The June quarterly stocks and acreage report released Monday June 30 didn’t give traders what they were expecting. Traders had thought that the extremely wet spring and late planting would lead to less corn and more soybeans being planted.
USDA News
The report basically showed ample acreage for both. The July 7 crop condition report had all key producers of corn and soybeans come in equal to or over the national average. The crop condition number exceeds the 10-year average. Needless to say, planted acreage, crop condition and weather all were and continue to be bearish for pricing. We have started off this week with lower prices on corn and soybeans on a cool wet 6 to 10 day forecast; however we should expect a buying opportunity with ample short covering with new buyers prior to Friday’s monthly USDA crop report.
Look for a pre-report rally as a good selling opportunity for corn, if weather cooperates. Should December continue to close under 4.20 it sets up 3.90 as a next major support, with 3.78 to follow.
Yield estimates for new crop corn remain conservative in my view until more is known about pollination in to mid-July. I see some analysts forecasting 170 bushels per acre. A yield this high would add a surprising 311 million bushels to last month’s production forecast. It is my belief that USDA should cut feed/residual use while increasing yield in months ahead, how much is the question? Weather and its effect will be the obvious determinant, as grain prices are 90 percent effected by weather at this time of year.
Two Trades
I propose two trades here, one futures and one options. For conservative traders, look at buying the September Corn 380 put for 8 cents or better. The cost is $400.00 which is the risk on the trade plus all commissions and fees. For more risk I propose selling futures on a pre-report or report day rally at or near 4.20 basis December. Risk a close over 4.38 if you get filled risking approximately $1,000.00 on the trade plus all commissions and fees. If weather continues to cooperate, rallies should be sold in my opinion.
Grains Webinar
For those interested in grains, Walsh Trading’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 pm central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Link for this week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
