Description
THE HIGHTOWER REPORT
Futures Analysis & Forecasting
SPECIAL REPORT
HightowerReport.com
June 23, 2015
Are You Prepared for the June 30th USDA Reports?
Traders, especially end users and producers, face a significant
volatility event with the June 30th USDA Planted Acreage and Grain
Stocks reports. In the past these reports have helped set some of
the key price fundamentals for the marketing year in the corn and
soybean markets. For example, over the last six years November
Soybeans over have dropped an average of 18 ½ cents on the day of
the report. For December Corn, the market has dropped an average
CME WEBINARS
June 24 & June 30
See page 12 for details.
of 11 cents over the last twelve years.
In this paper, we will review some strategies for end users and producers to consider going into that critical report date. (See tables on pages 2 and 3.) The corn and soybean markets both face huge ending stocks levels, and their stocks/usage ratios levels are considered “comfortable.” However, end users of vegetable oils face a very different setup, as www.HightowerReport.com Trade Recommendations Pre-open and Midday Audio Updates Fundamental & Technial Chart Library Daily Fundametal & Technical Analysis 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 1 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting NOVEMBER SOYBEAN FUTURES REACTION TO JUNE STOCKS/ACREAGE REPORT Year Price Changes Day of Report 10 Days Later Aug 1st Sep 1st Oct 31st 1990 0.00 0.25 -37.25 -8.00 -40.25 1991 -11.00 -29.25 87.25 26.75 -2.25 1992 -4.00 -43.00 -68.50 -70.00 -69.50 Notes Record Yield 1993 21.50 53.50 48.00 2.50 -38.75 1994 -6.25 -52.00 -68.75 -53.25 -86.50 1995 -4.00 60.00 10.50 29.25 80.25 1996 14.25 62.50 -8.50 49.25 -78.50 1997 -30.00 8.25 28.75 16.25 73.25 1998 10.75 -38.75 -64.75 -95.75 -58.25 1999 4.50 -33.50 2.50 34.75 9.75 2000 -15.00 -28.25 -20.50 36.00 -17.00 2001 23.00 44.75 27.75 20.25 -35.50 2002 15.25 26.50 34.50 42.75 58.50 2003 -5.75 -31.25 -36.25 22.00 241.75 2004 -30.75 -23.50 -103.00 -40.25 -141.50 Record Yield 2005 -22.75 65.25 38.25 -67.25 -101.50 Record Yield 2006 13.00 -11.25 -21.25 -68.25 7.75 2007 39.50 17.00 -27.25 25.75 128.25 2008 14.50 -58.00 -279.00 -275.50 -648.75 2009 -2.50 -76.50 49.50 -30.00 -3.00 2010 -9.50 85.50 107.50 106.50 323.50 Weather Impact 2011 -29.00 93.00 85.75 151.75 -86.50 Weather Impact Record Yield Record Yield 2012 24.25 162.75 188.75 340.50 119.25 Weather Impact 2013 -23.25 11.75 -70.50 134.75 28.25 Weather Impact 2014 -70.75 -71.00 -98.75 -125.25 -240.5 10 13 12 15 10 Higher Count Average 18.05 53.15 59.08 69.27 107.05 Max 39.50 162.75 188.75 340.50 323.50 14 12 13 10 15 Lower Count Average -18.89 -41.35 -69.56 -83.35 -109.88 Max -70.75 -76.50 -279.00 -275.50 -648.75 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 2 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting DECEMBER CORN FUTURES REACTION TO JUNE STOCKS/ACREAGE REPORT Year Price Changes Day of Report 10 Days Later Aug 1st Sep 1st Oct 31st 1990 3.25 -19.75 -40.25 -52.75 -57.75 1991 -4.50 -8.50 33.00 18.75 15.50 1992 -2.50 -23.00 -35.75 -37.50 -51.25 Notes Record Yield 1993 4.75 6.75 8.50 -3.00 19.50 1994 2.25 -18.75 -20.25 -18.25 -26.25 1995 6.25 16.00 -2.25 12.50 52.00 1996 8.75 18.00 -37.00 -19.75 -95.25 1997 2.75 18.25 26.75 34.00 41.50 1998 7.00 -26.00 -39.00 -55.00 -40.50 1999 1.50 -21.00 0.25 -4.25 -26.75 2000 -8.50 -16.25 -14.75 -9.50 -1.50 2001 0.00 20.25 16.75 23.00 -2.75 2002 -1.00 -6.25 19.50 30.75 4.00 2003 -6.25 -11.50 -6.50 16.25 23.50 Record Yield 2004 -10.50 -16.75 -39.25 -30.75 -64.50 Record Yield 2005 -5.25 36.25 13.75 -14.50 -35.50 2006 5.75 7.75 4.00 -16.00 60.50 2007 -7.50 -2.25 -9.50 2.50 24.75 2008 -30.00 -90.25 -201.50 -187.75 -355.50 2009 -30.00 -29.75 1.75 -48.00 -1.25 2010 29.50 31.75 31.00 74.00 208.50 2011 -30.00 64.50 95.25 139.50 26.50 2012 2.50 137.75 161.00 170.25 121.00 2013 -27.50 -7.50 -47.25 -35.75 -82.75 2014 -22.00 -43.50 -63.00 -61.50 Record Yield -104.00 Record Yield Higher Count Average Max 11 10 12 10 11 6.75 35.73 34.29 52.15 54.30 29.50 137.75 161.00 170.25 208.50 13 15 13 15 14 Lower Count Average -14.27 -22.73 -42.79 -39.62 -67.54 Max -30.00 -90.25 -201.50 -187.75 -355.50 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 3 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting supplies will be relatively tight going into the 2015/16 marketing year. If El Niño brings significant dryness to Southeast Asia, vegetable oil prices could trend sharply higher. In this report we offer some hedge suggestions for vegetable oil end users as well. Soybeans - COT - Disaggregated Futures and Options Non-Commercial - No CIT - Net Position Number Of Contracts 250,000 200,000 150,000 According to NOAA, May was the wettest May for the US since records began 121 years ago. It was also the wettest MONTH ever recorded. The map on page 1 shows the 14-day percentage of normal precipitation for the period ending June 21st.
A large part of the central and eastern Corn Belt has seen 200-600% of normal precipitation. 50,000 0 -50,000 2015 2014 2013 2012 2011 2010 2009 2008 -100,000 2007 While it is a common perception that “rain makes grain” and that good moisture in the spring will lead to big crops, the US weather so far this year has been exceedingly wet. Soybeans do not do well with too much moisture early in the year, and abundant and persistent rains can cause significant ponding in many corn fields. Unless these areas dry up and can be replanted in a timely manner, lower yield is a strong possibility. 100,000 2006 Wettest Month EVER US Soybean Crop Conditions Percent Good / Excellent - Select States 77 74 71 68 65 62 One look at the Commitments of Traders reports and it is clear that speculators believe the weather is bearish, with many traders expecting good weather for July, but this is suspect. 59 6/21 Estimate: 65% 56 53 50 2013 2014 2015 10 Year Avg. 600 550 Ending Stocks Stocks / Usage Ending Stocks (Million Bushels) 500 22.0% 20.0% 18.0% 450 16.0% 400 14.0% 350 12.0% 300 10.0% 250 8.0% 200 6.0% 150 4.0% 50 2.0% 0 0.0% 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 100 Until a few weeks ago, traders were looking for planted acreage to be revised upwards by about 2 million acres, and with good weather, yield would end up around 46.7 bushels per acre (down 1 from last year).
This would result in ending being a record 608 million bushels and a comfortable stocks/usage ratio of 16.3%. (Scenario C, page 5) 14-Sep 7-Sep 31-Aug 24-Aug 17-Aug 10-Aug 3-Aug 27-Jul 20-Jul 13-Jul 6-Jul 29-Jun 22-Jun US Soybeans - Ending Stocks vs. Stocks / Usage Ratio Stocks / Usage Ratio On May 26th trend-following fund traders in soybeans held a record net short position of 92,991 contracts. This was no surprise.
