USDA Crop Report

News & commentary on the USDA Crop Report and Grain Futures markets including wheat, soybeans, corn & more

USDA Crop Report is a blog dedicated to bringing updates, news and commentary on the USDA Crop Report and the grain futures markets including wheat, corn, soybeans and more.

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12/27/2015 Corn has a sell signal

Posted on 1/29/2015 1:40:52 PM by: Larry Baer, Market Strategist @ Zaner. 312-277-0112.

Sadly there evidence

Call me for trade

 

 


How Long Can Ethanol Production Chug Along?

Posted on 1/29/2015 1:24:19 PM by: Ted Seifried, VP, Ag Hedging @ Zaner. 312-277-0113.

Sadly there eviden

Ethanol production has been the bright spot for corn demand so far this marketing year with corn use for ethanol production beating the average needed to hit the USDA target for the last 10 consecutive weeks.  However, in the last few weeks the average Iowa ethanol profit margins have swung negative and stocks are sharply higher.  With lower crude oil prices and negative profit margins how long will we continue to produce ethanol at a better then expected pace?
 
Corn usage for ethanol production needs to average 99.25 million bushels a week to hit the current USDA estimate of 5.175 billion bushels.  The average for the last 10 weeks has been about 103 million bushels a week.  If this current pace were to continue we would overshoot the USDA projection by 100-120 million bushels.
 
While production has continued to run at the highest levels we have seen since pre-2012 profit margins have dropped and ethanol stocks are up sharply.  With low unleaded gasoline prices putting pressure on ethanol prices and higher (then harvest lows) corn prices profit margins have dropped significantly in recent weeks.  We have gone from a positive $2.40 per bushel profit margin back in October and November to a negative $.20-.40 in the last three weeks.  This may not be enough by itself to slow down ethanol production, but incentives are certainly lessened for ethanol producers.
 
As profit margins sputter ethanol stocks have increased dramatically over the past few weeks.  In a little over a month ethanol stocks have gone from about 17 million barrels to just under 21million barrels today.  This is a near record increase in stocks for the time frame.  However, ethanol stocks still remain well below early 2012 levels.  In early 2012, before the drought, ethanol stocks had reached just shy of 23 million bushels.  This suggests that ethanol storage capacity has some room, even if it has not increased since 2012.  However, if stocks continue to build at the current pace we could be at early 2012 levels within the next month.
 
This could suggest that despite growing ethanol stocks and falling profit margins we could continue to produce ethanol at a better then expected pace for some time.  But, at some point storage capacity may become an issue.  It is not clear to me if storage capacity has increased dramatically since 2012, but even if it has storage capacity is finite at a certain point.  The question will be if ethanol producers are willing to continue to produce at elevated levels if profit margins stay low for an extended period of time.
 
The bottom line is that a better then expected pace of ethanol production has the potential to cut into the 1.877 billion bushel carry over the USDA is currently projecting.  If the current production pace keeps up it could suggest that demand for corn used for ethanol is 100-150 million bushels stronger then the USDA estimate.  This could be significant if corn demand for feed and export meets of beats current expectations as well.
 
Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.  Also, follow me on twitter @thetedspread if you like. 
 
March Corn Daily chart:

March Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie


Will Grains see a February - May Bounce?

Posted on 1/29/2015 12:18:35 PM by: Ted Seifried, VP, Ag Hedging @ Zaner. 312-277-0113.

Sadly there eviden

Seasonally it is not uncommon for grains, corn and soybeans in particular, to see a bounce in the February to May time frame.  This seasonality makes sense in many years as markets can rally on South American harvest delays, to "buy' acreage in the US or due to concern of US planting delays.  However, there may not be a high correlation with seasonality this year for the grains markets.
 
Last year is a good example of a Feb thru May rally in grains.  Starting the beginning of February soybeans managed to rally almost $3.00 peaking at the end of May.  Corn started its rally a little earlier, in the middle of January, and managed a little over $1.00 off the lows peaking in April and again in early May.  Wheat was also able to rally almost $1.80 from very late January to early May.  When all was said and done this was a better then average Feb - May rally and had a unique set of fundamentals driving it.
 
