AM Calls – US to buy AG Commodities

Look for cautious trade with a lower tone into the USDA report. The report should be negative but that might be the end of the negative push for a while depending on weather and how fast and how much gets planted.

 

  1. US-China trade deal. No one really knows how this will turn out. Right now we are trading NO DEAL, increased tariffs, and the US Government will be buying ~$ 15 billion in Ag commodities and then shipping it to poor countries. This will exceed the amount of Ag goods that China would buy with a deal and support the Ag market. Thus, from here out, any deal would be bullish.
  2. Weather. Right now there is a 14 day window from 05/14-05/22 that should allow much of the eastern belt to get planted. Based on the soil moisture maps compared to 1993, there should still be a 2-4 million acres that will likely go PP as farmers plant around wet holes. This means that today’s reports should be based on the LARGEST potential production number of the year as futures reports reduce acres.
  3. USDA report. Attached is the estimate form todays report. WE will send an update later. We recommend that since corn stocks should come in around 2.2 billion bushels based on 100% acreage planted and trend (record) yield, the numbers can only decline from here and that his will be your most bearish report. Thus, we recommend you buy a negative report today.

Prospective revisions:

Corn Stocks est based on 92.8 Acreage, 177 yield = 2247 stks  and stks/use 15.1%

Corn Stocks est based on 90.8 Acreage, 177 yield = 1942 stks  and stks/use 12.9%

Corn Stocks est based on 90.8 Acreage, 170 yield = 1338 stks  and stks/use  9.0%  Based on known facts, this is most likely now

Corn Stocks est based on 90.8 Acreage, 165 yield = 922 stks  and stks/use  6.2%  will be weather determined

 

Conclusion – high odds that stocks/use will fall to 10% given current conditions. These revisions could take time. Even into August. But the low could be put in when maximum bearish news is announced. Buying corn below cost of production, near 10 year lows, and with commercial accounts long and fund account massively short, this seems like a low risk position to replace ownership previously sold. If you are a trader – buying today’s report and risking todays low seems like a very low risk trade. Call options are also cheap as volatility and bearish trade perception has deflated call premium.

 

Our previous recommendations remain in tact but please check with your broker

 

Short beans – futures and a short 3 way. Talk to broker and keep protection in place to take profit in case of a bottom

Long cor

Look for cautious trade with a lower tone into the USDA report. The report should be negative but that might be the end of the negative push for a while depending on weather and how fast and how much gets planted.

 

  1. US-China trade deal. No one really knows how this will turn out. Right now we are trading NO DEAL, increased tariffs, and the US Government will be buying ~$ 15 billion in Ag commodities and then shipping it to poor countries. This will exceed the amount of Ag goods that China would buy with a deal and support the Ag market. Thus, from here out, any deal would be bullish.
  2. Weather. Right now there is a 14 day window from 05/14-05/22 that should allow much of the eastern belt to get planted. Based on the soil moisture maps compared to 1993, there should still be a 2-4 million acres that will likely go PP as farmers plant around wet holes. This means that today’s reports should be based on the LARGEST potential production number of the year as futures reports reduce acres.
  3. USDA report. Attached is the estimate form todays report. WE will send an update later. We recommend that since corn stocks should come in around 2.2 billion bushels based on 100% acreage planted and trend (record) yield, the numbers can only decline from here and that his will be your most bearish report. Thus, we recommend you buy a negative report today.

Prospective revisions:

Corn Stocks est based on 92.8 Acreage, 177 yield = 2247 stks  and stks/use 15.1%

Corn Stocks est based on 90.8 Acreage, 177 yield = 1942 stks  and stks/use 12.9%

Corn Stocks est based on 90.8 Acreage, 170 yield = 1338 stks  and stks/use  9.0%  Based on known facts, this is most likely now

Corn Stocks est based on 90.8 Acreage, 165 yield = 922 stks  and stks/use  6.2%  will be weather determined

 

Conclusion – high odds that stocks/use will fall to 10% given current conditions. These revisions could take time. Even into August. But the low could be put in when maximum bearish news is announced. Buying corn below cost of production, near 10 year lows, and with commercial accounts long and fund account massively short, this seems like a low risk position to replace ownership previously sold. If you are a trader – buying today’s report and risking todays low seems like a very low risk trade. Call options are also cheap as volatility and bearish trade perception has deflated call premium.

 

Our previous recommendations remain in tact but please check with your broker

 

Short beans – futures and a short 3 way. Talk to broker and keep protection in place to take profit in case of a bottom

Long corn – previously sold cash on strong basis and replaced with ownership. Be patient crop year is just starting

Corn spread – locked in carry buying Dec19 and selling July 20 at 28 cents and order to do more at 35. Then holding spread until you want to sell, leaving you with a hedge 28-35 cents above your Dec sell price and hedged out into July20

 

 

Bill Biedermann

AgMarket.Net

815-893-7443 o

815-404-1917 c

n – previously sold cash on strong basis and replaced with ownership. Be patient crop year is just starting

Corn spread – locked in carry buying Dec19 and selling July 20 at 28 cents and order to do more at 35. Then holding spread until you want to sell, leaving you with a hedge 28-35 cents above your Dec sell price and hedged out into July20

 

 

Bill Biedermann

AgMarket.Net

815-893-7443 o

815-404-1917 c

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