THE MARKET REPORT
THE MARKET REPORT
Tomorrows Reports: See exactly what the markets will be focusing on, as well as expectations and previous results.
- NOPA weekly soybean crush report; after 0830 ET (1230 GMT)
- USDA weekly cheddar cheese report; 0830 ET (1230 GMT)
- USDA cold storage report; 1500 ET (1900 GMT)
- USDA cattle-on-feed report; 1500 ET (1900 GMT)
- USDA livestock slaughter report; 1500 ET (1900 GMT)
- Commitments of traders report on futures; 1530 ET (1930 GMT)
DAILY COMMENTARY: Receive in-depth market commentary on a daily basis including such information like who is buying and who is selling, what are the floor traders hearing as well as specific trade recommendations for tomorrows markets.
Wheat: We had little action today across the board in the grain markets. The bottom line in the wheat market is that poor weekly export sales numbers countered continuing dry weather in the central and southern plains. There is a lot of hype right now built around this recent dry spell. They have even gone as far as having Kansas State economist Bill Tierney, come out and say that the US winter wheat crop conditions at this point in the season are the worst since 1992 and the second lowest readings in over 14 years. I am telling you right now, if we get rain this market is going to break hard to the downside. The weekly export sales numbers were once again below expectations at 357,000 tonnes. Most of that was by Japan who stepped in and bought 102,400 tonnes, besides that there was not another buyer of more than 30,000 tonnes to be found. Just take a look at the numbers for 1999-2000, export sales of US wheat have fallen 6% below the year-ago pace, even though shipments are running slightly ahead of last year, and the “outstanding sales” (sales made but not yet shipped) of US wheat are lower at this point than at any other time in the past few years. I do want to eventually be long wheat but I just don’t think now is the time. I am afraid to say it but I think this market is going to be making new contract lows here very shortly. I had a current client give me a couple of good short term trading ideas in the wheat options. Basically we were talking about buying puts and selling calls. I can’t give you any more specifics on the trade until he has executed his orders, but I think it is going to be a real nice play to the short side. Along the same lines there was some noted interest in out of the money puts on the floor today. Cargill bought 200 $2.50 December puts, while USA Trading bought 600 $2.30 March puts. If nothing else, exit all of your current long positions and look to sell rallies.
Soybeans: Even though beans rallied again today, I strongly believe this rally has come along to fast and to early to sustain itself. I really think that you are going to see heavy producer selling here within the next six weeks. A lot of farmers carried their beans over and will need the money in late February or early March for the new crop. I also think the weather market has been over played a little bit, I am hearing that even though dry weather looks likely for the next few days in Argentina and southern Brazil, another system following that one looks to bring 1/2 to 1 inch of rain with 70% coverage into the weekend. This should prove to be enough to help improve the growing conditions for much of the producing regions of South America. I really like buying undervalued puts in this market. I’ve been picking up 4.50 and 4.60 March Bean puts for less than $100. I think that this is a great play considering that you have over one month until these little babies expire and they cost basically nothing to get into. The risk to reward ratio is excellent. For those of you who are more daring you could even look to sell some 5.75 or 6.00 calls against the puts and cover your initial cost. It looks like several large firms seem to be thinking the same thing. For example FIMAT bought 9,000 November $4.50 bean puts at 11/2 to 2, and 3,500 November $4.60 bean puts, before the market closed. If you are looking to trade any of the soy products just remember that the June US Census Bureau crush report is due out at 7:00am tomorrow, and the analysts’ estimates for the crush are coming in around 121.08 million bushels, with Soy oil stocks estimated at 1.703 billion pounds and the soy meal/hull stocks are thought to be right at 357,667.
Corn: Suffered a major set back in today’s action, closing limit down. The USDA report really caught the market off guard today releasing data that shows the US crop estimates at 9.561 billion bushels. This is 200 to 300 million bushels higher than they were anticipating. With this news alone we may be limit down again tomorrow. Not to mention that we crossed over on the 50 day moving average and saw the Funds step in and sell an estimated 7,500 contracts. I was hearing from the floor that Salomon Smith Barney bought 1,000 Dec $2.40 puts, ED&F; Man bought 1,000 Dec $1.90 puts, and Tenco bought 600 Dec $2.10 puts. As far as the futures are concerned, Salomon Smith Barney sold 4,000 September and 4,000 December contracts, Prudential sold 2,000 December, and Cargill sold 1,000 December. I think corn could fall to $1.80 fairly quickly. If you can get in a descent level sell this market.
Hogs: We had a nice move down in the hog market today. The market fell to 6-month lows with August and October contracts locking limit down as heavy selling surfaced before Friday’s USDA hog and pigs report. I am told that there are over 300 contracts still to sell in the August and October contracts. Therefore we should see an additional sell-off early in tomorrows trade. Richard Dennis was said to be a heavy seller of August and October contracts. I think fears of continued larger-than-expected slaughter rates and lower grain prices, were the main focus of the downward price action. Refco and Cargill sold July. FIMAT, Refco, Rosenthal, and RJ O’Brien sold August. FIMAT and Rosenthal sold October. As far as the belly market is concerned, I think primarily the hog market pulled it down. I received several reports of heavy commercial buying early in the session; other noted buyers were Rand, RJO, and RB&H.;
Live Cattle: We have a nice profit in our cattle position and I don’t want to give much of it back right here. So I am thinking about lightening the load and spreading a little of it off by shorting the August contract. This will leave me long April and short August. You have to remember that this market is going to have a lot to digest with a USDA Cattle-on-Feed report on Friday, heavier than normal weights, increasing slaughter numbers into early February, and the possibility of increased “forced” sales due to a drought in Texas. Hell, I am even hearing talks that packers are threatening to cut kills instead of paying up in the cash market this week for live inventory. As a result we may see the cash markets fall off a little bit this week. While slaughter numbers could taper off into late February, I am hearing sources say that we will still need to absorb a few weeks of weekly slaughters in excess of 700,000 head per week just to maintain. You also have to give some consideration to the recent Texas drought problems, which have come to the point where water supplies are so limited in areas that cattle are actually being forced to the slaughterhouse. As far as the report on Friday is concerned I am hearing that the average trade estimates will be for Cattle On feed to be at 107.3% (range 105-108.5), Placements at 108.9% (10-3-116) and Marketings at 101.4% (100-103).
MARKET POSITIONS: You will be able to track our positions and see firsthand how we are performing.
- LIVE CATTLE – Long April from 68.30 on Dec. 13
Current price 72.12
- CORN – Long May from 2.24 1/2 on Feb. 25
Current price 2.35 1/4
- SOYBEANS – Long May from 5.18 on March 7
Current price 525 1/2
- BEAN OIL – Long May from 16.26 on March 8
Current price 16.94
- OATS – Long May from 119 on March 14
Current price 120 1/2
RISK DISCLOSURE STATEMENT: The CFTC and NFA require all members to include the following risk disclosure statements:
Please remember that the material contained in this report is derived from sources believed to be reliable. No guarantee of accuracy or trading profits are implied.Trading futures involves significant risk and should only be attempted by those with sufficient risk capital.Past performance is not indicative of future results.
Hypothetical or simulated performance results have certain inherent limitations.Unlike an actual performance record, simulated results do not represent actual trading.Also, since the trades have not actually been executed, the results may have been under-or-over compensated for the impact, if any, or certain market factors, such as lack of liquidity.Simulated
trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will achieve profits or losses similar to those shown.