Spastic Markets!!!
Last week I saw some things in the markets that changed my opinion of price and value, both fundamentally and technically. As I am reporting the change earlier in the week and to customers last week on the phone, we get rain in the forecast for SA and the market gives it up! Rain wins for the week so far...Weather markets are always choppy, and this one is not letting us down; however, in light of the SA situation we have undoubtedly taken production down from the southern hemisphere. This has in my opinion lifted the floor for grain prices for the short term.
The bearish side of this market is without a doubt the US stats and the meat/ milk/ and ethanol markets here in the US. The chicken, cattle, hog and dairymen are under severe pressure in the current environment. I think the pile of corn is growing as we speak and the best ownership may be hay rather than grain! On the bullish side is the ongoing problems in SA and the propensity for countries to build reserves of food. The hog and feed report last week from China was very friendly to the demand picture. I know it may seem nuts, but countries remember last year all too well and are using weakness to buy in and build reserves. This provides a very vaulable bid for grains that was absent on the way down. I am not screaming buy and hold, but I feel that the lows are in. We have done irreversible damage to the SA crop whether it rains or not and our growing season is just around the corner.
The points above have made this market very spastic and two sided. Very choppy trade created by weather, electronic markets, and day traders.
For grain producers, please continue to use strength to make some sales if you haven't already done so. My bias is up for the short term.
For commercial users, use 2-3% down days to buy in corn the next 30-45 days usage.
The weather market is probably not over, the inflation trade continues to churn (watch gold) and our government is intent on reflating our economy at any cost. The US stats are ugly and getting uglier, but I don't think that is where the money is.
Good luck,
Jon Hart
Wednesday, January 28, 2009
Market Monitor by Marlin Clark
Grain markets erratic, but positive
Prices have been higher on the Chicago Board of Trade lately, but most days it has not seemed like that. We have had no steady gains, just bumpy trading.
Yesterday, Monday as this is written, was a good example. Prices were much stronger overnight, opened strong, then declined. We still had gains for the day, but the closing prices were disappointing.
Take the soybeans. March futures had a high of 10.41-1/2, but you would never have known it if you hadn’t seen the overnight. The day’s high was 10.40, and most of the trading was just above 10.00. We closed at 10.09, which was up almost a dime, but not up the 40 we once were. Overnight we eased of a penny or so,
March corn was also a disappointment, because we had an overnight high of 4.02-1/2, but did not quite get there on the open, and closed at under 3.94. Then, we lost four cents overnight.
March wheat futures finished the day up nearly a dime, and have held the gain overnight.
This is the kind of day that makes one think the top is in again. We have made good gains, after shrugging off bad news. Now, we have had a day when we ran away from the highs. And, the cynic in me says the top must be in because I spent all day yesterday taking targets that were tantalizingly above the highs are are not filled yet.
One sure sign of a top is when everyone thinks it will go higher.
Looking at the past six weeks is instructive. The lows were made in early December, then we had huge gains for a month. The January USDA reports stopped the gains, but we have spent the last two weeks trying to go higher. I remains to be seen if the current cycle is done, or if this is a glitch and we can challenge the highs seen around the 6th of January.
Marlin Clark trades producer and elevator grain for Keystone Commodities from an office near Andover, Ohio. He welcomes your comments at 866-293-4433.
Prices have been higher on the Chicago Board of Trade lately, but most days it has not seemed like that. We have had no steady gains, just bumpy trading.
Yesterday, Monday as this is written, was a good example. Prices were much stronger overnight, opened strong, then declined. We still had gains for the day, but the closing prices were disappointing.
Take the soybeans. March futures had a high of 10.41-1/2, but you would never have known it if you hadn’t seen the overnight. The day’s high was 10.40, and most of the trading was just above 10.00. We closed at 10.09, which was up almost a dime, but not up the 40 we once were. Overnight we eased of a penny or so,
March corn was also a disappointment, because we had an overnight high of 4.02-1/2, but did not quite get there on the open, and closed at under 3.94. Then, we lost four cents overnight.