At this time last year export sales were very strong for grains and oilseeds.  For corn global demand was playing catch up from the drought shortened 2012 crop.  Wheat was having weather issues with drought conditions in the Southern plains.  Soybeans, which seemed to be the leader of the pack, were setting a record export pace on the back of seemingly endless China demand.  As it turned out, China was double booking soybean shipments from both the US and South America to hedge any South American harvest delays with the idea that they would cancel US shipments if they didn't need them.  However, maybe partly due to issues with rejected corn shipments, we were not willing to let the cancel.  At the end of the marketing season we had a 92 million bushel carry over in soybeans which effectively means we ran out of soybeans.
 
This year may be a different story however.  With good crops in 2013 and record crops in 2014 we have mostly caught up with the supply deficit left by the 2012 drought year.  Corn exports have been good recently but are on pace to fall well short of last year.  Soybean exports have been very good to start the marketing year but have fallen off in recent weeks with China canceling a good amount.  This time last year China was still a very aggressive buyer and this continued for a few more months.  Weather has also been milder this winter, possibly suggesting better wheat and normal planting conditions.
 
Another interesting note is that seasonality has not had a strong correlation so far this marketing year.  In the beginning of October, when we would normally be making new lows in a year with record crops, grains began a multi-month rally.  This was due to corn yields not being quite as exceptional as expected, Russian - Ukrainian tensions causing concern about increased corn and wheat exports, and most of all a massive shortage in the soybean meal market.  As mentioned before, we effectively ran out of soybeans last year which dropped crush down to near 10-year lows.  This meant there was very little soybean meal available.  Soy meal quickly rallied back above last summer's highs and grains as a whole followed.
 
This may suggest that we may have had our spring bounce early this year.  Higher prices, especially in corn may have encouraged more planted acreage as producers had the opportunity to hedge or forward contract at prices that were well off the lows.  South American and US weather looks mostly normal going forward, however it is too early to tell exactly what conditions will be.  This could mean that the record crops from last year may put pressure on prices going forward short of a major weather issue with South America in the form of a late season drought or major harvest delays, or major planting delays here in the US.  Nothing is ever certain in markets or weather so it will certainly be interesting what develops in the next few months.
 
Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.  Also, follow me on twitter @thetedspread if you like. 
 
March Corn Daily chart:

March Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie


Soybean Meal Questions

Posted on 1/27/2015 4:14:05 PM by: Ted Seifried, VP, Ag Hedging @ Zaner. 312-277-0113.

Sadly there eviden

This year corn and soybeans put lows in during the first week of October.  Mid-harvest, or early harvest lows are usually indicative of a crop year where yields were smaller then expectations.  While corn yields have come down a little from early expectations the national average yield was a record by far, as were soybeans.  So, this was an odd year for a harvest rally.  However, there was something else at play here and it was directly related to the old crop soybean balance sheet.  We effectively ran out of soybeans last year which led to a sharp drop in crush which led to very low soybean meal stocks.  With soybean meal being the leader on the way up what is the soybean meal outlook going forward?
 
With a 92 million bushel ending stocks figure for soybeans last year we basically ran out of soybeans.  Soybean crushers were having a very hard time sourcing beans and the crush dropped to near 10 year lows.  A low crush resulted in very tight soybean meal supplies and soybean meal prices quickly responded to ration demand.  By mid-November soybean meal prices we trading well over the highs from last July, thereby erasing the effects of a record soybean crop.  This sharp rally in soybean meal prices supported soybeans and corn and pulled them off low at an unexpected time.
 
