Market Report

Dow +189.80

S&P +21.35

Nasdaq +66.35

 

Land O’Lakes To Acquire Ceres: Land O’Lakes Inc. and Ceres Inc. announced June 17 that they have signed a definitive merger agreement under which Land O’Lakes will acquire all of the outstanding capital stock of Ceres in a transaction valued at approximately $17.2 million

 

U.K: The prospect of a U.K. exit from the EU had sent stocks around the world tumbling in recent sessions, while bond yields dropped to record lows as investors feared the move would spark a prolonged period of uncertainty and deal a blow to growth and trade in the world’s fifth-largest economy.  Stocks, sterling and oil soared at the start of the week after polls suggested the U.K. was more likely to vote to remain in the European Union in Thursday’s referendum than previously expected.  The pound surges more that 2% against the U.S. Dollar.

 

Grain Markets @ 12.36pm

 

July Corn -15’6 @ 4.22’0

Dec Corn -14’2 @ 4.34’4

July Beans -13’4 @ 11.46’0

Nov Beans -11’6 @ 11.36’4

 

For a glimpse of last week check out the ProEdge Update found here: http://cva-assets.s3.amazonaws.com/content/uploads/2015/03/ProEdge-Update-061716.pdf

 

Looking forward: June 30^th at 11am will be the USDA planted acreage report.  I anticipate the extreme heat we have been seeing will impact the production.  I don’t see the production numbers growing.  I do believe the markets has already added a lot of weather premium to the market, and with forecasted record heat I anticipate support continues in the market places.  Conversely if we had a turn to cooler weather as well as good rain, we could see the markets lose traction quickly.

 

Strategy: Using call options to keep upside potential on presold grain.  For example short dated $4.40 corn calls are about 19 cents.  This can be done through brokerage or CVA.

 

Weather

Trained weather spotters in the Fremont area recorded rain totals of 6.3 inches overnight, and there are reports of flooding and downed trees in the area.  Parts of Douglas and Dodge counties are under a flash flood warning till 4:30 a.m. Saturday.  See video here http://www.ketv.com/news/reports-of-heavy-rain-flooding-in-fremont/40114986

This week chances of thunderstorms, but no real rain opportunities throughout the corn belt.

My Blog

 

Check out weekly blogs at http://www.cvacoop.com/blog/

 

The market is full of surprises and we continue to see the grain markets rally.  Recently seeing a lot of volatility in both corn and soybeans, it leaves many wondering what to do next.  Will the market go up?  Will the market go down?  Many producers hold out because it may go higher, however, that philosophy could mean a missed opportunity.  Many producers also find themselves looking in their rear view mirror, saying I wish I would not have sold so early.

 

The reality is no one has the ability to look into the future.  Sales are made based on the information a producer has at that moment in time.  That being said, a rally like this was unexpected.  A producer who sells ahead makes that first sale and HOPES it will be the worst sale of the year.  What?!?! You may ask, then why make it?  To that I say, to manage your risk, to lock in a profit.  For example, if a producer sold 40% of their new crop beans at $10.50, and come harvest time beans are worth $12.00, the producer is averaging $11.40 futures price on their entire crop.  However, if the harvest price drops to $9.00 the average price would then be $9.60.

 

Market Moves Up
	Percent	Price
Sold	40%	$10.50
Harvest	60%	$12.00
Average	100%	$11.40
Market Moves Down
	Percent	Price
Sold	40%	$10.50
Harvest	60%	$9.00
Average	100%	$9.60

 

Selling ahead a solid way to protect your operation from a bear market.  Without risk management producers stand the risk of having a losing year.  Market timing is everything, and locking in profitable sales to guarantee income is never a bad idea.  Selling on the way up and continuing to “grab profits” from the market is a guarantee of success.  Waiting for a home run often back fires when the market rally ends abruptly and a producer finds himself unsold and currently at an unprofitable level.

 

When it comes to marketing, many find it to be very emotional.  Never beat yourself up for selling too early or selling too late.  The key is to lock in profits incrementally and guarantee profits for your family.

 

Final thought:  This principle also applies to producers who sell from their bins not selling ahead).  Selling incrementally and locking in profit as they become available is a sound business practice.  Selling ahead only offers a larger window of opportunity to sell.

 

Greg Mockenhaupt

ProEdge Risk Management Consultant

P: (402) 685-5613 | Greg.Mockenhaupt@cvacoop.com

 

 

 

 

 

1007 County Road O

Oakland, NE 68045

www.cvacoop.com