March wheat futures finished the day up nearly a dime, and have held the gain overnight.
This is the kind of day that makes one think the top is in again. We have made good gains, after shrugging off bad news. Now, we have had a day when we ran away from the highs. And, the cynic in me says the top must be in because I spent all day yesterday taking targets that were tantalizingly above the highs are are not filled yet.
One sure sign of a top is when everyone thinks it will go higher.
Looking at the past six weeks is instructive. The lows were made in early December, then we had huge gains for a month. The January USDA reports stopped the gains, but we have spent the last two weeks trying to go higher. I remains to be seen if the current cycle is done, or if this is a glitch and we can challenge the highs seen around the 6th of January.
Marlin Clark trades producer and elevator grain for Keystone Commodities from an office near Andover, Ohio. He welcomes your comments at 866-293-4433.
Monday, January 26, 2009
Monday Morning Update--The worm is turning
I said to clients many times last week that the market felt like it wanted to go higher. From my viewpoint, the fundamentals continue to be bearish, but there is something more here. We had rain in SA over the weekend and grains finished stronger in the overnite. Gold broke out of the long consolidation to the upside and we have follow thru this morning, last at up 16 per ounce @ 913. I have been advising grain farmers to sell into the strength, still looking for a lower trade. Following a marketing plan is always the right thing to do, however, the end users need to pay heed to the tape and consider using any weakness to finish out purchase for the next 60 days as we seem to intent on moving higher period.
In this business, one cannot fight the trend for long. The market is right up against flashing lights that are buy signals from the technicians. If you are a producer, stay informed and set some price targets ahead using wide scales. If you are an end user, pay attention and buy and weakness for deliveries the 60-90 days.
Good luck,
Jon Hart
In this business, one cannot fight the trend for long. The market is right up against flashing lights that are buy signals from the technicians. If you are a producer, stay informed and set some price targets ahead using wide scales. If you are an end user, pay attention and buy and weakness for deliveries the 60-90 days.
Good luck,
Jon Hart
Wednesday, January 21, 2009
A word from Marlin Clark who trades from our Andover, OH office
Market Monitor
By Marlin Clark
Volatility continues in grain markets
If there is one thing to talk about in the grain markets, it is volatility. Grains have traded over wide ranges in short periods of time, even when we had to hunt for a reason for prices to change.
Blame it on the stock markets, blame it on USDA reports, blame it on the phase of the moon. Prices have moved around. Lately, the trend has been sharply higher, and the long weekend helped that trend in the corn markets.
March Chicago corn futures gained 7 cents in the Sunday-Monday overnight trading. That is only part of the story, however. Friday to Monday morning we have had a 42-cent range. Friday the market did not know how to lean over the long weekend, and was very weak for awhile. It ended on a positive note and has continued that.
March futures before the open Monday are at 4.07, after a foray in early December to 3.05-1/2. That is pretty sick after a June high over $8 on the March, but that was then and this is now. Then we wondered where all the ethanol corn would come from. Now we wonder where the financing comes from to keep the ethanol plants open. Then the farmers were lining up to contract with the ethanol plants. Now, the farmers are calling local elevators to use them as the middlemen to the ethanol plants so they know they get paid.
So, it is a different ball game now, and we are trying to find direction from here. Just when we thought the lows were in, the USDA reports last week gave us reason for low prices again. The good news is, that we dipped, but the old lows are still a long way away. Higher crop production numbers contributed to a limit-down move, but now we have digested the news. If bad news cannot make the market go down more than that, then the December 5 or so lows have held.
The rebound on corn is two thirds or so of the recent dip. The recent high was 4.27, and that does not seem so far away when we are at 4.07 instead of the 3.58 of last week. Now we are not so far away from the most critical news of the year, which is the Planting Intentions Report of March 31. After that we can worry about weather.
Marlin Clark trades producer and elevator grain for Keystone Commodities from an office near Andover, Ohio. He welcomes your comments at 866-293-4433.
