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USDA
releasing info this morning that China cancelled 300,000 tons of soybeans
for the 2012/13 marketing year and that another 120,000 tons where canceled
by "unknown" destinations. This is obviously being digested as
"negative" and is forcing some soybean bulls to rethink Chinese
import demand.
South
America seems to be somewhat mixed as thoughts are Brazilian production
could be huge (larger than the current USDA estimates), while Argentine
production of both corn and beans could be substantially below the current
USDA estimates.
Argentine
government has decided to limit wheat exports during the first two-months
of the year to just 2 million tons.
Looking
To Build A Floor In New Crop Soybeans: Producers wanting to lock in a portion of your
2013 estimated soybean production might want to consider buying the NOV13
$13.00 puts and selling the DEC13 corn calls to help finance this floor. We
recommended this strategy a few weeks back, selling (2) corn calls for each
soybean put @ even money or slightly better.
TRADE & HEDGING UPDATES
We
really haven't made any adjustments to our hedging or trading portfolio
during the past couple of weeks, except for scaling back our end-of-year
holiday trade exposure.
Old-crop
corn hedges will be kept in place for while longer. Currently we are up
about $0.10 to $0.15 cents on these positions. I might scale out of a
portion once I believe the timing is right. Which will more than likely
once Brazil starts to run out of exportable corn supplies. As for now sit
tight with the $7.00 floor.
Producers
who are sold out of "old-crop" bushels and want to jump back in
the game in case we see late inning rally should consider the bull spreads
vs. being long the outright flat price contracts. I am just afraid there is
too much down side risk still in the marketplace to be outright long the
board or have some type of future contract re-owership. I believe there
might be a better opportunity in owning bulls spreads such as long MAR13
corn vs short JU13 corn or long MAR13 vs short MAY13 corn. I haven't
officially re-entered any type of corn bull spread as of yet, but I do have
a few on my radar screen and continue to patiently wait for an opportunity
to initiate my position.
JAN13
meal call/put spread is more than likely going to expire out-of-the-money
on Friday. We collected about $0.02 cents when we put the position on so no
harm...no foul. We will no longer have any type of JAN meal spreads or
hedges in place at this time.
Long
MAR KC Wheat vs short MAR CBOT Wheat will be held a while longer, as there
is talk the funds need to rebalance by purchasing a large number of KC
wheat contracts and selling over a big chunk of their long CBOT wheat
contracts. We currently have some good profits in this trade, and I
know some of you have talked about banking the returns. I personally want
to hold it for now to see how this rebalancing shakes out.
Coffee
market continues to intrigue me. Coffee on the board has gotten hammered by
more than 40% this past year, and I have to believe it is a
"longer-term" bargain. The problem is this market can be
extremely volatile, so holding through more downward pressure could be very
painful. I will eventually be daring enough to once again dip my toe back
in the waters, but for now I am going to continue watching this market from
the sidelines.
Current Portfolio -
24% at risk - 76% cash
CORN HEDGE - 10/26
Long MAR13 $6.70 & $7.00 Puts vs Short MAR13 $8.50 Call collecting $0.01 to
$0.02 cents - HOLD - For
producers this gives you floor at $6.70 and HTA type sales on any unsold
bushels at $8.50. For specs, your ultimate risk is corn settling beyond
$8.50. From my perspective it will take some serious South American weather
concerns to make this happen. I am not ruling that out of the realm of
possibilities, I am just saying "IF" the weather cooperates we
are breaking...no two ways about it.
CORN HEDGE 10/26
Short the DEC13 $6.00 straddle collecting about $1.30 - HOLD - This position keeps you in
the money as long as DEC13 corn settles between $4.70 and $7.30. Downside
same as above, it ties up money for along period of time and does NOT
provide a traditional floor. Be sure to speak with your advisor
before committing bushels.
SOY HEDGE 10/26
Short the NOV13 $13.00 straddle collecting over $2.25 - HOLD - This position could obviously be extremely
volatile over the corse of time considering the massive range of the
soybean market but if we end somewhere between $10.75 and $15.25 you will
be able to bank a little premium. The obvious fear is a market trading
below $10.75 (THIS DOES NOT PROVIDE A FLOOR!). If the market were to
explode higher you would have HTA sales on the board at $15.25. I wouldn't
commit a large number of bushels to this strategy, but it might be
something to diversify a small portion. *For those who want more defined
downside protection consider using a small portion of the premium to pick
up a $12 put to something to lock in your downside.
