March 11, 2015 Written by Chris Robinson Corn: May corn settled up 3 cents at $3.91 while new crop CZ settled up 2 ¼ cents at $4.14 ¼. Corn was higher overnight with soybeans, but didn’t get much follow though buying during the day session. Tuesday’s USDA was not a game changer in any way, shape or form. The trade continues focus ahead on planting intentions due on the USDA on the 31st which we get in exactly one dozen trading days. A third confirmed case of bird flu hit the news wire today. The avian flu is now confirmed in Arkansas, Missouri and Minnesota. So far the cases have been confined to turkey farms. Finally, technically corn trudges towards the apex of the wedge formation on the weekly charts which I have noted over the past two weeks. Resistance above this week comes at $3.97 and support below $3.83 ¼ for CK. Hedgers: Use rallies to protect unpriced any unpriced or unprotected 2015 bushels. We have 12 trading days left before the March 31st USDA planting intentions report. Wheat: May wheat settled up 5 3/4 cents at $4.99, while new crop WN settled up 4 ¾ cents at $5.01 ¾. Managed funds continue to be the talk of the trade, as they are nearing record short position currently short an estimated 70K contracts of wheat. Weather remains non-threatening across the US. The USDA was somewhat friendly if only because the USDA finally stopped increasing the US carry, even if by just 1 million bushels. A bounce is a bounce, but it’s all relative after a 3 month, $2.00 bushel sell off took us to contract and 5 year lows just last Thursday. As the wheat emerges from dormancy with the warm weather, any freeze or unexpected storm will be trumpeted by the bulls. The new 12 year high in the US dollar, combined with a worldwide carry out of over 7 billion bushels of wheat are the hard bearish facts US producers must endure. Hedgers: The jump in the US dollar has led the melt-down in prices over the past 3 months. Make sure you have identified what your break-even is for 2015 bushels given this changed environment. Clients that were on board before Christmas were able to protect much higher prices than current new clients are able to protect. We can custom fit a plan for your needs, but you need to identify your break even as a starting point. Soybeans: May beans settled up 8 ¼ cents at $9.92 ¾. New crop SX settled up 6 ¼ cents at $9.71 ½. Beans were higher overnight, and then whipsawed through a 10 cent trading range during the day session. Traders talked about the vessels lining up in Brazil, while the lines in the PNW for beans to China dwindled. This is to be expected as focus shifts to exports coming out of South America. The trade looks content to continue its sideways chop through the end of the month, as we await the March 31st planting acres from the USDA. Tuesday’s report held no real surprises for bulls or bears. Some worry came late after the first confirmed case of bird flu in Arkansas. A jump to chickens might result in export bans, which would most certainly decrease demand for meal. With the funds long 22K contracts of meal that might be a trap for any weak longs. The funds have a relatively small short position in beans, short just 9K contracts. Technically, we are still digesting last week’s 62 cent move from a 2 month high to a one month low. Hedgers: March 31st USDA is just 12 trading days away. Rather than spend 30 cents a bushel on a SX $9.00 put for the next 225 days, protect through the USDA with a $9.50 put for just 13 cents. Your floor is 50 cents higher; the premium (which we are willing to lose) is less than half that 30 cents; and you are protected for the next 43 days through this critical USDA report. Today’s last paragraph will focus on the impact of the US rally to 12 year highs. We watched the USD dollar index rally from 80 to close to 100 in the past 7 months (25%). In the last 12 weeks alone, the index has jumped almost 12 points or 14%. http://www.topthird.com/images/us-dollar-31115.png This is a chart of the US dollar going back to 1985. This chart gives us a picture, which is sometimes easier to understand. Basically, a higher dollar is generally, historically accompanied by lower US grain prices. When the markets are rallying and the funds are long, they are the farmer’s best friend. The rally in the US dollar combined with the decisions the managed funds make are two things that no one has any control over, in the long run. What we can control is how much we pay for our downside protection to make sure any continued down drafts in flat prices are addressed. We have 12 business days before that critical USDA report. Make sure you have a plan in case the managed funds and the US dollar continue to generate head winds against higher US commodity prices. CER
