CFGAG News and Views   vol. 29   December 1, 2011

"There is a risk of loss when trading futures and options. The thoughts and opionions in this article are those of the author, and while believed to be correct, are not guaranteed as to the accuracy or content. Past performance is not indicative of future results, and each individual should examine their own risk capital carefully before trading."

"Are The Lows In" 

Many of the calls we get the last week have included that question. The most honest answer is, "maybe, but we dont know for sure".  As we have talked about all year, the market spends very little time below $6.00 per bushel in the December contract. Last friday, November 25th, the low in March corn was $5.87 and many technicians point to this price level as very important to hold, with some projecting to $5.00 or lower if this low is taken out. So what are we looking at doing now and why? We lead with the friendly factors list this time, for reasons to be optimistic:

1) Basis remains very strong, with most locations well above normal

2) Dec/Mar spread is tight, not an indication of a weak market.

3) End users, domestically, are very profitable at these price levels

4) Eastern corn belt farmers are still battling weather to finish harvest.

5) With the recent price break, export sales are starting to pick up a bit.

We also note from the last CFTC report, that managed money, or spec postitions, showed that the only net long postions left were in corn. Beans held a net short postion, and wheat shorts were at record levels. We do not have that omious dark cloud of possible liquidation of hefty fund longs to worry about. For the bears, there are still items of concern which include:

1) Continued debt issues in Europe

2) No resolution of US debt issues by the "Super Committee"

3) Very ample world wheat supplies, some would say almost "burdensome"

4) Excellent South American weather and crop prospects

5) Farmer movement of grain is expected to pick up after January 1.

We spoke last month about the merits of selling cash grain on tight basis and reowning them on paper for winter rally possibilies. With the recent low put in last friday, we may now have a good place on which to begin this process. Consider buying futures or call options on dips toward that low, and use sell stops below $5.87 March futures to exit. We also have some hedges on using short Dec 11 and long Dec 12 futures, and the same idea applies. Lift the short Dec 11, and place sell stops in the March while maintaining the long Dec 12. In these volatile markets, a 10-15 cent risk is relatively low considering how quickly they move, and if we can get a rally of any sort, we can move the stops up and protect some profits. These are only examples, and we urge you to call and go over all the possibilities with us as well as timing to see if something like this can work for you. Keep in mind the risk you are willing to accept in trading these positions, as well as the risk of unsold or unprotected grain as we watch to see if Europe comes together for a solution that will last, or implode and deal with the financial calamity. Keep an eye on South American weather also, as any negative change in crop prospects could get the fund buying engine cranking again.

Looking forward into December, the monthly Supply/Demand report will be on friday the 9th, but no update to crop production until January. Macro economic factors will likely "rule the roost" for the most part, so we will focus on the value of the US $, and the Euro $ and the relative prices. We will also watch China for any increase in grain buys, to see if they build reserves at relatively low prices compared to their domestic price.

From  the technical side, we have the following numbers from our computer to consider:
March  Corn                Support                 Resistance
                                 5.75                      6.12                                                                    
                                 5.52                      6.37
                                 5.28                      6.62

                                 5.04                      6.88
March Beans              10.67                     11.55
                                10.17                     12.10

                                 9.96                      12.66                               

In conclusion, Take a few minutes to enjoy the fruits of your labor, get away from the unending demands on your mental energy for a bit, and put the year in perspective. What have we learned and what do we need to improve on, to make you more content with your operation. Is it more land, more yield, or more attention to market details. We know how frustrating the markets can be, but taking the simple approach of deciding what you want and need first, then putting those goals into a real plan can bring real satisfaction at the end of the year. We use the winter months to sit down with our clients one at a time and at meetings to make those plans, see what ideas and tools fit what you want, and then put them into action. We can meet with your lender, your insurance agent, or all at once to make sure we have a road map for the year. Dont forget the cash marketing service that is available as well, and let us know if we can help you find any of those folks that we work with if you are not happy with your insurance agent or lender. Have a Blessed and joyous Christmas, and let 2012 come in with lots of peace and joy for all.

Mike Daube      888-391-6330
Allen Gard       800-205-1700