Record planted acreage in the US, record production in Brazil and Argentina, and record world ending stocks and a record stocks/usage ratio left the market in a steady downtrend. However, for the week ending June 19th, November Soybeans closed sharply higher on the week after posting a contract low. This weekly key reversal was a strong bottoming signal.
Why the sudden turn? The shift in the “what ifs” for the US balance sheet has opened the door for a tighter outlook than what the market has been expecting. 15-Jun Soybeans – Tighter Old Crop Supply, New Crop Concerns 8-Jun 1-Jun 47 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 4 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting "What If's" for 2015/16 USDA SUPPLY/DEMAND US SOYBEANS Jun May Jun USDA USDA USDA 09-10 10-11 11-12 12-13 14-15 15-16 15-16 Scenario A Scenario B Scenario C Planted Area (M Acres) 77.5 77.4 75.0 77.2 83.7 84.6 84.6 84.0 84.6 86.2 Harvested Area (Acres) 76.4 76.6 73.8 76.1 83.1 83.7 83.7 83.1 83.7 85.3 Yield (Bu/Acre) 44.0 43.5 42.0 40.0 47.8 46.0 46.0 44.5 46.0 46.7 Beginning Stocks (M Bu) Production Imports 138 151 215 169 92 350 330 280 330 330 3,361 3,331 3,097 3,042 3,969 3,850 3,850 3,698 3,850 3,983 15 14 16 41 30 30 30 30 30 30 3,514 3,497 3,328 3,252 4,091 4,230 4,210 4,008 4,210 4,343 Crushings 1,752 1,648 1,703 1,689 1,815 1,825 1,830 1,830 1,830 1,830 Exports 1,499 1,505 1,365 1,317 1,810 1,775 1,775 1,775 1,775 1,775 Seed 90 87 90 89 98 92 92 92 92 92 Residual 20 43 -2 16 38 38 38 38 38 38 3,363 3,282 3,159 3,111 3,761 3,729 3,734 3,735 3,735 3,735 151 215 169 141 330 500 475 273 475 608 4.5% 6.6% 5.4% 4.5% 8.8% 13.4% 12.7% 7.3% 12.7% 16.3% Supply,Total Use, Total Ending Stocks Stocks/Use Ratio However, traders now see the potential for smaller beginning stocks, smaller acres and smaller yield. Traders believe that the USDA’s current estimate of 330 million bushels for 2014/15 ending stocks is too high. The soybean crush for May was a record high, and the basis has been very strong. In addition, the market has inverted, with the July futures trading at a 16 ¼-cent premium to the August and a 29 ½-cent premium to the September.
As a result, more and more traders are looking for the USDA to revise 2014/15 usage higher and production for lower, which could leave old crop ending stocks closer to 280 million. This drop is supply could show up in the form of a tighter than expected stocks number in the June 30th report. The USDA’s June supply/demand update pegged old crop ending stocks at 330 million bushels, down from their 350 million-bushel estimate in May. For the new crop season, ending stocks were forecast at 475 million bushels down from trade expectations of 487 million and down from 500 million bushels in the May report.
World ending stocks for 2014/15 came in at 83.7 million tonnes, down from 85.80 million tonnes expected. World ending stocks for the 2015/16 season came in at 93.22 million tonnes versus expectations near 96 million tonnes and up from 96.22 million projected in May. This was below expectations but still a new record high.
Argentine production was estimated at 59.5 million tonnes vs. 58.50 million forecast in May. Massive rains for May and much of June in Kansas and Missouri have opened the door for a loss of several million acres of soybeans. In addition, ponding across much of the Midwest has left crop conditions in a decline, and this suggests that yield may not be as strong as suggested. For the week ending June 21st, good to excellent readings are expected to be near 64-65% versus a reading of 72% last year at this time.
If we were to assume a smaller acreage number, a yield of 44.5 bushels per acre (still the second highest on record) and smaller beginning stocks, ending stocks would fall to 273 million bushels for the coming year, with a stocks/usage ratio of 7.3%. (Scenario A, above) The key weather period for soybeans won’t occur until late July and early August. For now, the price trend could go either way.
As of June 14th, there were still 3.3 million acres left to plant in Missouri and 1.6 million left in Kansas. However, any loss of acreage from here will not show up in the June 30th report, as the survey was done in early June. If the weather turns dry, the USDA raises acreage by a few million acres, and August weather is favorable, there could be more downside price action ahead. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 5 .
June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting Producer Hedges for Soybeans End User Hedges for Soybeans Short-term: SELL an in-the-money September Soybean Short Dated New Crop (SDNC) $9.60 put for around 45 ½ cents and BUY 3 September Soybean SDNC $9.10 puts for around 19 ½ cents each. The net outlay would be 13 cents. Short-term: BUY November Soybean futures/BUY an August Soybean SDNC $9.60 put for 26 cents, and wait to SELL an August Soybean SDNC $9.00 put for 12 cents. The hedge portion of this trade is the long futures position, which is protected by the purchase of the put. Selling the in-the-money put guards against a temporary recovery following the report and even a surprise weather threat in the early portion of the summer season that would reduce the sensitivity of the long out-of-the-money put position. In the event of a near term rally, the producer could bank some profits on the short put, which would increase the sensitivity of the short side hedge for the remainder of the growing season! On a 50-cent decline, the short put could be expected to lose 36 cents, while the 3 long puts combined could gain 84 cents, for an overall net gain of 48 cents.* If there is a weather threat and the soybean market rallies, the net cost of the hedge remains only 13 cents per bushel. Longer-term: BUY 1 November Soybean futures/BUY 4 September Soybean SDNC $8.80 puts for 10 cents each. The delta will be flat to start, but it will become net short on good weather into the critical growing season during late July and early August. The long futures component is effectively a “hedge of the hedge,” as it is designed to protect the short side hedge in the event of a surprise bullish event.
If the hedge is not needed and the market runs significantly higher, the hedger can recoup a large portion of the lost options premium. This could be used to implement a fresh hedge at a more favorable price level. The long futures component makes the hedge a “volatility hedge,” where wide swings in either direction will serve to benefit the hedger’s net position. 100 90 World Soybeans - Ending Stocks vs. Stocks / Usage Ratio Ending Stocks Stocks / Usage Longer-term: SELL 1 March Soybean futures at $9.50/BUY 10 March Soybean $12.20 calls for 6 cents each.
On a return to the June lows in March Soybeans, BUY BACK the futures for a 43-cent profit, hold the calls for a cheap, early 2016 hedge. This is a leveraged, long-term hedge against higher prices that can be partially or fully financed by market volatility, which is possible given potential size of the crop and the state of flux in the weather. With soybeans already rallying $1.56 per bushel into the report, it would not be a reach to predict a $1.00-$2.00 range into next spring. In order to see that range unfold on the downside, it would require periodic rain and the avoidance of extreme heat. This strategy uses the continuation of downward pricing to lay out protection for the future! 34.0% 31.5% 29.0% 26.5% 60 24.0% 50 21.5% 40 19.0% 30 16.5% 20 14.0% 10 11.5% 0 9.0% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 70 Stocks / Usage Ratio 80 Ending Stocks (MMT) The short, further out-of-the-money put is a financing mechanism that should provide the hedger with the confidence to pay more for the more expensive $9.40 put. Selling the $8.80 put limits the maximum protection of the long futures, but on an extremely sharp break in soybean prices, the end user should begin to see significantly lower purchase prices on the cash market. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 6 .