Long MAY13 Soybeans
vs Short JUL13 Soybeans @ $0.10 inverse - Rolled 50% of the short JUL13
positions into short MAR13 positions - HOLD - Obviously if we are
right in our assessment of the worlds soybean situation, one being in
extremely tight supplies moving forward, and baring any complete global
economic financial melt-down, you have to believe the "inverse"
and front-month premium in the May contract will continue to lead the July.
I believe there is big potential in this trade with somewhat limited risk.
We rolled a portion of the shorts forwards to protect on the down hill
slide.
Long MAY13 Soymeal
vs Short JUL13 Meal - HOLD Simply looking to play the
"logistical" issues that could occur in South AMerica once the US
soybean supply is depleted.
Long JAN13 570
Soymeal Call vs Short JAN13 420 Put @ even money - HOLD - Support in the Meal
market seems to be strong down around 410 but may push as low as 400. Be
patient! We are currently taking some heat on this position.
Long JUL13 $14 Bean
Call & Short (2) JUL13 $9 Wheat Calls @ Even - HOLD -
I like this trade because I believe there is more potential for July
2013 soybeans to push well beyond $14, especially if there are any
production type glitches in South America. Wheat on the other hand will
take some more serious production type problems to end up north of $9.00
per bushel. If your a wheat producer this seems a like no-brainer. You have
basically no downside risk directly associated with the trade. If wheat
prices race higher you are short the board with HTA type sales at $9.00,
that should be ok in anyones book. If beans happen to explode you might
bank a nice profit. If both head lower all you are out is the cost of
putting the trade on.
Long DEC13
Chicago Wheat vs. Short JUL13 Chicago Wheat @ $0.10 - HOLD Thoughts are this spread could widen out to $0.30
to $0.50 cents once we get there considering we may see an additional
10-15% in SWR wheat acres here in the US.
Long MAY13 Wheat
vs. Short JUL13 Chicago Wheat @ 0.30 cent inverse - HOLD A
more risky version of the trade listed above. You have to believe with
25% (my guess) more acres and with 80mmbu already in deliverable positions
the inverse will likely be at a carry by the time we get there.
10/12 Long MAR13
KC Wheat vs. Short MAR13 Chicago Wheat @ $0.35 cents - HOLD - With HRW stocks down
aggressively and SRW stocks higher I think there is potential for this
spread to move out towards $1.00 premium to the KC contract. keep in mind
there are also some "quality" issues being kicked around in
Argentina and Australia right now. I hate to say this, but you will need to
risk about $0.20 cents on the trade simply because fund-volatility in the
KC contract can cause some very abnormal spread movements so don't go
overboard with size. Look to scale in on strange breaks or movements.
Long DEC13 Corn vs
Short MAY13 Wheat @ around $2.80 premium to the Wheat - HOLD - From our perspective the wheat
market seems to have more downside risk than the corn market at this
juncture, despite the poor growing condition reports here in the US in
regards to wheat. For this reason I like being long the DEC corn market
over the May wheat contract. This position could experience some extreme
price swings so be cautious of the risk associated.
11/29 Live Cattle
Hedge - I
am just a little worried that the Fats could fall back to the lower end of
trading range. Putting a little protection on at this juncture certainly
makes sense. Below are a couple of ideas:
- Buy the FEB13 130 Put and
Sell the FEB13 135 Call for
60 points or better. Should cost you around $250 or less. Options
expire on Feb 1, 2013.
- If you are looking to hedge
a portion of your 2013 Q1 marketings. Which I would recommend. You can
consider Buying an APR13 134 Put and Selling the APR140 Call for
about 115 (or about $460). This give you a floor at 134 and sales on
the board at 140. I would hedge at least 25-45% of estimated
marketings.
MARKETING
DETAILS - Hedging Details & Previous Cash Sales
CASH SALES
>>> Corn
2012 - 90% Sold
- 10% Hedged - Last cash sale made with DEC12 corn around $8.30,
previous two sales made at just above $7.90. Two previous cash sales before
this made with DEC12 prices just above $7.00. Our worst sale was made at
around $5.60 vs the DEC12 contract. Prior to this our early new crop sales
were recommended months ago in the $6.25 and $6.50 area. Floor on 20% at
around the $7.20 area.
We currently have
hedges in place that will put us short the board vs the MAR13 contract at
$8.00 and $8.20 should we rally. Those looking to move more cash bushels
should target $7.74, there is strong resistance right around $7.75 so be
careful. Those who don't mind the risk, can consider holding into the next
wave of technical resistance at $7.95. Players using the board that
currently have NO hedges in place should think about selling their cash
bushels into a strong basis and re-owning the cheap volatility in the
front-month.
