CANOLA HEDGE THOUGHTS

  • · The market knows that excessive rain has slightly reduced the acreage devoted to Canola, and weather concerns continue to evolve. However, the reality is that the canola crop in Canada, and especially the soybean crop in the US, is now planted with overall excellent moisture, lots of fertilizer and warm temperatures.
  • · Do not get complacent, and hedge the quantities that follow your plan. Most farmers should have 50-70% hedged with a reasonable portion of that done in options.
  • · Hedging 10% of 2012 production in futures would also be a good start to next year. We plan to be able to execute Nov 2012 OTC options available as early as September.

CANOLA FUNDAMENTALS

  • · After withstanding liquidation pressure from weakness in Chicago markets, canola values firmed this week on continued concerns about canola acres lost to the constant flooding and continued wet conditions in the eastern regions of Saskatchewan and Western Manitoba.
  • · Canola contracts continued higher Tuesday and Wednesday with advances associated with the strength displayed by CBOT soybean values and some bargain hunting by commercials.
  • · The upside in canola continues to be tempered by bearish chart signals and talk that the canola fields that were planted in time in western Canada, were doing extremely well.
  • · The relative strength in the Canadian dollar helped to restrict the price advances in canola, as did the absence of fresh export business.

CANOLA TECHNICALS

  • · The November 11 canola contract reached and held above a very important area of support in last week’s trade. This support was the 200 day moving average (green line) near the recent low at 545.0.
  • · By holding over the 200 day moving average, the longer term market trend remains bullish. The 10 day moving average (red line) has been broken as resistance in this week’s trade at 561.5 which now turns the 40 day moving average (blue line) into the next upside resistance at the 578.7 level.
  • · A rally and close above the 40 day moving average would be further confirmation that the market has bottomed and will also turn the 606.8 early June and contract high into the next upside objective.
  • · Key support remains the 200 day moving average currently at 543.9. A drop under this moving average would turn the 511.0 March low into the next primary support. It would also turn the longer term market trend sideways to lower.

MGEX HRSW HEDGE THOUGHTS

UNCHANGED FROM LAST WEEK

  • · The wheat seasonal high in March proved to be solid and we have consistently urged producers to hedge 30-50% of their wheat crop protected through a mixture of cash sales, OTC products, options or futures.
  • · We will be offering OTC options on December 2012 spring wheat sometime this fall, and we would consider a 5-10% hedge on next year’s production to get a good start on next year.

MGEX HRSW FUNDAMENTALS

  • · Values firmed for most of this week following the tone of all grain markets.
  • · The trade noted more reports of disappointing early harvest results in European wheat. French wheat prices are some $40/ton over Russian values now.
  • · Also of note, the Canadian Crop conditions are reported mediocre in many areas and the northern plains in the US remain too wet, placing pressure on the future protein quality of spring wheat. On the positive side, the North China Plains have received more needed precipitation.
  • · On Monday’s weekly USDA crop summary report, US Winter wheat came in at 36% g/ex, up 1% this week but still 27% behind last year, with 56% of the harvest completed, compared to 44% LW, and 52% both LY and on average. Spring wheat ratings also rose a point to 70% g/ex, up from the 69% 5YA but behind 83% on this date LY. Crop progress lists spring wheat as 94% emerged and 13% headed.

MGEX HRSW TECHNICALS

  • · Since topping at a 1055’2 high in late May, the December 11 Minneapolis wheat contract has lost 25% over the following five weeks of trade.
  • · From the recent low of 783’6 set in early July, the contract has rallied back up to the first area of resistance which is the 10 day moving average (red line) currently at 825’5. So far, the moving average has held as resistance which keeps the primary market trend bearish.
  • · The 783’6 July low remains primary support followed by the 745’6 which was a previous low from Nov 2010 and finally, 713’2 which was a low set in Oct 2010. If the 10 day moving average is broken as resistance the near term trend will turn back higher with the 200 day moving average (green line) currently at 888’3 then becoming the next level of resistance.
  • · As long as the contract trades below the 200 day moving average, the primary market trend will remain sideways to lower. However, a rally back over this average should signal that a market low has been set.

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