June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting Corn – Are Traders too Pessimistic about Demand and too Optimistic towards Supply? US Corn - Ending Stocks vs. Stocks / Usage Ratio 2,250 Ending Stocks 22.5% Stocks / Usage 20.0% 1,750 Ending Stocks (Million Bushels) 2,000 17.5% 1,500 15.0% 1,250 12.5% 1,000 10.0% 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 1993 World Corn - Ending Stocks vs. Stocks / Usage Ratio 230 Ending Stocks 50% Stocks / Usage 150 30% 130 25% 20% 15% 70 10% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 35% 90 Ending Stocks (MMT) 170 Corn - COT - Disaggregated Futures and Options Non-Commercial - No CIT - Net Position Number Of Contracts 400,000 300,000 200,000 100,000 0 -100,000 -200,000 2015 2014 2013 2012 2011 2010 2009 -300,000 2008 The June USDA supply/demand update was considered bearish for the world numbers and neutral for the US numbers. The USDA pegged 2014/15 US ending stocks at 1.876 billion bushels versus 1.859 billion expected and 1.851 billion in the May report. For 40% 2007 Pork is also seeing an expansion. For the June 26th Quarterly USDA Hogs and Pigs report, traders are looking for the number of market animals on hand June 1st to be 8% above a year ago.
While it is easy to talk about lower feed demand, we are not seeing the statistics to need to see a decline. 190 2006 For the five weeks ending June 6th, the average number of chicks placed per week for broiler production has been up 3.7% from the same period last year. Second-quarter broiler production totaled 10.1 billion pounds, up 5% from last year. 45% 110 The trade media is full of reports of the potential decline in feed usage in the US due to bird flu as egg prices surge higher. But so far the key broiler production areas have not been affected by the flu, and there has been little or no impact on broiler meat production.
The primary impacts have been declines in egg and turkey production and poultry exports. 210 Stocks / Usage Ratio The trade may be too bearish going into the key growing season traders may be too pessimistic about demand and too optimistic about supply. Stocks are high in the US and worldwide, but they do not appear burdensome in the face of current usage levels. It may take some major weather concern to force the market to put in a significant low, but building a more bearish case from here may also be a difficult task. 2000 0.0% 1999 0 1998 2.5% 1997 250 The excessive moisture in the Midwest could curtail any replanting of ponded areas in a timely fashion, but even if this is a significant issue, it will not show up in the June 30th report.
Yields could be dragged down, and there could be a final revision lower in acreage, but will these factors be enough to offset the good start to the crop and the current outlook for a lack of excessive heat in July? 1996 5.0% 1995 7.5% 500 1994 750 Stocks / Usage Ratio Corn traders do not have too much to get excited about going into the key June 30th reports. The slow pickup in US ethanol exports, concerns that bird flu will hurt domestic usage, a much bigger Brazilian crop that will leave a longer export tail, and massive corn stocks in China are all seen as bearish factors. In addition, the northern Midwest corn crop was planted on time, so the possibility of seeing a significant decline in acreage from the March expectations is limited. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 7 .
June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting "What If's" for 2015/16 USDA SUPPLY/DEMAND US CORN Jun May Jun USDA USDA USDA 10-11 11-12 12-13 13-14 14-15 15-16 15-16 Scenario A Scenario B Scenario C Planted Area (M Acres) 88.2 91.9 97.3 95.4 90.6 89.2 89.2 88.7 89.2 88.7 Harvested Area (Acres) 81.4 83.9 87.4 87.5 83.1 81.7 81.7 81.2 81.7 81.2 152.6 146.7 123.2 158.1 171.0 166.8 166.8 162.0 166.8 167.0 Yield (Bu/Acre) Beginning Stocks (M Bu) Production Imports 1,708 1,128 989 821 1,232 1,851 1,876 1,876 1,876 1,876 12,425 12,314 10,755 13,829 14,216 13,630 13,630 13,161 13,628 13,567 28 29 160 36 25 125 25 25 27 25 Supply, Total 14,161 13,471 11,904 14,686 15,472 15,506 15,531 15,062 15,531 15,468 Feed & Residual 4,777 4,520 4,315 5,034 5,250 5,300 5,300 5,300 5,300 5,300 Food, Seed & Industry 6,425 6,421 6,038 6,503 6,522 6,560 6,560 6,560 6,560 6,560 Ethanol for Fuel 5,019 5,000 4,641 5,134 5,175 5,200 5,200 5,200 5,200 5,200 Domestic Total 11,202 10,941 10,353 11,537 11,772 11,860 11,860 11,860 11,860 11,860 Total Exports 1,831 1,541 730 1,917 1,825 1,900 1,900 1,900 1,900 1,900 Use, Total 13,033 12,482 11,083 13,454 13,597 13,760 13,760 13,760 13,760 13,760 Ending Stocks 1,128 989 821 1,232 1,876 1,746 1,771 1,302 1,771 1,708 Stocks/Use Ratio 8.7% 7.9% 7.4% 9.2% 13.8% 12.7% 12.9% 9.5% 12.9% 12.4% 2015/16, ending stocks were projected at 1.771 billion bushels versus expectations for 1.779 billion and 1.746 billion reported in May. In the same report, world ending stocks for 2014/15 came in at 197.01 million tonnes versus 192.5 million forecast in May. World ending stocks for 2015/16 came in at 195.19 million tonnes from 191.94 million tonnes last month. Trend-following fund traders held a massive net short position of 186,216 contracts as of June 16th. This leaves the market vulnerable to short-covering if yield, stocks or acreage come in below trade expectations. For now, the trade is convinced that July’s weather will be cool, with normal to above normal precipitation due to El Niño. The USDA is starting the year using an above-trend yield of 166.8 bushels per acre that would also be the second highest on record.
If the weather stays normal, this may be a good projection. However, the heavy rainfall in May and June has left some ponded areas that may not get replanted in time, and this could drag down yield. Given the acreage issues in a few parts of the western Corn Belt (such as Missouri), acreage could ultimately be adjusted down by 500,000 acres. If we assume a yield of 167 bushels per acre, then ending stocks would come in near 1.708 billion bushels.
(Scenario C) However, if yield is adjusted down to the 20-year trend of 162, ending stocks could slide to 1.303 billion bushels, with a relatively tight stocks/usage ratio of 9.5%. (Scenario A) The point of the exercise is to show that it may take some very good weather to expect a 166.8 yield. If we look at the last 10 years and keep the record year in and throw out the drought year, the average yield is still only 154.9 bushels per acre.
If we use the current USDA projections but plug in a 154.9 yield, ending stocks would drop to just 798 million bushels, with an extremely tight 5.8% stocks/ usage ratio. Again, while it is easy to believe we can have another excellent weather year like 2014, it will not take much in the way of pollination issues or unexpected heat in July to cause reductions in the yield outlook. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 8 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting Producer Hedges for Corn End User Hedges for Corn Short-term: SELL December Corn futures, and protect that position by BUYING an August Corn SDNC $3.70/$4.00 bull call spread for around 11 cents. Short-term: BUY December Corn futures/BUY a September Corn SDNC $3.60 put for 10 cents/SELL a September Corn SDNC $4.15 call for 6 ½ cents. This strategy is appealing because of the recent rally of 73 cents per bushel in corn off the June lows. The short corn futures position makes the hedge very sensitive to the growing fears of a large crop, while the bull call spread in SDNC options provides cheap, temporary protection against a sudden rally. The producer has a very responsive hedge but also has a modest “hedge of the hedge” to protect against bullish surprises. The net cost for the options will be 3 ½ cents. This hedge provides sensitive long protection with the direct negative threat of option time decay.
The long hedge remains sensitive until the December corn futures expire. The purchase of a SDNC $3.60 put serves as protection for the hedge, while the sale of the SDNC $4.15 call is a tool to offset the cost of the put. If end users want full protection against a shift in corn fundamentals into an outright bullish environment, they should not sell the $4.15 call.
On the other hand, end users can sell the call and be quick to take a profit on it or plan to exit if and when the weather begins to turn more threatening. Longer-term: SELL 1 December Corn $3.60 put for 20 cents and BUY 5 September SDNC Corn $3.45 puts for 4 ½ each (22 ½ cents total). The net outlay will be 2 ½ cents. This strategy offers a leveraged and short side-hedge at a reduced cost. It also allows for some protection and financing of the hedge from the sale of a single, short-dated put.
