It might be worth considering a purchase of a $3.40 DEC 14 Corn Call for a cost of $.06 to protect the current revenue price vs. the original price of $4.62. $3.40 + $.06 = $3.46 vs. $4.62 = $1.16 potential gain. Not likely that we will rally back anywhere close to $4.62 during October but if the FSA reported acres with historical adjustments are accurate, we could see planted acres fall to 88.0 to 89.0 million acres which even with a 172.5 yield would cause production in the 13.900 to 14.050 billion bushel area using a 91.5% harvested level. If this gets reported in the October report and/or we see a surprise in the September 30th stocks report this could be a worthwhile investment of a small amount of money with no margin call risk.
Some may also want to look at buying a NOV 14 $9.90 Soybean Call for a cost of $.05 which is $9.95 vs. the $11.36 initial Revenue Price. Again this is a potential gain of $1.41 if prices for some un-expectecd reason rally sharply from here - again not what I am looking for but you never know.
With just 7% of the corn harvested as of 9-21 and 3% of the soybeans harvested, it may be too early to put a stamp on a guarantee of a higher U.S. corn and soybean yield than those shown in the September crop report. I do realize and believe that a lot of the early harvest yields are very good and many are records but over 40% of the corn production and around 25% of the soybean production is from areas that saw varying degrees of crop stress and/or potential freeze damage. None of these areas had much - if any - harvest completed as of 9-21.
Some reasons we could rally are: Noncommercial traders added to their net long futures and options in the last CFTC report, the Middle East situation is concerning vs. what may happen to some oil fields and thus we could see higher crude oil prices, the RIF ruling could come down on raising the blending back up some, Russia could threaten to boycot the EU nations over Ukraine sanctions creating a higher oil price thus more potential for ethanol exports (even though we are running at a very fast pace already), later season yields could show potential for a lower yield than the current figure for key states as MN, IA, and NE. Funds have made a great profit on shorting this market and the end of the month and end of quarter arrives on 9-30. The wet weather forecast by NOAA to start 9-29 and continue over most of the corn belt to at least 10-7 may cause some market concerns as well.
I am not sure what is going to happen but at these price levels, I see good chances for the market to rally once the down trend stops. Perhaps the $3.25 DEC 14 corn price will be an early fall low.
Just some thoughts.
