Corn: December corn settled down 17 ¾ cents at $5.09 ¼. For the week CZ gained 18 cents. Today’s trade was volatile as we combined a Friday with the last trading day of July futures. July corn traded in a 26 ½ cent range on the screen, with a low tick at 7.00 ½. On the post close in pit trading, with no limits CN traded at $8.00. December posted its high of $5.27 on the pit open at 8:30 AM, headed south and never looked back. When the mid-day weather forecast came out, it added rain and took away the heat ridge. That was enough for any lingering bulls to throw the towel in and hope for a better weather story Sunday night. Thursday’s USDA report lingered on the minds of traders, but all in all, we are trading weather now. The critical pollination window should be between the 21st and 31st of July. The next 2 weeks of trade will ebb and flow based on the weather updates. On the export front, the USDA reported the largest sale of the year to China, 960K MT, raising the years total to over 3 Million MT. Support for CZ comes at $4.90 and then $4.60 which was the low on November 17, 2010. For the bulls, resistance above comes at Thursday’s 2-week high of $5.28 ¼, then $5.40. Hedgers: No changes in recommendations.
Wheat: December wheat settled down 2 ¾ cents at $6.93 ¾. KC settled down 2 cents at $7.24 ¼. For the week Chicago December gained 23 ¼ cents while KC gained 18. Considering the beating that new crop corn took, the wheat held up very well. Chicago is just 8 days post contract low at $6.66 ¼ posted on July 1st and 2nd. KC is just 5 days removed from its contract low posted on the 5th down at $7.05 ¼. The market got good news this week with the sales to China. It certainly looks like it’s trying to carve out a bottom, but a lot of the bulls thought that a few times over the past 8 month sell off. As risk managers, all we can advise is to stay balanced. The put protection we held over the past months did its job. Now that you are selling the physical grain off the combine, it’s time to lift your downside protection and make sure you re-own at least a portion of the grain you are selling off the combine. Put the crystal ball away and just manage your business risk. If you are selling physical grain now, your business risk becomes a sharp re-bound in prices. Hedgers: No change in recommendations.
Soybeans: November soybeans settled down 34 ¼ cents at $12.57 ¼. SX gained 29 cents on the week. However, on the weekly charts, it completed a very large outside-week-down, where we saw a 72 rally between Monday’s 6-week low at $12.25 and today’s 2-week high at $12.97 which came at 8PM during Thursday night’s trade. SX today opened on its day-session high at $12.88 ¾ and then collapsed. The selloff began with the July contract, which had a 75 ½ cent trading range. Support for SX comes at $12.25, $12.00 and then$11.86. Resistance above comes at $12.97, $13.21 and then $13.50. SX just fell off a cliff today technically. While the beans are known for “not liking wet feet”, we are far enough away from making this crop for that to come into play now. The trade digested the acres report and as is so often, voted on the second day after having time to step back from the initial emotion. The talk of lost double crop acres, potentially 2 to 3 million acres, fell on deaf ears today. Hedgers: Protect $12.00 beans through harvest for 30 cents a bushel. Mark recommended selling another 10% of your guaranteed bushels on Wednesday. As always, a huge part of the marketing plan is following Mark’s cash grain sale recommendations as we endeavor to get our clients priced out in the top third of available prices in a marketing year.
This week had something for both the bulls and the bears. This time last week, we had CZ settled on its heels at $4.91 ¼. Between last Fridays’ close and Thursday’s high, we had rallied back almost 40 cents of the previous 80 cent break. The bulls were happy, and we were glad we had our calls in place. 48 hours later, with the USDA report digested; the weatherman re-took the spotlight. CZ promptly gave back over ½ of that 38 ¼ cent rally with today’s low at $5.07. Suddenly, we are glad we have puts in place, and wish we had blown out of our puts yesterday on the highs. My point is this: If you as a client or potential client feel that we as risk managers should be selling your puts on the lows, and blowing out of your calls on the highs, then you are missing the point of a hedging program.
We are here to manage risk, not add to it by trading in and out of puts and calls every time they have a gain or a loss. When the markets get volatile, it becomes tempting to try to catch every swing. In reality, as a hedger, over-trading is the worst thing you can do for your bottom line. Instead; please let the options do their job. If the grains rally, you’ll have the grain to sell at those higher prices, even though the value of your put will decline. However, if we continue to grind lower, the puts will provide your floor and will gain in value. That is the difference between a hedging program and a speculative trading program.