By Marlin Clark
Volatility continues in grain markets
If there is one thing to talk about in the grain markets, it is volatility. Grains have traded over wide ranges in short periods of time, even when we had to hunt for a reason for prices to change.
Blame it on the stock markets, blame it on USDA reports, blame it on the phase of the moon. Prices have moved around. Lately, the trend has been sharply higher, and the long weekend helped that trend in the corn markets.
March Chicago corn futures gained 7 cents in the Sunday-Monday overnight trading. That is only part of the story, however. Friday to Monday morning we have had a 42-cent range. Friday the market did not know how to lean over the long weekend, and was very weak for awhile. It ended on a positive note and has continued that.
March futures before the open Monday are at 4.07, after a foray in early December to 3.05-1/2. That is pretty sick after a June high over $8 on the March, but that was then and this is now. Then we wondered where all the ethanol corn would come from. Now we wonder where the financing comes from to keep the ethanol plants open. Then the farmers were lining up to contract with the ethanol plants. Now, the farmers are calling local elevators to use them as the middlemen to the ethanol plants so they know they get paid.
So, it is a different ball game now, and we are trying to find direction from here. Just when we thought the lows were in, the USDA reports last week gave us reason for low prices again. The good news is, that we dipped, but the old lows are still a long way away. Higher crop production numbers contributed to a limit-down move, but now we have digested the news. If bad news cannot make the market go down more than that, then the December 5 or so lows have held.
The rebound on corn is two thirds or so of the recent dip. The recent high was 4.27, and that does not seem so far away when we are at 4.07 instead of the 3.58 of last week. Now we are not so far away from the most critical news of the year, which is the Planting Intentions Report of March 31. After that we can worry about weather.
Marlin Clark trades producer and elevator grain for Keystone Commodities from an office near Andover, Ohio. He welcomes your comments at 866-293-4433.
Monday, January 19, 2009
The week that was and the week that is
What a confusing week! Too much corn followed by everyone racing to cover shorts on Friday running corn up 26 cents in the process. We have the trade wanting to lean to the short side of the boat, but we all are perfectly aware of the developing weather/ crop story to our south. Being caught short going into a 3 day weekend in a weather charged market was not something most were willing to do. I know that SA is in need of moisture, some areas more than others. Our global supply of beans is not that great as to dampen a full fledged disaster in the souther hemisphere; however, haven't we all seen this movie before? It is my job to never let us forget that weather rallies in the grain markets are not something to waste, but something to take advantage of. Use this ralley led by the bean complex to sell something. Put in orders with you friendly grain broker, namely Jon Hart and Keystone Commodities, but put them in and let the market have your grain. Use wide scales, by that sell a load every 25 or 50 cents up. There is no way of knowing how far we can run this thing, 12:00 beans? not an impossibility. Just don't let yourself get hypnotized into thinking that this shall last! That is the mistake that all of us make and it is usually very costly.
All of the experts continue to make their 2009 forecasts, acreage estimates, etc. This has to be done and allows us to see where we are in comparison to other analog years and gives one the chance to predict price based on models from other years. That is what we do, evaulate, compare, compile, and predict. I urge you to remember that this is not a normal year and these are not normal circumstances. We are under severe financial duress, unpredicted by almost everyone and not well understood. If Mr. Market gives farmers the chance to sell grain at a profit, please take him up on it. None of us know what things will be like in 9 months or a year, maybe much better, maybe a little worse, but this is not the year to go all in on red in my opinion.
Things to keep in mind as we watch the markets this week. If we are really on a tear to the top side, please come back and reread these again.
All of the experts continue to make their 2009 forecasts, acreage estimates, etc. This has to be done and allows us to see where we are in comparison to other analog years and gives one the chance to predict price based on models from other years. That is what we do, evaulate, compare, compile, and predict. I urge you to remember that this is not a normal year and these are not normal circumstances. We are under severe financial duress, unpredicted by almost everyone and not well understood. If Mr. Market gives farmers the chance to sell grain at a profit, please take him up on it. None of us know what things will be like in 9 months or a year, maybe much better, maybe a little worse, but this is not the year to go all in on red in my opinion.
