The Nemenoff Report 12/12/12

Financials: Mar. Bonds are currently 5 lower at 148’28 and the 10 Yr. Note 2 lower at 133’11.0. If you remain short the Bonds I recommend covering positions as the market is now in the 148’26 area (over night low was 148’19). This afternoon the Fed will make their usual announcement on interest rates following the 2 day FOMC meeting around 1:30 Chicago time. I expect no major policy change with rates unchanged and language predicting that the economy is growing at a slow pace and rates will remain low through 2013 and into 2014. Operation Twist (buying of long term Treasuries, 6-30 years, and the selling of short term Treasuries, 90 day-3 years) is expected to continue in the coming months. Although I remain long term negative for the Bonds I caution against selling support. If current support levels do not hold (the 148’26 area + or – a few ticks, the next level will be the 147’10 area.

Grains: Mar. Corn is currently 0’4 lower at 727’0, Jan. Beans 6’6 lower at 1465’6 and Mar. Wheat fractionally lower at 820’4. Yesterday morning’s supply/demand report showed the following:
U.S. estimates are in billions of bushels except soyoil, which is in
billions of pounds. Soymeal is in short tons. Cotton is in millions of
480-pound bales. Rice is in million hundredweight. World crop forecasts
are in millions of metric tons.

USDA U.S. Grain, Cotton Carryout

Tuesday 2012-13 November
2012-13 Analyst 2012-13
Estimate Estimate Estimate

Corn 0.647 0.666 0.647
Wheat 0.754 0.718 0.704
Soybeans 0.130 0.135 0.140
Soyoil 1.480 n/a 1.520
Soymeal 300,000 n/a 300,000
Rice 30.1 n/a 30.1
Cotton 5.40 5.50 5.80

USDA World Carryover

Tuesday November
2012-13 2012-13
Estimate Estimate
Wheat 177.0 174.2
Corn 117.6 118.0
Rice 102.54 102.25
Soybeans 59.9 60.0
Soymeal 9.56 9.05
Soyoil 3.00 2.90
Cotton 79.6 80.3

USDA World Grain Production

Tuesday November
2012-13 2012-13
Estimate Estimate

China corn 208.0 200.0
South Africa corn 13.5 13.5
Argentina corn 27.5 28.0
Brazil corn 70.0 70.0
Australia wheat 22.0 21.0
Argentina wheat 11.5 11.5
EU 27 wheat 131.7 131.8
Canada wheat 27.2 26.7
China wheat 120.6 118.0
Russia wheat 38.0 38.0
Ukraine wheat 15.5 15.5
Brazil soybeans 81.0 81.0
Argentina soybeans 55.0 55.0
China soybeans 12.6 12.6

Basically there is more Corn than expected, fewer Beans and more Wheat. The reaction was as expected with Corn a few cents lower, Beans 2 cents lower with old crop gaining on new crop and Wheat about 27 cents lower. Corn came close to testing the 722’0 support level (the low being 723’6). Over the last few months we have had success buying Corn in this area (under 725’0) with a 20 cent risk (the recent low was 708’6 on Sept. 28th) and I am willing to knock on that door again so to speak. We remain long the Mar. Corn 800’0/850’0 call spread and will cover the short 850’0 call leg at 2’0 if the market allows, leaving us long the 800’0 call.

Cattle: Yesterday Feb. LC closed 170 higher at 131.95 and Mar FC 2.15 higher at 153.375 as a result of lower feed grain prices and tight supplies for Live Cattle. Both of these markets are now in resistance. Feeder Cattle producers should be looking for hedging opportunities with either option strategies or futures. I am now willing to consider the use of futures for hedging Feeder Cattle given the recent 5.00 run up in price.

Silver: Mar. Silver is currently 28 cents higher at 33.30 and Feb. Gold 9.00 higher at 1718.50. We remain long silver, however, we were stopped out of our additional contracts purchased in the 32.75 level when the market traded through the 32.95 level yesterday (the low was 32.835). We remain long Gold and will move protective sell stop up from the 1699.00 level to 1705.00.

S&P’s: Dec. S&P’s are currently 1.50 higher at 1433.00. The 1420.00 resistance level was penetrating (stating the obvious) and we have taken a loss on recent short positions. For the moment I will treat the market as a trading affair between 1418.00 and 1437.00. On Thursday the Mar. contract will be the volume leader. The Dec. contract expires on Dec. 21st.

Currencies: As of this writing the Dec. Euro is currently 40 higher at 1.3045, the Swiss 50 higher at 1.0773, the Yen 55 lower at 1.2067 and the Pound 29 higher at 1.6141. We are currently on the sidelines in all currencies. Of note: the Yen has made a new recent low at 1.2058. Dec. contracts expire on Dec. 17th.

Regards,
Marc
Questions? Ask Marc Nemenoff today at 312-264-4310

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