With soybean meal being the leader to the upside on the rally off of lows we are very interested to where meal could be headed from here.  I have one question - What do you get when you have a record crush margin and a record soybean crop?  The answer could be record meal supplies.  The tightness in soybean meal back in October and November was a temporary issue.  Now that soybeans supply is abundant and crushers have had a chance to lock in very favorable margin soybean meal stocks should more then adequate.
 
The bigger problem may be that while soybean meal prices went sharply higher end users may have looked for substitutes.  This is the point of price rationing, to get buyers to look for other alternatives.  However, in this case the supply issue was very temporary but the impact on demand may not be.  Many end users looked toward the abundant DDG stocks for answers and found a great alternative.  With ethanol production ramping up after a record corn crop DDGs may provide a viable alternative for soybean meal longer term.  The switch has been made and soybean meal prices may at some point have to go and buy back demand at some point.  The question is how low meal would have to go (if lower at all) to buy demand back and the market is the only one who can answer that question with certainty.
 
While soybean meal was the leader on the rally off of lows it could also be the leader to the downside at some point.  After two months of near record crush numbers it seems that soybean stocks should be more then adequate at this point.  The questions are "how much soybean meal demand did we loose?" And "how low do we need to go to buy it back?".  The markets could be looking to answer these questions in the months to come.  As long as South American production holds up there could be a big need to "find" more meal and soybean demand later in the year.
 
Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.  Also, follow me on twitter @thetedspread if you like. 
 
March Corn Daily chart:

March Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie


Options play: How long will this soybean slide last?

Posted on 1/25/2015 9:45:13 AM by: Matt McKinney, Market Strategist @ Zaner. 312-277-0115.

Sadly there ev

Direct-312-277-0115, http://www.mmckinneyfutures.com/

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.

 

 

Options play: How long will this soybean slide last?

There are many different factors that have contributed to the slide in soybean prices over the last week.

 

Fundamentally, some of the factors that have had an impact on the slide in soybean prices from a high of about $10.61/bushel on January 12 all the way down to a low of $9.67/bushel on January 23 are too many to mention here, but I will cover a few. I'm hearing from conversations with traders and farmers that the South American crop that will come to harvest in the coming weeks should be a big time bumper crop, if not a record crop. Although I'm reading that our number one buyer the Chinese have had some very good overall economic signs over the last week which could lead to very solid demand price action is showing me that might not be enough to push prices up.  In fact according to morning Hightower commentary on Friday, "China's Shanghai Composite was also higher and advanced into the highest level in five years, with an added source of support coming on a slight beat in Chinese manufacturing activity in January." That's great news for their economy, but will it actually translate into solid bean purchases by China? As of now prices are telling me not.

 

Technically, I have added my favorite technical indicators to the gold chart below. They are the 9 (red line), 20 (green line), and the 50 (blue line) period simple moving averages or SMA's. I have also added Bollinger Bands or BB's (the light blue shaded area) and Candlesticks (the red and green bars). On the daily chart below each bar or Candlestick represents one day of trading. These few technical indicators tell me 6-12 different characteristics about the market at a quick glance. I have them saved on my charts in MARKETHEAD so they can populate any chart, any market, and any time frame at the click of a mouse.

Also from a technical standpoint this is a break out to the downside on the chart below in my view. We also have what I have coined a "SUPER-TREND" down on this March soybean chart. In order to achieve this what we need to have happen first is a cross of the 9 period SMA (red line) down and under the 20 period SMA (green line) as both indicators point lower on a fairly sharp angle while the market itself trades below the 9. Now we have the 9 period SMA as our first area of resistance, then the 20, then the 50 SMA's and finally the top line of the BB's.

 

March daily soybean chart

 

OPTION PLAY:

Some good plays I think could be to buy puts or bear put spreads with a call for a hedge or "insurance" in case the trend changes to up dramatically. I would recommend this in a 3 to 1 ratio as always. Puts or bear put spreads have a limited risk. Another play could be to sell deep out of the money calls to collect premium. This tsrategy requires a well-funded account and a high risk tolerance. But as they say, no risk no reward.