Things to keep in mind as we watch the markets this week. If we are really on a tear to the top side, please come back and reread these again.
Ethanol profitability remains at not much more than break even for the most efficient plants.- Corn going up and oil coming down adds pain, not analgesic!
The rally late last week has certainly put red ink back in the picture for pork, beef, dairy, and feathers. Cattle have not been able to rally even with the winter storm this past week that would have normally had cattle prices firming as the cold slowed movement as well as weight gains. Poor feeding margins have slowed feeding, the herds/ flocks are shrinking and most if not all durable rallies must be led my demand, not by fear of a shrinking supply. There is a difference here.....- The economy that is left continues to suffer. Much more pain to come in 2009 for main street america.
- I believe the dollar will continue to strengthen over this year as we confirm the fact that world cannot fight off the weakness in the US. I do not understand who thought that the world would march on w/o the good of US of A, but the world is flat as Tom F says and that means that when we have a cramp, the rest of the world is chewing down immodium. On this point, Prof. Milton Friedman say years ago that the Euro would not survive the first recession. People ask me how is the dollar so strong in this environment, to that I point you to Europe in a very deep recession and other emerging markets that are sought after by investors for growth and newness, not they are being sold for instability and possible insovency! People are flocking back to the dollar, betting on safety and solvency.
Good luck!
JH
Monday, January 12, 2009
Bearish report hits the grain market
USDA Ending Stocks Estimates from today's report
USDA Dec. 08/09 End Stocks Average Trade Guess
Corn 1.790 1.489
USDA Dec. 08/09 End Stocks Average Trade Guess
Corn 1.790 1.489
Soybeans 0.225 .186
Wheat 0.655 .655
Wheat 0.655 .655
Compliments of the Linn Group
"March Corn fell 30 cents to $3.80 per bushel. The combination of a bearish report from the USDA and crude taking a hit to the downside today helped corn lock limit down. Traders said that funds came in and sold 4000 contracts with options traders giving the indication that futures may open over seven cents lower. The USDA reported that corn production for the U.S. in 2008 came in at 12.101 billion bushels above the estimated 11.975 billion bushels. The USDA also reported that inspections for export were at 20.013 million bushels well below the estimated 24 to 29 million bushels. Argentina is still plagued by hot, dry weather adding stress to the corn and soy crops with Brazil fairing a little better. CFTC reports that funds cut their net shorts last week.
January Soybeans fell 83-1/2 cents to $9.54, with March locked limit down 70 cents to $9.66. Breaking crude adds to the selling pressure after the USDA reports larger than expected soy stocks. Traders said that funds came in and sold 6000 contracts with option traders giving the indication that futures may open four cents lower. The USDA reported that soy stocks were at 2.276 billion bushels for the period ending Dec.1. Well above the estimated 2.182 billion bushels. The USDA also report that inspections for export were at 23.228 million well below the estimated 25-30 million. The CFTC reported that speculators increased their longs despite todays break. Cash market remains steady to lower.
March Wheat fell 60 cents to $5.69-1/2 with May also locking limit down. Wheat also breaks on the USDA report of a larger crop and poorer exports. Traders said that funds came in and sold 5000 contracts with option traders indicating that the futures would open at their day session price of $5.69-1/2. The USDA also reported that inspections for export were at 19.613 million bushels nicely above the estimated 9 to 15 million. The CFTC report that speculators trimmed their net shorts last week. With the Midwest getting blanketed in snow, no threat of winterkill over the U.S. plains for this past weekend."
The question remains is the more liquidation left or is the start to something bigger?
7 % Stocks to Use would historically imply a 6.75-8.00 cash price. I am not 6.75 bearish beans but one cannot exclude anything this year!
Our corn stocks were 239 million over expectations and suggests a 20% decline in y/o/y in corn feeding. This is unprecendented but as I stated many many times to clients that very few were able to plug in 6.50-7.50 corn and produce a ROI. So now here we are wondering where all of that corn came from, makes me wonder? This in my opinion reduces concern over a potentially tight 09/10 US corn balance table and that is important.