If the December $3.60 put moves deep into the money prior to the expiration of the September SDNC $3.45 puts, the September puts should be even deeper into the money and should be acting almost like short futures. If there is a near term upside extension, the hedger can decide to bank profits on the short December $3.60 put, which would increase the sensitivity of the long puts and will add a limited, defined amount of exposure to the net cost of the hedge. For example, if short $3.60 put position is liquidated at 10, the added cost would be $500 per hedge, but then there would be nothing to get in the way of benefiting from a summer slide in corn prices. Longer-term: 1) SELL 1 September Corn SDNC $3.60 call for 24 cents/BUY 4 December Corn $4.30 calls for 8 cents each. This strategy employs long term leveraged call protection that is partially financed by the sale of a single, closer to expiration, call. Unless bullish conditions surface right away, the September SDNC call will lose sensitivity, as it will only have 52 days until expiration as of the report date.
Hopefully, initial weakness in prices will allow for a profit to be banked in the short call, which would then allow the hedger to open up coverage of the hedge and simplify the position. 2) SELL December Corn futures/BUY 5 May 2016 Corn $5.10 calls for 6 cents each. This strategy provides the end user with longer term coverage in a leveraged option position. The premium outlay is initially protected by the short corn futures, while the leveraged call position should remain effective for almost 300 days! If corn prices dive in the wake of the report or they decline due to improvements in crop conditions during the growing season, the hedger should have to ability to bank profits from the short futures and defray the 30-cent combined premium cost for the calls. If corn prices fall to a significantly lower level, this strategy would allow the hedger to recoup the entire premium expense and reset it at a lower level! 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 9 .
June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting Potential Volatility in Soybean Oil Sun Palm 1500 1250 1000 750 500 250 9 8 World Palm Oil - Ending Stocks vs. Stocks / Usage Ratio Production Stocks / Usage 21% 19% 5 13% 4 11% 9% 7% 1 5% 0 3% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 15% 2 20 18 World Vegetable Oil - Ending Stocks vs. Stocks / Usage Ratio Ending Stocks Stocks / Usage 14.00% 13.40% 12.80% 14 12.20% 12 11.60% 10 11.00% 8 10.40% 6 9.80% 4 9.20% 2 8.60% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 16 Ending Stocks (MMT) Argentina is the world’s largest soybean oil exporter, with 5.1 million tonnes forecast for this year. US exports are projected at just 907,000 tonnes. It will be difficult to quickly find another 4.55 million tonnes to make up for any shortfall of palm oil out of Southeast Asia. A significant expansion of biodiesel usage in the US, South America and Southeast Asia could also keep stocks tight. 6 Stocks / Usage Ratio The primary reason that El Nino dryness in Malaysia and Indonesia is such a concern is that 86% of world palm production comes from that region.
If there are production difficulties and exports decline, soybean oil exports will need to make up the difference. Global soybean oil exports are projected at 10.77 million tonnes. If palm exports drop 10%, soybean oil exports will need to jump to 15.3 million tonnes, a 42% increase from the current estimate. 17% 3 Production (MMT) 7 With record crops in Argentina and Brazil and record planted area in the US, one would assume that there is (or will eventually be) plenty of soybean oil to meet the world’s demand.
However, the world vegetable oil stocks/usage ratio is historically tight, even with record palm oil production and exports of 45.5 million tonnes onto the world market. May-15 May-14 May-13 May-12 May-11 May-10 May-09 May-08 May-07 May-06 May-05 May-04 May-03 May-02 May-01 May-00 May-99 May-98 May-97 May-96 0 Stocks / Usage Ratio The potential for an El Nino event is initially a bearish force for soybeans, as it can increase moisture in both the US and Brazil. However, a severe and sustained El Nino event later this year and into next year could have the greatest impact on palm oil production and on palm, soy and vegetable oil prices. Burdensome supplies of soybeans would seem to reduce the risk against oil buyers, but the potential for a market-turning weather event should not be discounted. With soybean oil prices already posting a low to high bounce of roughly 15.5% from their early 2015 lows, it would seem that the trade is registering some concern with future weather conditions. Rapeseed 1750 May-95 The outlook for global soybean prices has rarely presented a more bearish case than the one facing the markets now.
World ending stocks, stocks to use ratios and stocks in the hands of exporters are all registering bearish signals, but the potential for even lower prices looms if the feared supply builds become a reality. Soybean 2000 $/Ton Rotterdam Vegetable oil end users and speculators are in a tough position this year, as the oilseed production outlook is extremely bearish but vegetable oil stocks are relatively tight. If any El Niño weather problems develop in Southeast Asia, world vegetable oil prices could advance. Cash: Weekly Vegetable Oils - Rotterdam 2250 It will be important to see normal monsoon rains in India. Otherwise their import requirements could increase as well.
Chinese demand continues to advance, too. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 10 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting Vegetable Oil Exports Comparison End User Hedge for Soybean Oil This is essentially a “volatility” hedge. With the long multiple call/ short futures position, the worst case scenario for the hedger would occur if market fails to swing up or down. Our interest in this strategy stems from the potential for good production weather in the US to be followed by unfavorable production weather for Malaysia and Indonesia later this year. If a hedger buys 3-4 out of the money May calls and sells a May futures contract, the short futures position can be lifted on weakness early this summer, leaving the end-user covered against any uptrend into 2016. Malaysia Palm Argentina Soy Indonesia Palm 23.500 21 18 Million Metric Tonnes 18.000 15 12 9 6 5.100 3 0.907 15 14 13 12 11 10 09 08 07 06 05 04 03 02 01 00 99 98 97 96 95 0 94 We suggest that they consider buying multiple May 2016 (or later expiration) calls as a hedge against a change in the current outlook. Given that soybean oil prices for May 2016 delivery are 3.5 cents above their 2015 lows, hedgers might consider hedging the premium outlay for the calls with the sale of a soybean oil futures contract. This is a volatility play that needs a significant range-up move to provide a windfall.
However, if bearish weather for the US crop pushes ending stocks expectations even higher and/or the El-Nino threat dissipates, a significant portion of the hedge premium outlay could be recouped with the short futures position. US Soybeans 24 S USDA India Vegetable Oil - Production vs. Usage 24 21 Production Domestic Consumption 18 Million Metric Tonnes Given the potential for the current forecast for historically high ending stocks being undone by adverse weather, the prospect of significant volatility in soybean oil is high. This is something that end users could use to their advantage. 27 15 12 9 6 3 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 China Vegetable Oil - Production vs.
Usage 36 33 30 Production Domestic Consumption 27 Million Metric Tonnes 24 21 18 15 12 9 6 3 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 11 . THE HIGHTOWER REPORT Futures Analysis & Forcasting June 23, 2015 SPECIAL REPORT CME Webinars: Are You Prepared for the USDA Acreage Report? June 24 | June 30 2:30 - 3:30 p.m. CT Both events will be hosted as online webinars To help commercial hedgers and end users prepare for the June 30 USDA Acreage Report, we're bringing in the experts. In this two-part webinar series, top industry analysts share their insights pre- and postreport to help you prepare for any major impacts to the agricultural markets. Pre-USDA Webinar • • The impact of El Nino – Blu Putnam, Chief Economist, CME Group Expectations and Strategy – David Hightower, President, The Hightower Report Post-USDA Webinar • Analysis and outlook panel discussion – Dan Basse, AgResource Click here to register! Disclaimer The information in this report may be considered dated upon its release and should not be considered interpersonal advice. This report is merely an opinion on the market and is a reflection of conditions as of its publication.
Market conditions change! Traders should not consider entering positions without their own independent analysis of the market’s current situation, nor without further consideration of any changes to the information contained herein that may have occurred since this report was written. The authors are not responsible for any verbal or written claims and opinions that might be provided in conjunction with this report. The trading suggestions contained herein have been provided merely as a general guide and only for the purpose of quantifying the authors’ opinions. This report includes information from sources believed to be reliable but no independent verification has been made and we do not guarantee its accuracy or completeness.
Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition.
