Thursday 04-02-2012 Newsletter  04/11/12 1:57:54 PM Printer Friendly VersionPrinter Friendly Version

 

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April 12, 2012
www.heartlandinvest.com 701-222-0221 or 1-800-359-0221
 
 
 
 
 
What I've Learned


 
   
"Life's problems wouldn't be called "hurdles"
if there wasn't a way to get over them."


- Author Unknown

 

Commentary

I have been saying for months that grains are tracking the years 1988, 1996 and 2008. Obviously 1988 is weather related and we are starting to show concerns on that front. In looking at the attached graphic courtesy of www.agtradertalk.com, which overlays the latest Drought Monitor Map over corn producing districts by percentage of US corn production, it becomes readily apparent why a wetter pattern will be needed from here forward to maintain favorable production outlooks. www.tstorm.net reports that 69% of projected US corn production areas have drier than normal subsoils and 35% are much too dry. Not only is it drier than normal in parts of the Midwest, it also happens to be driest where some of the best production areas of the country lie. Note the four district area in northern IA/southern MN, which has produced an astounding 9.8% of the US corn crop over the last 5 years. Compare that to the entire states of IN/OH, which combined have produced just 11.2% of the US corn crop. If we include the other two districts in IA, the two droughts affect districts in NE and 1 in southeastern SD, total production affected rises to 15.9%.

  

Regarding yesterday's crop reports, the issue from here forward is that the vast majority of South American losses have been reported and it's now a matter of lower production showing up in US demand, which I believe will show up more so in new crop than old crop soybeans. The function of the soybean market remains twofold: one, trade high enough to encourage maximum US acreage this spring and South American acreage this fall and two, trade high enough to crimp demand. The time to attract additional US acreage is drawing to a close, but prices are likely to remain high enough to encourage the other two issues until late summer. The USDA's decision to basically "bet on the come" regarding an early US corn harvest and greater than normal wheat feeding in justifying their decision to leave ending corn stocks unchanged yesterday, has drawn the ire of many analysts, including this from CIS Inc.'s Bill Gary. There are few qualified analysts who will view today's USDA reports as long term negative for futures. The USDA's stocks and supply/demand estimates have become unreliable in recent years and should not be viewed as the central answer to long term price trends. We advise subscribers to utilize independent, qualified crop observers and cash markets as a more reliable guide to longer term price trends. We would view a setback in futures following today's reports as a buying opportunity. Gary I agree with you and believe higher prices are ahead for grains.
 

 

 

The US dollar is stalled under 80.50. Closing above that will probably crush crude oil in $100 and cause the CRB to take a negative tone on.


 

US Dollar Intraday Chart    

 

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Corn

Monday I said "Corn is correcting it's strength from last week. Look for 641-645 to be very solid support to buy, risking 630 on a closing basis". Corn slipped through the support I said, but as the chart below shows, 630 is truly "the line in the sand".

May Corn Intra-Day Chart

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Beans

Soybeans fell into profit taking as the bulls weren't feed any new fodder to sustain the current run. 1395-1402 should contain the setback in play. When beans are down on Wednesdays, Thursday usually makes up for it with upside strength.
 

 May Bean Daily Chart

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Wheat

  


Take a real good look at the Minneapolis new crop September wheat chart below and I will tell you what should jump out at you. The first thing you learn in chart reading is when major resistance is over come, that resistance then becomes support. Guess what, until we see some meaningful rain in the Northern Plains, HRS wheat is a buy.
 

      Sept Minn Wheat Daily Chart

 

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Live Cattle and Feeder Cattle
The volatile consolidation continues in cattle futures, finishing higher as they are trying to forge a trading range low.  This is likely to be the case for some time, until the packers can push beef prices higher.  Beef cutouts were mixed at midday (choice 177.54 -.54, select 177.89 +.54), and packer margins are a negative $102 per head.  There were a few scattered cash deals around 120 yesterday and today.  Feedlot offers are 122, but packers appear to have ample inventory for the time being.  The bullish supply side of the cattle market has not changed.

  April Live Cattle Daily Chart

 

August Feeder Cattle Daily Chart

Gold

On Monday I stated " Look for 1660-1662 to be resistance that will get sold in gold for now."  and for now that is happening. A Friday close above there does neutralize the excessive selling gold was seeing and at least says we will trade sideways for awhile.

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.  .    

                                                         May Crude Oil Daily Chart

  
 

04-02-12

 
Link (in blue) below to view the latest market prediction interview on KFYR - TV:

--> Watch Eugene On the News <--
 
 

 

 
 
 
» 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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