Soybean stocks today are 95 mil bu over expectations—the largest ever in most databases. We still have to contend with Argentine weather and a hungry China which should stabilize our fall in price, but it appears that all eyes are on an increasing supply rather than demand. There is nothing bullish about total global grain stocks (mostly corn) advancing nearly 16mmt vs. last year. Today’s report spoiled the party for corn bulls—you’ll recall that the Jan ’08 crop report posted corn stocks nearly 300 mil bu less than trade expectations.... This is almost the polar opposite.
To close, this break was expected EX bullish surprise on the report. We came too far too fast for the rally to be durable. End users should use this retracement to be scale down buyers just the same as I told grain farmers to be scale up seller's on the rally. TO succeed in this environment, you have to be willing to do the hard thing and that is selling on the big green days when you are sure that it is going significantly higher and buy on the red days when the last to buy are the first in line to get out! For grain farmers, I urge you to consider selling strength when it happens or when Mr. Market gives us a chance. There may be limited opportunities to lock in profits, don't let indecisiveness get in the way of making 2009 a success.
Jon Hart
Wednesday, January 7, 2009
Grain Market Summary and Thoughts on Jan 7, 2009
March corn fell 11 cents to $4.16-1/2. After hitting two month highs some profit taking today plus falling crude helped fuel the sell off. The forecast has changed for the better in South America with rain predicted in some of the hot, drier regions. The recent bout of hot dry weather has reduced soil moisture in Brazil which has been adding to the stress of crops. The third largest importer of U.S. Corn, South Korea, reports that their largest feed maker might cut imports up to twenty percent.
January Soybeans fell 24-1/4 cents to $9.90 with March falling 26 cents to $9.90. Profit taking pressured the market after hitting the ten dollar level but the large Chinese demand and the recent bout of hot , dry weather in South America may have slowed the break a bit. The possibility of rain in Argentina and Brazil could help fuel the sell off.
March Wheat fell 30-1/4 cents to $6.13 per bushel. Profit taking today after the recent fund buying and the rally in corn and beans helped push wheat to a three month high.
Trends and trading ideas:
Gravity has it way some days in this business and today was one of them. I woke up early to read my daily 4 or 5 page review of all of the markets to find there was another book cooker in India that had the equity markets on edge. The foreign exchange market is and has been looneytown as the USD and the EURO are trading in a ridiculously wide range. And to top it off, today was inventory day for the energy markets. Just like in physics, all it took was a little nudge and gravity did the rest. The equity markets fell victim to profit taking, the crude inventories were larger than expected which sent crude and the products off the cliff, gold was weak and the grains did not have a chance.
Every couple of days I find another blurb that is negative to corn. It is ofcourse already in the market, but with fertilizer prices weakening and corn values strong enough for farmers to lock in some profitability, I am negative corn but it may take time to get there and I recognize that we may trade in a 3.85-4.85 range for awhile, but my long term bias is negative based on the fundamentals and the structural problems in the energy market.
The energy analysts tell me that 35-40 crude should hold this break to the down side. Grain farmers beware of the energy market that wants to roll over below the 32 ish lows from the end of 2008. This would be very negative corn. The bio/ renewable fuels industry already has the O2 mask on, 4.00 corn and 1.35/ g gas for any length of time would force even the most efficient operators onto life support.
We seem to have decoupled from the daily moves in the dollar but I wonder if this will continue throughtout the year. As I stated in an eariler post, the dollar is key to the pricing of our markets in the long run. Stronger dollar in the short run does not always equal lower grain prices, but in the long haul if the low in the dollar coincided with the high in crude oil, we have to consider the fact that a strengthening dollar in 2009 may put significant pressure on the crude market which is the driver for the grains save for production problems.
The short term trend is still higher for c/b/w. Monday is a crop report possibly full of surprises. With weakening fertilizer prices and better grain values there is light at the end of the tunnel in 09 for the grain producers if they are willing to act.