Any reproduction or retransmission of this report without the express written consent of The Hightower Report is strictly prohibited. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 12 .
In this paper, we will review some strategies for end users and producers to consider going into that critical report date. (See tables on pages 2 and 3.) The corn and soybean markets both face huge ending stocks levels, and their stocks/usage ratios levels are considered “comfortable.” However, end users of vegetable oils face a very different setup, as www.HightowerReport.com Trade Recommendations Pre-open and Midday Audio Updates Fundamental & Technial Chart Library Daily Fundametal & Technical Analysis 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 1 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting NOVEMBER SOYBEAN FUTURES REACTION TO JUNE STOCKS/ACREAGE REPORT Year Price Changes Day of Report 10 Days Later Aug 1st Sep 1st Oct 31st 1990 0.00 0.25 -37.25 -8.00 -40.25 1991 -11.00 -29.25 87.25 26.75 -2.25 1992 -4.00 -43.00 -68.50 -70.00 -69.50 Notes Record Yield 1993 21.50 53.50 48.00 2.50 -38.75 1994 -6.25 -52.00 -68.75 -53.25 -86.50 1995 -4.00 60.00 10.50 29.25 80.25 1996 14.25 62.50 -8.50 49.25 -78.50 1997 -30.00 8.25 28.75 16.25 73.25 1998 10.75 -38.75 -64.75 -95.75 -58.25 1999 4.50 -33.50 2.50 34.75 9.75 2000 -15.00 -28.25 -20.50 36.00 -17.00 2001 23.00 44.75 27.75 20.25 -35.50 2002 15.25 26.50 34.50 42.75 58.50 2003 -5.75 -31.25 -36.25 22.00 241.75 2004 -30.75 -23.50 -103.00 -40.25 -141.50 Record Yield 2005 -22.75 65.25 38.25 -67.25 -101.50 Record Yield 2006 13.00 -11.25 -21.25 -68.25 7.75 2007 39.50 17.00 -27.25 25.75 128.25 2008 14.50 -58.00 -279.00 -275.50 -648.75 2009 -2.50 -76.50 49.50 -30.00 -3.00 2010 -9.50 85.50 107.50 106.50 323.50 Weather Impact 2011 -29.00 93.00 85.75 151.75 -86.50 Weather Impact Record Yield Record Yield 2012 24.25 162.75 188.75 340.50 119.25 Weather Impact 2013 -23.25 11.75 -70.50 134.75 28.25 Weather Impact 2014 -70.75 -71.00 -98.75 -125.25 -240.5 10 13 12 15 10 Higher Count Average 18.05 53.15 59.08 69.27 107.05 Max 39.50 162.75 188.75 340.50 323.50 14 12 13 10 15 Lower Count Average -18.89 -41.35 -69.56 -83.35 -109.88 Max -70.75 -76.50 -279.00 -275.50 -648.75 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 2 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting DECEMBER CORN FUTURES REACTION TO JUNE STOCKS/ACREAGE REPORT Year Price Changes Day of Report 10 Days Later Aug 1st Sep 1st Oct 31st 1990 3.25 -19.75 -40.25 -52.75 -57.75 1991 -4.50 -8.50 33.00 18.75 15.50 1992 -2.50 -23.00 -35.75 -37.50 -51.25 Notes Record Yield 1993 4.75 6.75 8.50 -3.00 19.50 1994 2.25 -18.75 -20.25 -18.25 -26.25 1995 6.25 16.00 -2.25 12.50 52.00 1996 8.75 18.00 -37.00 -19.75 -95.25 1997 2.75 18.25 26.75 34.00 41.50 1998 7.00 -26.00 -39.00 -55.00 -40.50 1999 1.50 -21.00 0.25 -4.25 -26.75 2000 -8.50 -16.25 -14.75 -9.50 -1.50 2001 0.00 20.25 16.75 23.00 -2.75 2002 -1.00 -6.25 19.50 30.75 4.00 2003 -6.25 -11.50 -6.50 16.25 23.50 Record Yield 2004 -10.50 -16.75 -39.25 -30.75 -64.50 Record Yield 2005 -5.25 36.25 13.75 -14.50 -35.50 2006 5.75 7.75 4.00 -16.00 60.50 2007 -7.50 -2.25 -9.50 2.50 24.75 2008 -30.00 -90.25 -201.50 -187.75 -355.50 2009 -30.00 -29.75 1.75 -48.00 -1.25 2010 29.50 31.75 31.00 74.00 208.50 2011 -30.00 64.50 95.25 139.50 26.50 2012 2.50 137.75 161.00 170.25 121.00 2013 -27.50 -7.50 -47.25 -35.75 -82.75 2014 -22.00 -43.50 -63.00 -61.50 Record Yield -104.00 Record Yield Higher Count Average Max 11 10 12 10 11 6.75 35.73 34.29 52.15 54.30 29.50 137.75 161.00 170.25 208.50 13 15 13 15 14 Lower Count Average -14.27 -22.73 -42.79 -39.62 -67.54 Max -30.00 -90.25 -201.50 -187.75 -355.50 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 3 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting supplies will be relatively tight going into the 2015/16 marketing year. If El Niño brings significant dryness to Southeast Asia, vegetable oil prices could trend sharply higher. In this report we offer some hedge suggestions for vegetable oil end users as well. Soybeans - COT - Disaggregated Futures and Options Non-Commercial - No CIT - Net Position Number Of Contracts 250,000 200,000 150,000 According to NOAA, May was the wettest May for the US since records began 121 years ago. It was also the wettest MONTH ever recorded. The map on page 1 shows the 14-day percentage of normal precipitation for the period ending June 21st.
A large part of the central and eastern Corn Belt has seen 200-600% of normal precipitation. 50,000 0 -50,000 2015 2014 2013 2012 2011 2010 2009 2008 -100,000 2007 While it is a common perception that “rain makes grain” and that good moisture in the spring will lead to big crops, the US weather so far this year has been exceedingly wet. Soybeans do not do well with too much moisture early in the year, and abundant and persistent rains can cause significant ponding in many corn fields. Unless these areas dry up and can be replanted in a timely manner, lower yield is a strong possibility. 100,000 2006 Wettest Month EVER US Soybean Crop Conditions Percent Good / Excellent - Select States 77 74 71 68 65 62 One look at the Commitments of Traders reports and it is clear that speculators believe the weather is bearish, with many traders expecting good weather for July, but this is suspect. 59 6/21 Estimate: 65% 56 53 50 2013 2014 2015 10 Year Avg. 600 550 Ending Stocks Stocks / Usage Ending Stocks (Million Bushels) 500 22.0% 20.0% 18.0% 450 16.0% 400 14.0% 350 12.0% 300 10.0% 250 8.0% 200 6.0% 150 4.0% 50 2.0% 0 0.0% 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 100 Until a few weeks ago, traders were looking for planted acreage to be revised upwards by about 2 million acres, and with good weather, yield would end up around 46.7 bushels per acre (down 1 from last year).
This would result in ending being a record 608 million bushels and a comfortable stocks/usage ratio of 16.3%. (Scenario C, page 5) 14-Sep 7-Sep 31-Aug 24-Aug 17-Aug 10-Aug 3-Aug 27-Jul 20-Jul 13-Jul 6-Jul 29-Jun 22-Jun US Soybeans - Ending Stocks vs. Stocks / Usage Ratio Stocks / Usage Ratio On May 26th trend-following fund traders in soybeans held a record net short position of 92,991 contracts. This was no surprise.
Record planted acreage in the US, record production in Brazil and Argentina, and record world ending stocks and a record stocks/usage ratio left the market in a steady downtrend. However, for the week ending June 19th, November Soybeans closed sharply higher on the week after posting a contract low. This weekly key reversal was a strong bottoming signal.
