Thursday 04-05-2012 Newsletter  04/04/12 2:59:42 PM Printer Friendly VersionPrinter Friendly Version

 

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April 05, 2012
www.heartlandinvest.com 701-222-0221 or 1-800-359-0221
 
 
 
 
 
What I've Learned


 
    "If you want to make your dreams come true,
the first thing you have to do is wake up."


- J.M. Power

 

Commentary
 The commodity world fell out of bed today as the aftershock from "Bennie and the Inkjets" (Ben Bernanke and the FED here forward) from their Fed minutes yesterday implied that there would be no easing at this time. That is because they need the markets to be looking ugly before they pump more "hopium" into the market. They did that in 2009-2010 nonstop and got their fingers caught in the cookie jar. So metals, energies and stocks taking on an ugly look helps them continue the crony capitalism that has come to permeate Wall Street.

Soybean crops in Argentina and Brazil have suffered from more poor weather and harvest forecasts for
the two countries may have to be cut by a combined 2-3mmt, Hamburg-based oilseeds analysts Oil
World said on Tuesday. "The South American supply situation could really become serious and
exports of soybeans and products may be forced to decline significantly in Sept. 2012/Jan. 2013." On
March 20, Oil World had reduced its forecast of Argentina's 2012 soybean crop by 0.5mmt to
46.5mmt, down from 49.2mmt in 2011. "We may be forced to shave 1.0-1.5mmt off our Argentine
soybean crop estimate," Oil World said. On March 20 Oil World also cut its forecast of Brazil's 2012
soybean crop by 1.5mmt to 66.5mmt compared with 75.3mmt in 2011 because of drought and crop
fungus. Oil World said there is a risk it may have to cut the Brazilian estimate by a further 1.0-1.5mmt
because of low yields achieved so far in Brazil's harvest after drought. Brazilian analytical firm
Agroconsult sees Brazil's 2011-12 soybean crop at 65.2mmt and their corn crop at 65mmt. The last
USDA soybean estimate was 68.5mmt for Brazil. A prolonged drought hit Argentina's 2011-12
soybean crop hard, causing yields in the northern fields to slide more than expected and production
prospects have dipped to 43.1mmt, the Rosario Grains Exchange said Tuesday. The Rosario
exchange's new forecast is down 1.4mmt from its earlier estimate and well below the last USDA
estimate of 46.5mmt. The exchange also reduced their Argentine corn production estimate to 19.7mmt
from 19.8mmt previously and 22.5mmt and well below the last USDA forecast of 22mmt. If one were
to take the mid-points of the Agroconsult and Rosario Exchange estimates vs. the March USDA
figures, production would fall 6.7mmt in April compared to the USDA, or nearly 250mb! Until
this uncertainty is cleared up, a substantial break in soybeans is highly unlikely despite the sharp
gains since December.

While early planting conditions in the US have been ideal, the trade is also aware that a warm, dry spring could leave sub soil conditions short going into summer. The western Corn Belt, particularly southern Minnesota and northwest Iowa, have heavy depletions of soil moisture, said Elwynn Taylor, an extension climatologist at Iowa State University. He said northwest Iowa at this time of year on average has seven inches of water stored below the surface, yet the amount of water stands at just two inches to four inches right now. On the other hand, after two years of heartbreaking spring floods, farmers on the fertile Canadian Prairies are tuning up their tractors to roll out one of the earliest planting starts in the past decade. Last spring's floods left up to 6 million acres idle in Western Canada, but drier than usual conditions since summer mean farmers could start to sow crops by mid-April, a couple of weeks ahead of the usual seeding start.



 

US Dollar Daily Chart    

 

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Corn

Corn gave up overnight strength as the US$ improved in price.  If outside markets were to continue a negative outlook in to Thursday / Friday, then major support for May corn now at 638-645 can get challenged.  Look to acquire old crop corn on weakness near that value.  When 675 is cleared, 700 would be the psychological target.  New crop corn should grind its way up to 575 if that occurs.

