/2 of its value in just 6-months? We all have opinions. But as risk managers, it’s our responsibility to make sure you’re in the game to make good cash sales when you WANT to, as opposed to making cash sales when you feel you HAVE to. Remember, your money is in the fields. We use the options to help you be in position to make the best cash sales we can; without benefit of a crystal ball or ESP. CER