Corn 2013 - 30% cash sold - 0% Hedged
- Last sale made with SEP13 corn trading just above $6.55, previous
sales made with SEP13 trading just above $6.90, $6.15, and $6.50.
Total sold 30%
Next target is $6.75
vs SEP13 or if you don't like selling in to the Sep contract consider
pulling the trigger in the DEC13 on a move to $6.55
>>>
Soybeans - 90%
Sold - 0% Hedged - Blew out 20% of our overestimated production between
$14.80 and $15.10 vs the Jan contract. Previous cash sales came
with prices vs NOV12 at $17.30 and just above $16.50. Before that we made
sales at $15.55, then back in Spring on 4/3 @ $13.95, prior to that on 3/15
@ $13.25 vs SX12. Some may argue that being 90% sold is a little aggressive
considering the tight stocks number, but I believe locking in good soy
profits and reducing volatility helps insure profitable farming.
We are currently
holding 10% of our final production. Prices are extremely strong right now,
and I should probably be dumping it all, but with so many unknowns and such
a tight balance sheet I want to have some bushels around incase the basis
explodes or the US actually runs out of beans. Producers who don't mind
playing the board and have a fairly strong basis can eliminate all cash
price risk and simply re-own on paper with a limited risk call type play.
My hunch however is the basis will be where the money is made, not the flat
price. Therefore I am not currently re-owning the board as of yet.
Soybeans 2013 - 25% Sold - 5% Hedged - Last
sale made with NOV13 trading just above $13.40. First couple of sales made
with NOV13 beans trading just above $13.10. Sold $16 NOV13 puts for $0.45
cents as a short-type hedge.
Next target is
$13.39 vs the NOV13 contract. I strongly advocate getting at least
30% of your estimated production booked with prices somewhere between
$13.25 and $13.60.
>>> Wheat - 80% Sold - 20% Hedged - Last
two cash sales made with DEC12 trading just above $9.05. Previous cash
sales being made with DEC12 wheat above $7.60. Before that cash sales were
last made in early Sept at around $8.25, prior sales were made in the late
spring and early summer of 2011 in the $9.00 range. 20% hedged with a floor
between $8.50 and $9.00. Cash marketers are 100% sold.
Looking to make
final sales @ $9.60 the MAR12 contract
Wheat 2013 - 50% priced and 10% hedged. Made
HTA sales on the board with prices at $9.05, $8.75, $8.60, and $8.55 vs the
DEC13 contract. Floor in place at around $8.50.
Next target is $9.10
vs the JUL13 contract or $9.25 vs the DEC13 contract. With already 50% of
estimated production booked we need to be somewhat conservative here. Our
sales have been great, I just don't want us to get out over the tips of our
ski's with the current dry conditions. Don't be afraid to make sales just
don't get out past your insurance coverage. For those with out insurance
coverage I wouldn't get much over 50% sold.
Wheat
2014 -
10% sold vs JUL14 @ $8.50 on 12/7 - 0%hedged. For those of you who
can book a "futures-first" or "HTA" type contract vs
the JUL14 wheat contract you might want to start thinking about it with
prices right around $8.50. I am not talking about anything major but 10%
might not be a bad start.
RECENT
COMMENTS
Written on Dec 7th - For those of you who can book a
"futures-first" or "HTA" type contract vs the JUL14
wheat contract you might want to start thinking about it with prices right around
$8.50. I am not talking about anything major but 10% might not be a bad
start.
Written on Nov 29th - I am a little worried that
the Fats could fall back to the lower end of trading range during the next
couple of months. Putting a little protection on at this juncture certainly
makes sense. Therefore looking to
Buy
the FEB13 130 Put and Sell the FEB13 135 Call for 60 points or better.
Should cost you around $250 or less. Options expire on Feb 1, 2013.
If
you are looking to hedge a portion of your 2013 Q1 marketings. Which I
would recommend. You can consider Buying an APR13 134 Put and Selling the
APR140 Call for about 115 (or about $460). This give you a floor at 134 and
sales on the board at 140. I would hedge at least 25-45% of estimated
marketings.
Written on Nov 21st - Producers
who have a strong basis into the Thanksgiving rally should make another
round of cash CORN sales. Many of our clients are banking cash prices in
excess of $8.00 per bushel. With the outside market uncertainty this is a no-brainer
in my opinion. Get caught up on sales and bank the big profits!!!