For exact details on strategies, months, expiration dates, strike prices, and number of positions feel free to contact me at 312-277-0115 or mmckinney@zaner.com .

It is also important to note that I am not married to a market, but to trends. So I make recommendations with options on futures and commodities like the energies, metals, currencies, softs, financials, and more. So whether you are a hedger or a speculator I believe I can help by putting together strategies and recommendations present them to you, then as always leave the final decision in your hands. We work as a team. Also recommending when to get in and when to get out while watching the trade every step of the way as I keep you updated personally. May all the best trades be yours and mine.

 

FREE QUOTE- "Diamonds are made under pressure." -Peter Marshall 

 

 

 

FUTURES, OPTIONS AND FOREX TRADING IS SPECULATIVE IN NATURE AND INVOLVES SUBSTANTIAL RISK OF LOSS. THESE RECOMMENDATIONS ARE A SOLICITATION FOR ENTERING INTO DERIVATIVES TRANSACTIONS. ALL KNOWN NEWS AND EVENTS HAVE ALREADY BEEN FACTORED INTO THE PRICE OF THE UNDERLYING DERIVATIVES DISCUSSED. FROM TIME TO TIME PERSONS AFFILIATED WITH ZANER, OR ITS ASSOCIATED COMPANIES, MAY HAVE POSITIONS IN RECOMMENDED AND OTHER DERIVATIVES.

 

 

FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERDLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STICKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT OPTIONS PRICES MAY ONLY MOVE A LITTLE.

 

THE LIMITED RISK CHARACTERISTIC OF OPTIONS REFERS TO LONG OPTIONS ONLY AND REFERS TO THE AMOUNT OF THE LOSS, WHICH IS DEFINED AS THE PREMIUM PAID ON THE OPTION(S) PLUS FEES.

 


 

 


THE MEAL REMAINS THE KEY IN MY OPINION, WHEAT COMPLEX REMAINS WEAK OVERALL.

Posted on 1/21/2015 6:42:56 AM by: Rick Alexander, VP, Trading @ Zaner. 312-277-0107.

Sadly there eviden

WE HAVE A VERY GOOD HEDGING DEPARTMENT HEADED BY TED SEIFRIED. WHY NOT TALK TO HIM OR ANY OF OUR OTHER HEDGING BROKERS. NO ONE WILL PRESSURE YOU AND WHAT HAVE YOU GOT TO LOSE? I'VE BEEN A LICENSED FUTURES BROKER FOR 41 YEARS AND TRUST NO ONE MORE THAN TED AND HIS GROUP.

Higher for Minneapolis, Kansas City and Chicago wheat along with corn, oats and soybean meal while lower for rough rice, soybeans and soybean oil.  The wheat complex has staged a small rally over the last few days but remains very bearish overall. Minneapolis has looked better than KC as evidenced buy the spread between the two. Also, at least so far, all three have held critical support areas with Minneapolis needing to hold the 550 area, KC 570 and Chicago 520 or else it could be a long 2015 as I mentioned last week. Oats have also rallied but still look very bearish with little resistance up to the 300 area in the way of falling further. Although rice had reversal type action last Thursday and little resistance up to 1160, it also remains in a strong downtrend overall. Corn closed higher while continuing to hold a strong looking support area so far. Holding 375 and 350 look important to me. The beans and oil settled down while the oil higher. The beans and meal have heavy resistance overhead and look to head lower in my opinion. The meal's weakness is what concerns me the most. Oil has been in a sideways to higher pattern since November while having upward momentum since the beginning of December.  Beans not holding the ten dollar area is not good also. Still, I'm going to remove my sell signal for the oil and stand aside at this time. SELL SIGNALS FOR MINNEAPOLIS, KANSAS CITY AND CHICAGO WHEAT ALONG WITH CORN, ROUGH RICE, SOYBEANS AND SOYBEAN MEAL. For additional charts, quotes, news, commentary & more, sign up for a FREE 30 day trial to markethead.com.


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