May Corn Intra-Day Chart

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Beans

 In spite of all commodities being lower, the Up Wednesday Syndrome kicked in and carried soybeans higher.  As the chart shows below, last year's high of 1468 is the last resistance point on this chart and the market has come within 30 cents of that.  The support on setbacks should be strong in the 1385-1395 region.
 

 May Bean Daily Chart

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Wheat

 While Kansas and Chicago wheat get sold as the popular side of the buy corn/beans sell wheat spread, Minneapolis is holding up well. 840-845 was resistance now turned support, so if HRS gets through tomorrow without breaking much, buy it looking for the advance to continue.





    May MPLS Wheat Daily Chart

 

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Live Cattle and Feeder Cattle
Liquidation continued in cattle futures.  Money flowed out the door and the outside markets were of no help in stopping it.  There was some light cash business yesterday at $122, and some scattered trade in the South today 1.00 lower than that.  Beef cutouts were sharply lower at midday (choice 180.78 -2.31, select 179.20 -1.71), and packer margins are back to $107 per head in the red.  Spot live cattle have violated the 78% retracement, so a move to the 116 area is not out of the question.  If that happens, feeder cattle could go to valley support at 145.

  April Live Cattle Daily Chart

 

August Feeder Cattle Daily Chart

Gold

 The 1660 value we thought was support got crushed overnight, as liquidation picked up steam from the Fed minutes yesterday.  With the propensity for traders to sell now, look for 1640-1644 and then 1660-1662 to be resistance that will get sold for now.

Gold Intra-Day Chart

gold chart

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Crude

Bottom line here is crude oil is failing to hold the 103.00 value much sooner than I thought it would fail. The US dollar is becoming a more dominate feature again and Iran has been quiet for awhile. If oil closes under physiological support of $100, look for a liquidation phase that could carry oil initially to 95.00-96.00.   If the US dollar is climbing above 82.00 and "Bennie and the Inkjets" aren't doing a song and dance that implies a goose to the market soon, oil could find the war and FED premium taken out and spot oil could find itself at 85.00-90.00.    

                                                         May Crude Oil Daily Chart

  
 

04-02-12

 
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» Hedge Recommendations

 

Corn:

2011 production

1-24-12 Sold 20% @ 634 March.

1-11-12 sold 20 % at 653 March.

8-24-11 sold 20% at 7.42 December. 

3-30-11 sold 20% at 608 March 1012


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Soybeans:

2011 production

1-24-12  Sold 20% @ 1225 March.

1-11-12 Sold 20% at 1207 March.

3-19-11 Sold 20% of 2011 beans at 1350 on the November 2011 contract.

10-14-11 Sold 20% of 2011 production at 1281 on the Jan. 2012 contract.  

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 HRS Wheat:  

2011 production

2-28-12 Cashed a 22 cent profit in on a 40% futures sale to be added to a cash sale.

2- 1-12 Sold 20% of 2011 crop on the May contract at 828

1-11-12 Sold 20% on the board at 816 March with basis not locked.

8-24-11 sold 20% at 931 December.

3-29-11 Sold 20% at 910 on the Dec 2011 HRS contract.  For winter wheat producers sold the Sept KC wheat at 883.


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Cattle

 
 
 For January, March, April, and May Feeder Cattle...Covered 100% of production buying puts and selling calls. Covered the calls in the December break near $1.00 for most.

 
NOTE: With the exception of livestock, all trades will be entered in the electronic markets unless otherwise noted. Hedge recommendations and Trade recommendations are totally separate, and may sometimes conflict with one another. It is strongly suggested that Spec trades and Hedge trades be done in separate accounts.
 
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A word to the Wise             

              

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable to Heartland Investor Capital Management , Inc. but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK of LOSS involved in trading futures and / or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL . NO LIABILITY  on the part of the author exists for any trading loss you may incur in the use of this information. The information contained in this newsletter is privileged, confidential and protected from disclosure. Any further disclosure or use, distribution, dissemination or copying of this message or any attachment is strictly prohibited.

Newsletter provided by Heartland Investor Capital Management, Inc. a registered CTA with the NFA, of which Eugene Graner is principal. This entity is a separate legal entity from the Introducing Broker Heartland Investor Services.

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Copyright © 2012 Heartland Investor Capital Management All rights reserved



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