Why the sudden turn? The shift in the “what ifs” for the US balance sheet has opened the door for a tighter outlook than what the market has been expecting. 15-Jun Soybeans – Tighter Old Crop Supply, New Crop Concerns 8-Jun 1-Jun 47 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 4 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting "What If's" for 2015/16 USDA SUPPLY/DEMAND US SOYBEANS Jun May Jun USDA USDA USDA 09-10 10-11 11-12 12-13 14-15 15-16 15-16 Scenario A Scenario B Scenario C Planted Area (M Acres) 77.5 77.4 75.0 77.2 83.7 84.6 84.6 84.0 84.6 86.2 Harvested Area (Acres) 76.4 76.6 73.8 76.1 83.1 83.7 83.7 83.1 83.7 85.3 Yield (Bu/Acre) 44.0 43.5 42.0 40.0 47.8 46.0 46.0 44.5 46.0 46.7 Beginning Stocks (M Bu) Production Imports 138 151 215 169 92 350 330 280 330 330 3,361 3,331 3,097 3,042 3,969 3,850 3,850 3,698 3,850 3,983 15 14 16 41 30 30 30 30 30 30 3,514 3,497 3,328 3,252 4,091 4,230 4,210 4,008 4,210 4,343 Crushings 1,752 1,648 1,703 1,689 1,815 1,825 1,830 1,830 1,830 1,830 Exports 1,499 1,505 1,365 1,317 1,810 1,775 1,775 1,775 1,775 1,775 Seed 90 87 90 89 98 92 92 92 92 92 Residual 20 43 -2 16 38 38 38 38 38 38 3,363 3,282 3,159 3,111 3,761 3,729 3,734 3,735 3,735 3,735 151 215 169 141 330 500 475 273 475 608 4.5% 6.6% 5.4% 4.5% 8.8% 13.4% 12.7% 7.3% 12.7% 16.3% Supply,Total Use, Total Ending Stocks Stocks/Use Ratio However, traders now see the potential for smaller beginning stocks, smaller acres and smaller yield. Traders believe that the USDA’s current estimate of 330 million bushels for 2014/15 ending stocks is too high. The soybean crush for May was a record high, and the basis has been very strong. In addition, the market has inverted, with the July futures trading at a 16 ¼-cent premium to the August and a 29 ½-cent premium to the September.
As a result, more and more traders are looking for the USDA to revise 2014/15 usage higher and production for lower, which could leave old crop ending stocks closer to 280 million. This drop is supply could show up in the form of a tighter than expected stocks number in the June 30th report. The USDA’s June supply/demand update pegged old crop ending stocks at 330 million bushels, down from their 350 million-bushel estimate in May. For the new crop season, ending stocks were forecast at 475 million bushels down from trade expectations of 487 million and down from 500 million bushels in the May report.
World ending stocks for 2014/15 came in at 83.7 million tonnes, down from 85.80 million tonnes expected. World ending stocks for the 2015/16 season came in at 93.22 million tonnes versus expectations near 96 million tonnes and up from 96.22 million projected in May. This was below expectations but still a new record high.
Argentine production was estimated at 59.5 million tonnes vs. 58.50 million forecast in May. Massive rains for May and much of June in Kansas and Missouri have opened the door for a loss of several million acres of soybeans. In addition, ponding across much of the Midwest has left crop conditions in a decline, and this suggests that yield may not be as strong as suggested. For the week ending June 21st, good to excellent readings are expected to be near 64-65% versus a reading of 72% last year at this time.
If we were to assume a smaller acreage number, a yield of 44.5 bushels per acre (still the second highest on record) and smaller beginning stocks, ending stocks would fall to 273 million bushels for the coming year, with a stocks/usage ratio of 7.3%. (Scenario A, above) The key weather period for soybeans won’t occur until late July and early August. For now, the price trend could go either way.
As of June 14th, there were still 3.3 million acres left to plant in Missouri and 1.6 million left in Kansas. However, any loss of acreage from here will not show up in the June 30th report, as the survey was done in early June. If the weather turns dry, the USDA raises acreage by a few million acres, and August weather is favorable, there could be more downside price action ahead. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 5 .
June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting Producer Hedges for Soybeans End User Hedges for Soybeans Short-term: SELL an in-the-money September Soybean Short Dated New Crop (SDNC) $9.60 put for around 45 ½ cents and BUY 3 September Soybean SDNC $9.10 puts for around 19 ½ cents each. The net outlay would be 13 cents. Short-term: BUY November Soybean futures/BUY an August Soybean SDNC $9.60 put for 26 cents, and wait to SELL an August Soybean SDNC $9.00 put for 12 cents. The hedge portion of this trade is the long futures position, which is protected by the purchase of the put. Selling the in-the-money put guards against a temporary recovery following the report and even a surprise weather threat in the early portion of the summer season that would reduce the sensitivity of the long out-of-the-money put position. In the event of a near term rally, the producer could bank some profits on the short put, which would increase the sensitivity of the short side hedge for the remainder of the growing season! On a 50-cent decline, the short put could be expected to lose 36 cents, while the 3 long puts combined could gain 84 cents, for an overall net gain of 48 cents.* If there is a weather threat and the soybean market rallies, the net cost of the hedge remains only 13 cents per bushel. Longer-term: BUY 1 November Soybean futures/BUY 4 September Soybean SDNC $8.80 puts for 10 cents each. The delta will be flat to start, but it will become net short on good weather into the critical growing season during late July and early August. The long futures component is effectively a “hedge of the hedge,” as it is designed to protect the short side hedge in the event of a surprise bullish event.
If the hedge is not needed and the market runs significantly higher, the hedger can recoup a large portion of the lost options premium. This could be used to implement a fresh hedge at a more favorable price level. The long futures component makes the hedge a “volatility hedge,” where wide swings in either direction will serve to benefit the hedger’s net position. 100 90 World Soybeans - Ending Stocks vs. Stocks / Usage Ratio Ending Stocks Stocks / Usage Longer-term: SELL 1 March Soybean futures at $9.50/BUY 10 March Soybean $12.20 calls for 6 cents each.
On a return to the June lows in March Soybeans, BUY BACK the futures for a 43-cent profit, hold the calls for a cheap, early 2016 hedge. This is a leveraged, long-term hedge against higher prices that can be partially or fully financed by market volatility, which is possible given potential size of the crop and the state of flux in the weather. With soybeans already rallying $1.56 per bushel into the report, it would not be a reach to predict a $1.00-$2.00 range into next spring. In order to see that range unfold on the downside, it would require periodic rain and the avoidance of extreme heat. This strategy uses the continuation of downward pricing to lay out protection for the future! 34.0% 31.5% 29.0% 26.5% 60 24.0% 50 21.5% 40 19.0% 30 16.5% 20 14.0% 10 11.5% 0 9.0% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 70 Stocks / Usage Ratio 80 Ending Stocks (MMT) The short, further out-of-the-money put is a financing mechanism that should provide the hedger with the confidence to pay more for the more expensive $9.40 put. Selling the $8.80 put limits the maximum protection of the long futures, but on an extremely sharp break in soybean prices, the end user should begin to see significantly lower purchase prices on the cash market. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 6 .
June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting Corn – Are Traders too Pessimistic about Demand and too Optimistic towards Supply? US Corn - Ending Stocks vs. Stocks / Usage Ratio 2,250 Ending Stocks 22.5% Stocks / Usage 20.0% 1,750 Ending Stocks (Million Bushels) 2,000 17.5% 1,500 15.0% 1,250 12.5% 1,000 10.0% 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 1993 World Corn - Ending Stocks vs. Stocks / Usage Ratio 230 Ending Stocks 50% Stocks / Usage 150 30% 130 25% 20% 15% 70 10% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 35% 90 Ending Stocks (MMT) 170 Corn - COT - Disaggregated Futures and Options Non-Commercial - No CIT - Net Position Number Of Contracts 400,000 300,000 200,000 100,000 0 -100,000 -200,000 2015 2014 2013 2012 2011 2010 2009 -300,000 2008 The June USDA supply/demand update was considered bearish for the world numbers and neutral for the US numbers. The USDA pegged 2014/15 US ending stocks at 1.876 billion bushels versus 1.859 billion expected and 1.851 billion in the May report. For 40% 2007 Pork is also seeing an expansion. For the June 26th Quarterly USDA Hogs and Pigs report, traders are looking for the number of market animals on hand June 1st to be 8% above a year ago.
