|
| In regard to unsold corn, beans & wheat. The fundamental side first: A thought about the dollar. For a variety of reasons I believe there is one more leg to the downside. I notice wheat gained some open interest in the front options in the down market yesterday…new shorts & new longs. Weather in Brazil is going to become a front burner issue. Overnight, there continues to be decent ocean freight fixtures. The acreage question is still open for debate. The predominant opinion is a lot more wheat acres, leaving corn, beans and cotton to bid for the remainder acres. On the risky side, the crop report Friday has to be survived. While I have my opinions about the reaction to it, those opinions are highly speculative. A slightly increased or lower bean number on this report or next should keep soybeans strong. Corn is going to be the weak sister as regardless of a swing of 1-200 million bushels we will have a sufficient carryout this crop year, the question is next year. The additional risk in corn is the possible reduction of the ethanol grind by USDA in the supply-demand calculations possibly offset with increased exports and feed use.
The technical side: old crop wheat could drop a dollar and from a pure technical view the bull trend line would still be intact. July corn needs a close over $3.88 to renew the bull posture. January beans cleared their resistance overnight and remain intact & now need to test the previous highs.
From my perspective, if the dollar does have one more leg down and uncovers another round of export business I would then anticipate a ‘demand top” in all of the old crop markets.
If you have already sold corn at a good price, I would tend to wait a bit on the balance. If you have not sold much, the current prices are not a disaster. In terms of hedging corn I would place the hedges in July 08, if we get a large report, with acreage still an unknown, the carry to Dec 08 should widen a bit allowing you to roll forward into Dec 08 (assuming you have on-farm storage). If we get the large crop number & acreage the carry between Dec 08 & July 09 should widen.
The same for beans. Except I would certainly have some already sold. In terms of hedging beans, I favor the August 08 with the idea of rolling the hedge back into the May 08 after the first of the year. Learn to study carrying charge relationships.
If it is at all helpful to anyone, I have always defined my speculative trading unit in different markets. What can I handle if I am completely wrong in everything? If, for example I want to trade 100,000 of a grain, I may scale into the position or go entirely at the market; priced orders are okay if in a trading range, but if I want in, I just go at the market; If I realize a sudden unexpected gain I will liquidate one-half of the trading unit giving me ammunition to re-enter the position on a reaction. However, if I am extremely committed to a market I will not take this action; but, in most markets, 75% of the trading is within a trading range & 25% of the time it goes on a breakout trend.
If offered between now and Thursday, I am going to lose ½ of my ½ unit of corn at $3.86. If Sept wheat closes below $6.60 I will sell more. I will exit Sept wheat, if the market instead goes above $6.79 coming into the close of any session. I now believe my hope for a break in soybeans is fantasy and plan to pick up a few Jan beans today and again take the worry beads out of the drawer. These wild markets are like watching a close relative in the ICU ward; you have to remain in tune as there is always something looming over the horizon. I dislike the situation whereby markets rally into a major crop report, the risk of a deep reaction is increased markedly.
| |
|
Reply to unsold grain