Good luck
Jon Hart
January Soybeans fell 24-1/4 cents to $9.90 with March falling 26 cents to $9.90. Profit taking pressured the market after hitting the ten dollar level but the large Chinese demand and the recent bout of hot , dry weather in South America may have slowed the break a bit. The possibility of rain in Argentina and Brazil could help fuel the sell off.
March Wheat fell 30-1/4 cents to $6.13 per bushel. Profit taking today after the recent fund buying and the rally in corn and beans helped push wheat to a three month high.
Trends and trading ideas:
Gravity has it way some days in this business and today was one of them. I woke up early to read my daily 4 or 5 page review of all of the markets to find there was another book cooker in India that had the equity markets on edge. The foreign exchange market is and has been looneytown as the USD and the EURO are trading in a ridiculously wide range. And to top it off, today was inventory day for the energy markets. Just like in physics, all it took was a little nudge and gravity did the rest. The equity markets fell victim to profit taking, the crude inventories were larger than expected which sent crude and the products off the cliff, gold was weak and the grains did not have a chance.
Every couple of days I find another blurb that is negative to corn. It is ofcourse already in the market, but with fertilizer prices weakening and corn values strong enough for farmers to lock in some profitability, I am negative corn but it may take time to get there and I recognize that we may trade in a 3.85-4.85 range for awhile, but my long term bias is negative based on the fundamentals and the structural problems in the energy market.
The energy analysts tell me that 35-40 crude should hold this break to the down side. Grain farmers beware of the energy market that wants to roll over below the 32 ish lows from the end of 2008. This would be very negative corn. The bio/ renewable fuels industry already has the O2 mask on, 4.00 corn and 1.35/ g gas for any length of time would force even the most efficient operators onto life support.
We seem to have decoupled from the daily moves in the dollar but I wonder if this will continue throughtout the year. As I stated in an eariler post, the dollar is key to the pricing of our markets in the long run. Stronger dollar in the short run does not always equal lower grain prices, but in the long haul if the low in the dollar coincided with the high in crude oil, we have to consider the fact that a strengthening dollar in 2009 may put significant pressure on the crude market which is the driver for the grains save for production problems.
The short term trend is still higher for c/b/w. Monday is a crop report possibly full of surprises. With weakening fertilizer prices and better grain values there is light at the end of the tunnel in 09 for the grain producers if they are willing to act.
Good luck
Jon Hart
Monday, January 5, 2009
Trying something new for 2009, feedback welcome
I will be making an effort to post updates here atleast weekly on what is happening in central pa grain markets, maybe a few words on the macro view of agriculture and anything else that I feel needs to be said. The below is the Friday market review from my futures broker. It is a informative review of the last year. It has been a very strange year with the volatility unprecedented in our long grain trading history. Markets responded to the fundamental loss of world wheat production with a rally that carried to $25 a bu in spring wheat and $13.80 in KC and 13.30 in Chi. This stretched the wheat hedger so that he unloaded hedged positions as fast as he could. What was considered a tenuous tie between futures and cash got stretched even more---basis bids got really weak and eventually disappeared totally. No one wanted to bid for deferred shipments due to the cost of carrying hedges on grain bot $8.00 below the current levels. Some hedges were replaced with long puts to stop the growing margin calls from markets that were moving $1.00 a day in some instances. This action forced the move to change the wheat contract---finally adopted late in the calendar year increasing the delivery locations and raising the storage charges for the first 5 months of the year. The corn market had a different driving force with the move to increase ethanol production. Profitability had grown as the energy markets rallied on tightening supplies around the world. Everyone became familiar with the term “Peak Oil”. As the high cost of row crops and energy drove up food prices all around the world there was a huge cry to fix the problem. Ethanol unfairly got a lot of the blame for inflationary food prices. When the US Gov decided to act they went right at the source of the inflation---speculation in the energy market. I will write more as I see how this works and I see the response from all of you..!!
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