While it is easy to talk about lower feed demand, we are not seeing the statistics to need to see a decline. 190 2006 For the five weeks ending June 6th, the average number of chicks placed per week for broiler production has been up 3.7% from the same period last year. Second-quarter broiler production totaled 10.1 billion pounds, up 5% from last year. 45% 110 The trade media is full of reports of the potential decline in feed usage in the US due to bird flu as egg prices surge higher. But so far the key broiler production areas have not been affected by the flu, and there has been little or no impact on broiler meat production.
The primary impacts have been declines in egg and turkey production and poultry exports. 210 Stocks / Usage Ratio The trade may be too bearish going into the key growing season traders may be too pessimistic about demand and too optimistic about supply. Stocks are high in the US and worldwide, but they do not appear burdensome in the face of current usage levels. It may take some major weather concern to force the market to put in a significant low, but building a more bearish case from here may also be a difficult task. 2000 0.0% 1999 0 1998 2.5% 1997 250 The excessive moisture in the Midwest could curtail any replanting of ponded areas in a timely fashion, but even if this is a significant issue, it will not show up in the June 30th report.
Yields could be dragged down, and there could be a final revision lower in acreage, but will these factors be enough to offset the good start to the crop and the current outlook for a lack of excessive heat in July? 1996 5.0% 1995 7.5% 500 1994 750 Stocks / Usage Ratio Corn traders do not have too much to get excited about going into the key June 30th reports. The slow pickup in US ethanol exports, concerns that bird flu will hurt domestic usage, a much bigger Brazilian crop that will leave a longer export tail, and massive corn stocks in China are all seen as bearish factors. In addition, the northern Midwest corn crop was planted on time, so the possibility of seeing a significant decline in acreage from the March expectations is limited. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 7 .
June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting "What If's" for 2015/16 USDA SUPPLY/DEMAND US CORN Jun May Jun USDA USDA USDA 10-11 11-12 12-13 13-14 14-15 15-16 15-16 Scenario A Scenario B Scenario C Planted Area (M Acres) 88.2 91.9 97.3 95.4 90.6 89.2 89.2 88.7 89.2 88.7 Harvested Area (Acres) 81.4 83.9 87.4 87.5 83.1 81.7 81.7 81.2 81.7 81.2 152.6 146.7 123.2 158.1 171.0 166.8 166.8 162.0 166.8 167.0 Yield (Bu/Acre) Beginning Stocks (M Bu) Production Imports 1,708 1,128 989 821 1,232 1,851 1,876 1,876 1,876 1,876 12,425 12,314 10,755 13,829 14,216 13,630 13,630 13,161 13,628 13,567 28 29 160 36 25 125 25 25 27 25 Supply, Total 14,161 13,471 11,904 14,686 15,472 15,506 15,531 15,062 15,531 15,468 Feed & Residual 4,777 4,520 4,315 5,034 5,250 5,300 5,300 5,300 5,300 5,300 Food, Seed & Industry 6,425 6,421 6,038 6,503 6,522 6,560 6,560 6,560 6,560 6,560 Ethanol for Fuel 5,019 5,000 4,641 5,134 5,175 5,200 5,200 5,200 5,200 5,200 Domestic Total 11,202 10,941 10,353 11,537 11,772 11,860 11,860 11,860 11,860 11,860 Total Exports 1,831 1,541 730 1,917 1,825 1,900 1,900 1,900 1,900 1,900 Use, Total 13,033 12,482 11,083 13,454 13,597 13,760 13,760 13,760 13,760 13,760 Ending Stocks 1,128 989 821 1,232 1,876 1,746 1,771 1,302 1,771 1,708 Stocks/Use Ratio 8.7% 7.9% 7.4% 9.2% 13.8% 12.7% 12.9% 9.5% 12.9% 12.4% 2015/16, ending stocks were projected at 1.771 billion bushels versus expectations for 1.779 billion and 1.746 billion reported in May. In the same report, world ending stocks for 2014/15 came in at 197.01 million tonnes versus 192.5 million forecast in May. World ending stocks for 2015/16 came in at 195.19 million tonnes from 191.94 million tonnes last month. Trend-following fund traders held a massive net short position of 186,216 contracts as of June 16th. This leaves the market vulnerable to short-covering if yield, stocks or acreage come in below trade expectations. For now, the trade is convinced that July’s weather will be cool, with normal to above normal precipitation due to El Niño. The USDA is starting the year using an above-trend yield of 166.8 bushels per acre that would also be the second highest on record.
If the weather stays normal, this may be a good projection. However, the heavy rainfall in May and June has left some ponded areas that may not get replanted in time, and this could drag down yield. Given the acreage issues in a few parts of the western Corn Belt (such as Missouri), acreage could ultimately be adjusted down by 500,000 acres. If we assume a yield of 167 bushels per acre, then ending stocks would come in near 1.708 billion bushels.
(Scenario C) However, if yield is adjusted down to the 20-year trend of 162, ending stocks could slide to 1.303 billion bushels, with a relatively tight stocks/usage ratio of 9.5%. (Scenario A) The point of the exercise is to show that it may take some very good weather to expect a 166.8 yield. If we look at the last 10 years and keep the record year in and throw out the drought year, the average yield is still only 154.9 bushels per acre.
If we use the current USDA projections but plug in a 154.9 yield, ending stocks would drop to just 798 million bushels, with an extremely tight 5.8% stocks/ usage ratio. Again, while it is easy to believe we can have another excellent weather year like 2014, it will not take much in the way of pollination issues or unexpected heat in July to cause reductions in the yield outlook. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 8 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting Producer Hedges for Corn End User Hedges for Corn Short-term: SELL December Corn futures, and protect that position by BUYING an August Corn SDNC $3.70/$4.00 bull call spread for around 11 cents. Short-term: BUY December Corn futures/BUY a September Corn SDNC $3.60 put for 10 cents/SELL a September Corn SDNC $4.15 call for 6 ½ cents. This strategy is appealing because of the recent rally of 73 cents per bushel in corn off the June lows. The short corn futures position makes the hedge very sensitive to the growing fears of a large crop, while the bull call spread in SDNC options provides cheap, temporary protection against a sudden rally. The producer has a very responsive hedge but also has a modest “hedge of the hedge” to protect against bullish surprises. The net cost for the options will be 3 ½ cents. This hedge provides sensitive long protection with the direct negative threat of option time decay.
The long hedge remains sensitive until the December corn futures expire. The purchase of a SDNC $3.60 put serves as protection for the hedge, while the sale of the SDNC $4.15 call is a tool to offset the cost of the put. If end users want full protection against a shift in corn fundamentals into an outright bullish environment, they should not sell the $4.15 call.
On the other hand, end users can sell the call and be quick to take a profit on it or plan to exit if and when the weather begins to turn more threatening. Longer-term: SELL 1 December Corn $3.60 put for 20 cents and BUY 5 September SDNC Corn $3.45 puts for 4 ½ each (22 ½ cents total). The net outlay will be 2 ½ cents. This strategy offers a leveraged and short side-hedge at a reduced cost. It also allows for some protection and financing of the hedge from the sale of a single, short-dated put.
If the December $3.60 put moves deep into the money prior to the expiration of the September SDNC $3.45 puts, the September puts should be even deeper into the money and should be acting almost like short futures. If there is a near term upside extension, the hedger can decide to bank profits on the short December $3.60 put, which would increase the sensitivity of the long puts and will add a limited, defined amount of exposure to the net cost of the hedge. For example, if short $3.60 put position is liquidated at 10, the added cost would be $500 per hedge, but then there would be nothing to get in the way of benefiting from a summer slide in corn prices. Longer-term: 1) SELL 1 September Corn SDNC $3.60 call for 24 cents/BUY 4 December Corn $4.30 calls for 8 cents each. This strategy employs long term leveraged call protection that is partially financed by the sale of a single, closer to expiration, call. Unless bullish conditions surface right away, the September SDNC call will lose sensitivity, as it will only have 52 days until expiration as of the report date.
