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06-17-2011 06:46 AM - edited 06-17-2011 02:17 PM
After the close:
Funds bought 9,000 corn contracts Friday. Meanwhile, as traders pondered this week's drop in corn, some didn't appear to be surprised the market fell so hard. In fact, because there were three previous setbacks of $1.30, at least one trader thought this week's fall was going to be steeper. Yet another trader seemed to be surprised the fall happended in such a short timeframe.
At the close:
The July corn futures settled 1 1/4 cents lower at $7.00 1/4, while Dec. corn closed 7 cents higher at $6.60. The July soybean contract ended 17 1/2 cents lower at $13.33. The Sep. wheat futures settled 1/4 of a cent lower at $7.08. The July soybean meal futures settled $4.70 per short ton lower at $349.00 and July soyoil futures closed $0.40 lower at $55.92.
In the outside markets, the NYMEX crude oil is $2.02 per barrel lower, the dollar is lower and the Dow Jones Industrials are up 71 points.
After setting an all-time high record of $7.99 last Friday, the July corn futures price dropped nearly $1.00 in a week. The blame for the sharp drop is being put upon funds, or outside investors, as they decided to exit the commodities markets, says on pit trader.
"I'm not talking about the billion dollar index funds. Rather, the funds that trade millions of dollars of corn contracts simply said get me out," he says. "These are the guys that run anywhere from 3,000-5,000 contracts per day."
He adds, "I don't think these fund investors got out at losses. But, when they saw they gave up 50-cents and then 60-cents, they simply wanted out. So, they liquidated their positions. Friday was milder, as far as liquidation, due to liquidation needs had already been met."
Next week, if the grain market can start a rally, it could signal the funds were able to get out of all of their long positions. "At that point, any rally would be backed by fundamentals, of which he haven't been trading lately," he says.
With this week's market trading solely on technicals, the focus could turn to weather, supply/demand, and acreage amounts, traders say.
"The USDA says 99% of the corn crop has been planted. But, 99% of how many acres? Nobody really knows how many corn acres either didn't get planted, were converted to soybeans, or remain flooded and will experience cut yields," he says.
July corn is 3 cents lower, but Dec. corn is 3 1/2 cents higher. July soybeans are 17 cents lower and Sep. wheat is trading 4 1/4 cents lower.
The crude oil market, now down $2.82 per barrel, has pulled down soybeans and has taken corn and wheat with it, with a lack of new news tofay.
Corn and wheat remain higher, as soybeans trade in negative territory.
At the open:
The July corn futures opened 10 1/4 cents higher at $7.11 3/4. The July soybean contract opened 1 1/2 cents higher at $13.51 1/2. The July wheat futures opened 1 1/2 cents higher at $6.74 1/2. The soybean meal futures opened $0.10 per short ton higher at $353.70 and soyoil futures opened $0.20 lower at $56.38.
In the outside markets, the NYMEX crude oil is $1.30 per barrel lower, the dollar is lower and the Dow Jones Industrials are up 87 points.
Question: This past week was a horrible one for risk management plans that were hit by margin calls. Al Kluis, Kluis Commodities, calls it a 'margin massacre'. How bad did it get for you and how did you survive? How do you work around a steep drop in price and numerous margin calls?
I know this is asking folks to talk about something that is uncomfortable. However, I thought some folks could learn from the shared stories. What's the takeaway from this week?
News nuggets from the Dow Jones Newswire:
--S. Korea bought 165,000 mt of feed-wheat from Cargill
--S. Korea bought 138,000 mt of corn from Cargill.
--The lower corn, wheat prices have enticed East Asian buying.
--Pakistan will export record amounts of 2011 wheat.
--China is buying up Argentina's farmland. Here's the story.
Early calls: Corn 10-12 cents higher, soybeans 4-6 cents higher and wheat 7-9 cents higher.
Overnight grain, soybean markets=Trading higher.
Crude Oil=$1.39 lower.
Wall Street=Seen trading higher after Greece named a new finance minister, raising hope from France and Germany. On the flipside, Research in Motion's earnings report missed Friday.
World Markets=Asia/Pacific stocks are lower, Europe higher.
More in a minute,
06-17-2011 09:17 AM
It's been a tough week for the fundamentalists. The funds are hitting the markets very hard in their profit taking.
I see a tough year for the grains with all the floods, late planting and droughts BUT you can't see that from the markets.
I almost broke even this week, I think there will be the Friday sell off late today that may balance out the week. No one wants to hold overnight , let alone over the weekend . The old saying JACK BE NIMBLE, JACK BE QUICK describes the successful trader in today's markets. I enjoy your comments and imputs.
06-17-2011 09:25 AM
I would think that this last week would've been a good week for guys that are well hedged, not so much for us gamblers that still have some old crop left in the bin. Either way no margin calls unless your speculateing buying the board.
06-17-2011 10:14 AM
The recently greater volatility of hedging on the board has me much less exposed than I used to be. I have a little cash forward sold but not as much as most years.
Bottom line - the CBOT margin calls are not an issue at this point. I'll probably keep them lower than in previous years, as the CBOT. La Nina or whatever is left of it, world-wide demand and ethanol are among the factors I'm trying to integrate. I'll probably decide sooner rather than later to hedge some more as I think the politicians and funds are going to roil the commodity markets this year at least by winter.
06-17-2011 10:30 AM
For me the takeaway was follow price action and ignore fundamentals. My signal had me selling July corn at 770, and I rode it all the way down to 710. Now it doesn't always work out that way, but it did this time in spades. I'll have plenty of losers, but I'll sure never face a margin call.