- I know many of you have
been monitoring your Diesel Fuel prices, and for most prices still
remain above levels you are comfortable locking in purchases.
Something you might want to consider though is your Propane and
Gasoline purchases. Both of these markets have been offering up
considerable discounts and should be entertained. Continue to keep
your eye on diesel prices, as historical tendencies generally make
pricing a significant portion of your needs between Thanksgiving and
Valentines Day a smart play.
Written on Nov 8th - For those who are planting wheat followed by soybeans I
suggest you take a look at the following strategy:
· Buy the JUL13 $13.40 soybean put and sell the JUL13
$10.00 wheat call @ even money, maybe even try and work the order
collecting a couple of cents to pay fees. This essentially gives you HTA
type sales at $10.00 on your wheat should we run higher and provides you
with an "early" floor in your beans at $13.40 should South
America come through with a record crop.
· If you are looking to get further out with the soybean
floor consider buying the NOV13 $13.40 put and selling (2) DEC13 $10.00
calls. This will get you clear through the season, but just remember this
is a 2:1 so be carful with the margin and don't get yourself oversold.
· Those with wheat acres and also corn acres may want to
loan at something like this: Buy the DEC13 $6.00 put and sell the
JUL13 $10.00 wheat call @ even money or Buy the SEP13 $6.30 put
and sell the JUL13 $10.00 wheat call
Written on Nov 6th -
Soybean Producers who can lock in a MAR13 price of $15.00 and leave
the basis "open" (hoping for additional strength into early 2013)
may want to consider pulling the trigger on a few more bushels!!!
Written on Nov 1st -
There is starting to be some talk in the trade about a longer-term
opportunity being "long DEC13 Corn vs short MAY13 Wheat."
Basically traders believe there is more "real-value" in owning
the back-end of the corn inverse vs. being short the front-end of the wheat
inverse.
Written on Oct 31st EXITED - Long
NOV13 Soybeans at around $15.50 (just wanted to remind everyone) - We
started building this position by rolling our front-end length in the NOV12
contract to backend length in the NOV13. We were long the NOV13 contracts
from $13.10 and $13.15 We banked over $4.00 on profits from our long NOV12
positions that we had drilled to the back-end. Exit these positions and
once again bank the profits!!!
Written on Oct 17th I continue
to encourage Producers to start pricing 2013 corn at prices above $6.50.
Pulling the trigger on sales at these levels makes a lot of sense to me
right now.
Written on Oct 12th NEW SOY
HEDGE - Sell NOV13 $16 Puts for $0.45 cents. This gives us a little
downside assistance should we break and an upside HTA type sale at $16.45
should we rally. Not bearish the market just believe $16.45 sales would be
terrific and IF it never happens, then banking the $0.45 cents is ok as
well.
Written on Oct 5th Producers
using only the "cash market" should be selling ALL of the bushels
you are NOT comfortable holding into the Spring of 2013!!!
RISK
DISCLOSURE:
The comments and information above belong to Farm Direction, Kevin Van
Trump and his team of professional trade analyst. The information is
believed to be reliable but no guarantee either written or implied is being
made. Please do not use this content as a personal recommendation or
substitute for your own judgement. Trading and or Hedging in derivatives,
futures or options may not be suited for all producers or investors. This
information is solely a recap of theories and strategies being recommended
by Farm Direction and or it’s team of trade analysts. Any investment, cash
sale or hedge strategy that you implement based on these recommendation are
solely your responsibility. Make certain you understand the risk
associated. THE RISK OF LOSS TRADING COMMODITIES OR FUTURES CAN BE
SUBSTANTIAL. COMMODITY TRADING HAS LARGE POTENTIAL RISKS, IN ADDITION TO
ANY POTENTIAL REWARDS. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO
ACCEPT THEM IN ORDER TO INVEST IN THE FUTURES OR COMMODITIES MARKETS. DON'T
TRADE WITH MONEY YOU CAN'T AFFORD TO LOSE. THIS IS NEITHER A SOLICITATION
NOR AN OFFER TO BUY OR SELL COMMODITY INTERESTS. PAST PERFORMANCE OF ANY
TRADING SYSTEM OR METHODOLOGY IS NOT INDICATIVE OF FUTURE RESULTS.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF
WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT
WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN
FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL
PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY
PARTICULAR TRADING PROGRAM. HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL
RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE
IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO
WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF
TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL
TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN
GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH
CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.
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