Hopefully, initial weakness in prices will allow for a profit to be banked in the short call, which would then allow the hedger to open up coverage of the hedge and simplify the position. 2) SELL December Corn futures/BUY 5 May 2016 Corn $5.10 calls for 6 cents each. This strategy provides the end user with longer term coverage in a leveraged option position. The premium outlay is initially protected by the short corn futures, while the leveraged call position should remain effective for almost 300 days! If corn prices dive in the wake of the report or they decline due to improvements in crop conditions during the growing season, the hedger should have to ability to bank profits from the short futures and defray the 30-cent combined premium cost for the calls. If corn prices fall to a significantly lower level, this strategy would allow the hedger to recoup the entire premium expense and reset it at a lower level! 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 9 .
June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting Potential Volatility in Soybean Oil Sun Palm 1500 1250 1000 750 500 250 9 8 World Palm Oil - Ending Stocks vs. Stocks / Usage Ratio Production Stocks / Usage 21% 19% 5 13% 4 11% 9% 7% 1 5% 0 3% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 15% 2 20 18 World Vegetable Oil - Ending Stocks vs. Stocks / Usage Ratio Ending Stocks Stocks / Usage 14.00% 13.40% 12.80% 14 12.20% 12 11.60% 10 11.00% 8 10.40% 6 9.80% 4 9.20% 2 8.60% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 16 Ending Stocks (MMT) Argentina is the world’s largest soybean oil exporter, with 5.1 million tonnes forecast for this year. US exports are projected at just 907,000 tonnes. It will be difficult to quickly find another 4.55 million tonnes to make up for any shortfall of palm oil out of Southeast Asia. A significant expansion of biodiesel usage in the US, South America and Southeast Asia could also keep stocks tight. 6 Stocks / Usage Ratio The primary reason that El Nino dryness in Malaysia and Indonesia is such a concern is that 86% of world palm production comes from that region.
If there are production difficulties and exports decline, soybean oil exports will need to make up the difference. Global soybean oil exports are projected at 10.77 million tonnes. If palm exports drop 10%, soybean oil exports will need to jump to 15.3 million tonnes, a 42% increase from the current estimate. 17% 3 Production (MMT) 7 With record crops in Argentina and Brazil and record planted area in the US, one would assume that there is (or will eventually be) plenty of soybean oil to meet the world’s demand.
However, the world vegetable oil stocks/usage ratio is historically tight, even with record palm oil production and exports of 45.5 million tonnes onto the world market. May-15 May-14 May-13 May-12 May-11 May-10 May-09 May-08 May-07 May-06 May-05 May-04 May-03 May-02 May-01 May-00 May-99 May-98 May-97 May-96 0 Stocks / Usage Ratio The potential for an El Nino event is initially a bearish force for soybeans, as it can increase moisture in both the US and Brazil. However, a severe and sustained El Nino event later this year and into next year could have the greatest impact on palm oil production and on palm, soy and vegetable oil prices. Burdensome supplies of soybeans would seem to reduce the risk against oil buyers, but the potential for a market-turning weather event should not be discounted. With soybean oil prices already posting a low to high bounce of roughly 15.5% from their early 2015 lows, it would seem that the trade is registering some concern with future weather conditions. Rapeseed 1750 May-95 The outlook for global soybean prices has rarely presented a more bearish case than the one facing the markets now.
World ending stocks, stocks to use ratios and stocks in the hands of exporters are all registering bearish signals, but the potential for even lower prices looms if the feared supply builds become a reality. Soybean 2000 $/Ton Rotterdam Vegetable oil end users and speculators are in a tough position this year, as the oilseed production outlook is extremely bearish but vegetable oil stocks are relatively tight. If any El Niño weather problems develop in Southeast Asia, world vegetable oil prices could advance. Cash: Weekly Vegetable Oils - Rotterdam 2250 It will be important to see normal monsoon rains in India. Otherwise their import requirements could increase as well.
Chinese demand continues to advance, too. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 10 . June 23, 2015 THE HIGHTOWER REPORT SPECIAL REPORT Futures Analysis & Forcasting Vegetable Oil Exports Comparison End User Hedge for Soybean Oil This is essentially a “volatility” hedge. With the long multiple call/ short futures position, the worst case scenario for the hedger would occur if market fails to swing up or down. Our interest in this strategy stems from the potential for good production weather in the US to be followed by unfavorable production weather for Malaysia and Indonesia later this year. If a hedger buys 3-4 out of the money May calls and sells a May futures contract, the short futures position can be lifted on weakness early this summer, leaving the end-user covered against any uptrend into 2016. Malaysia Palm Argentina Soy Indonesia Palm 23.500 21 18 Million Metric Tonnes 18.000 15 12 9 6 5.100 3 0.907 15 14 13 12 11 10 09 08 07 06 05 04 03 02 01 00 99 98 97 96 95 0 94 We suggest that they consider buying multiple May 2016 (or later expiration) calls as a hedge against a change in the current outlook. Given that soybean oil prices for May 2016 delivery are 3.5 cents above their 2015 lows, hedgers might consider hedging the premium outlay for the calls with the sale of a soybean oil futures contract. This is a volatility play that needs a significant range-up move to provide a windfall.
However, if bearish weather for the US crop pushes ending stocks expectations even higher and/or the El-Nino threat dissipates, a significant portion of the hedge premium outlay could be recouped with the short futures position. US Soybeans 24 S USDA India Vegetable Oil - Production vs. Usage 24 21 Production Domestic Consumption 18 Million Metric Tonnes Given the potential for the current forecast for historically high ending stocks being undone by adverse weather, the prospect of significant volatility in soybean oil is high. This is something that end users could use to their advantage. 27 15 12 9 6 3 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 China Vegetable Oil - Production vs.
Usage 36 33 30 Production Domestic Consumption 27 Million Metric Tonnes 24 21 18 15 12 9 6 3 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 11 . THE HIGHTOWER REPORT Futures Analysis & Forcasting June 23, 2015 SPECIAL REPORT CME Webinars: Are You Prepared for the USDA Acreage Report? June 24 | June 30 2:30 - 3:30 p.m. CT Both events will be hosted as online webinars To help commercial hedgers and end users prepare for the June 30 USDA Acreage Report, we're bringing in the experts. In this two-part webinar series, top industry analysts share their insights pre- and postreport to help you prepare for any major impacts to the agricultural markets. Pre-USDA Webinar • • The impact of El Nino – Blu Putnam, Chief Economist, CME Group Expectations and Strategy – David Hightower, President, The Hightower Report Post-USDA Webinar • Analysis and outlook panel discussion – Dan Basse, AgResource Click here to register! Disclaimer The information in this report may be considered dated upon its release and should not be considered interpersonal advice. This report is merely an opinion on the market and is a reflection of conditions as of its publication.
Market conditions change! Traders should not consider entering positions without their own independent analysis of the market’s current situation, nor without further consideration of any changes to the information contained herein that may have occurred since this report was written. The authors are not responsible for any verbal or written claims and opinions that might be provided in conjunction with this report. The trading suggestions contained herein have been provided merely as a general guide and only for the purpose of quantifying the authors’ opinions. This report includes information from sources believed to be reliable but no independent verification has been made and we do not guarantee its accuracy or completeness.
Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition.
Any reproduction or retransmission of this report without the express written consent of The Hightower Report is strictly prohibited. 141 West Jackson • Suite 4002 • Chicago, Illinois • 60604 • 800-662-9346 • 312-786-4450 • info@HightowerReport.com • @HightowerReport Trading futures contracts and commodity options involves substantial risk of loss, and thus is not appropriate for all investors. Investors should carefully consider the inherent risks of such an investment in light of their financial condition. Page 12 .
