Blogging by the Bushel
With numerous challenges over the past several years for producers, we at Mercer Landmark understand the need for a comprehensive risk management solution. We seek to provide our customers with unparalleled service to ensure maximum results.

Archive for December, 2010

What in the world has gotten into the market as the Christmas holiday is fast approaching? Normally this time of year the market is pretty quiet and volume is reduced as traders move to the sidelines for a bit. However, it appears that this has not been the case as of late as the market wants to move higher under pressure from the bulls.  Chatter that the tight supply will persist into the New Year and demand will remain strong is adding to the firestorm. Each day we trade higher increases the odds that a lot of the bullish expectation will be factored into the market before the January 12th crop report.  In addition with little selling interest right now it doesn’t take much to move the market. It has been almost too easy for the market to move higher. If selling does develop, which could happen before the first of the year the market could experience a correction quickly. In the mean time start to really think hard about moving some old crop beans at $13.00 or corn as the market moves closer to $6.00. Don’t be afraid to sell bushels as needed whether it is for tax reasons or for some holiday cash.

Anna Kaverman

Mercer Landmark

Back in early November Phil blogged about getting technical and covered island tops and island reversals. I wanted to expand on this topic a little more a look at another one of the most commonly used technical used tools by traders. That indicator is the moving average. Traders many times will mention the 15 day, 50 day, 100 day and 200 day moving averages and how they impact the market.  When reading the commentaries you may wonder what do they mean by moving averages?  Moving averages are used by traders to identify or confirm a trend and to define areas of possible support and resistance. Most investors and charting services use three moving averages. There lengths typically consist of short term (e.g. 15-day), intermediate and long-term (e.g. 50-day). Typically, upward momentum is confirmed when a short-term average crosses above a longer-term average. Downward momentum is confirmed when a short-term average crosses below a long-term average. 

 

Another commonly used system is 4, 9, 18 intervals. An interval may be ticks, minutes, days, weeks or even months. It depends upon the chart type. The normal moving average crossover buy/sell signals are as follows.

  • A buy signal is flashed when the short and intermediate term averages cross from below to above the longer term average.
  • Conversely, a sell signal is issued when the short and intermediate term averages cross from above to below the longer term average.

You can use the crossover approach with only two moving averages, but market technicians suggest longer term averages (a longer interval) when trading only two moving averages in a crossover system.

Anna Kaverman

Mercer Landmark

This is a million dollar question that many are wondering. The big thing to note is that no yield or production numbers will be released until the January report. However, this could still be a big report though, so don’t discount it as meaningless. I have tried to list what most will be looking for…hope it helps. Let’s first look at ethanol. In Friday’s report the USDA may adjust the amount of corn used for ethanol up anywhere from 50-100 mmt. Do not get too excited though because if we go back to last week, the lack of talk on the extension of the ethanol blender’s credit in congress turned the market bearish early in the week. So if they do not extend tax credits the USDA is liable to reduced it. Export demand is the tricky piece of puzzle. Exports could be increased if they decide to drop Argentina’s crop size from 25 mmt to closer to 22-23 mmt. This comes after a private estimate last week had Argentina corn production at 22.5 mmt and Brazilian production at 50 mmt compared to previous USDA numbers of 51 mmt. Exports could also increase if Russian import numbers are increased. Right now, the USDA has Russia importing just 1.9 mmt. Some believe they made need double that.
As for soybeans, it shouldn’t come as a surprise to anyone that the USDA more than likely once again raise exports by at least 50 mmt and crush by 25 mmt. U.S. soybeans are in high demand. There are rumors circulating though that the numbers could be much higher which means very bullish for beans. I believe that some of this premium has already been built in, but am uncertain as how much. If the market does make huge leaps I wouldn’t be afraid to make some more sales. Longer term the market will most likely continue higher but the moves will be fast and furious. So if you are not ready to sell, place open orders above the current market.
Wheat is the hardest off all three complexes to gauge because there is a lot that could change with the global numbers. With the recent wet weather in eastern Australia delaying harvest a lot traders are saying they wouldn’t be surprised to see the hard red winter wheat exports increased. Early estimates indicate that as much as 30% of Australia’s wheat crop this year will be feed grade quality due to the excessive rains. Due to this fact some traders are saying the export increase could be as much as 50 million metric tons.
Everyone looks straight ahead and sees all these supply/demand facts on the balance sheet, but we cannot ignore other key domestic issues as well. Keep in check the high unemployment figure, unresolved economic situation and the fact that banks are still easily not lending money. Most importantly a lot depends on what happens with the dollar. Right now I am an extremely cautious bull with optimistic bearish tendencies. That is a least until we see the December USDA numbers and then the January crop report.

Anna Kaverman

Mercer Landmark