MORNING COMMENTS
Friday June 27, 2008 US WEATHER- click QT Weather Site link
at www.qtweather.com For a look at the drought monitor, see
http://drouut ght.unl.edu/dm/monitor.html Wet then some drier
then wet with wet/cool ahead!
In the Midwest corn and soybean belt, additional heavy rains
fell overnight. As for the forecast, there are no changes from our
discussion yesterday - persistence is king! In the Plains hard red
winter wheat belt, the pattern over the next week looks
somewhat more active today in parts of Kansas which will cause
some further delays in harvest progress. The frontal boundary
across Western Australia has brought 10-20 mm of precip to
portions of the eastern WA wheat belt - the best totals seen in
several months. In the China corn, spring wheat, and soybean
belts, Heilongjiang remains the focus of attention especially with
the current rain opportunity. Up to this point, nothing has
accumulated. Significant rainfall is needed across this area since
dry/warm conditions will be returning next week resulting in an
increase in evaporation rates. Across India, it continues to look
like the monsoon will return to a more normal In the Canada
spring wheat and canola belts, the dryness across Saskatchewan
will continue to contract during the next 10 days. All in all, the vast
majority of acreage will be entering July with adequate soil
moisture reserves. The Argentina winter wheat belt will remain
mostly dry through early July.
June 30 Stocks Est
Average
Highest
Lowest
USDA June 2007
USDA March 1 2008
.
June 30 Acreage Est
Wheat
0.275
0.461
0.247
0.456
0.710
2/16/2016
Pg 1
banquet seating $55; children $35. Email Jamie at
jwasemillersms@aol.com. or register at www.jerrygulke.com
CONFERENCE AGENDA
Wed 9th PM Commodity Fundamental Outlook—
Roy Huckabay , Linn Group
Kennedy & Coe---2008 Farm Bill Implications
Evening Banquet
Thurs 10th AM Dr Vince Malanga (economic/inflation outlook),
Mark Russo(weather—July/Aug, Sept)
Gordon Linn Commodities Overview ---Money
Flow , Index and Spec Funds
Silveus (crop insurance status review—GRIP
status—what about next year ? )
Fri 11th AM— USDA Report Review—J Gulke
Roger Wallace—“Promises Un-kept”
(Livestock, ethanol, general markets )
Technical Analysis –Jerry Gulke—
Corn
Soybeans
3.894
0.663
4.000
0.720
3.550
0.615
3.533
1.092
6.859
1.428
Corn Soybean AllWht SprWht Durum
Average
85.661 74.257 63.808 14.306 2.628
Highest
87.399 76.000 64.000 14.500 2.700
Lowest
83.500 72.000 63.530 14.000 2.505
USDA March 2008 86.014
74.793 63.803 14.333 2.630
USDA 2007 final 93.600 63.631 60.433 13.297 2.149
SMS SUMMER CONFERENCE: Beaver Creek, CO July 9-11,
2008. at the Park Hyatt in Beaver Creek Room Rates are $169
for Single & Double Occupancies -call 800-233-1234 and
reference that you are with Strategic Marketing Services.
Conference fee is $495 per person including registration and
banquet, $250 for extra family members or business guest. Extra
IMPORTANT NEWS ON BILL HERRING: "Long time SMS
associate Bill Herring has been diagnosed with a re-occurrence of
the renal cell cancer that he dealt with a couple years ago. He is
having major surgery on his spine currently (6-7 hrs duration) and
will be in ICU for 3 days and in the hospital for at least a week
(Baptist Memorial Hospital, 6019 Walnut Grove Rd, Memphis,
TN, 38120). Our thoughts and prayers go out to Bill and Gloria
and the rest of his family. Check our web for updates.
MARKET COMMENTS: Another big day yesterday---with crude and energies exploding higher and up overnight as well. The vast
majority of news in the media is anti-ethanol and anti-speculator with pressure mounting for someone to do something!!! The American Farm
Bureau suggests yields will fall 10 bu below the 155 bu trend in corn and 2 bu in beans to 39 bu (see news below). Equity market looking
very negative as long term uptrend (daily, weekly and monthly) now negative---likely little odds for upside surge !!!!!!!!!!!!!
 Technically--- Energies at new highs should accelerate crude and Ngas higher--- grains following along into unknown and
uncharted territory---technically we are going into another report similar to how we entered past reports over the last 18 months—
this one seems no different---
SMS MORNING COMMENTS



2/16/2016
Page 2
Fundamentals - The supply side of the equation now may be falling faster than demand with ethanol profitability setting the bar.
It seems corn prices rally to the point where profitability of ethanol is squeezed—higher crude and products influences corn prices
as well. Wheat…Black Sea undercuts others, as seen in recent sales to Egypt. Higher prices recently don’t help our competitive
edge, unless the US market is focused on feeding wheat ??? Beans…PNW enjoying less advantage due MUCH narrow GulfPNW freight spread. Perhaps part of why Gulf prems strong lately. But bottom line is China continues to buy US and shun
Argentina. Indonesia will raise the export tax on palm from 15 pct to 20 pct starting July 1. China has impounded 75 TMT of palm
oil? Corn…BlkSea feed wheat should be working to Korea, displacing some corn---key item to watch. According to G Rasko
from Hungary, a past presenter at our conferences, reports excellent crops in E Europe with some up 40% over last year---wheat
exceptionally good as is Rapeseed—internal prices have fallen 20-30% last few months. Livestock feeding suffering while dairy
prospering.
DEMAND: Just about every thing I read agrees that demand is being or starting to be reduced---however to what extent is the
question along with the perception that supplies of corn and beans may be falling faster than demand requiring additional price
rationing. Some feel that if the report Monday is sufficiently bullish, it will require much higher prices to insure the release of viable
CRP acres as well as encourage more production world wide---price is a great fertilizer!!!!!
Technically--- The grains dodged a bullet this week, reversing just in time to thwart off a convincing sell signal headed into the
report.
USDA JUNE 30 REPORT Monday 7 am: Also the end of the month and quarter ! .


NEWS: The American Farm Bureau Federation said it estimates the current U.S. corn crop will fall 8 to 10 bushels per acre below the
trend yield of 155 bushels per acre due to inclement weather across the country ranging from flooding in the Midwest to drought in
California. In a news release, AFBF Senior Economist Terry Francl said he expects Iowa corn yields to be reduced 16 percent this year. He
further estimated that 1.5 million to 2 million acres of corn and soybeans in Iowa that farmers intended to plant this spring will likely remain
fallow. AFBF predicted that across the country, soybean yields will be down one to two bushels per acre from USDA's projected 42 bushels
per acre. AFBF said U.S. crops have incurred more than $8 billion in estimated weather-related damage thus far in 2008, with severely
flooded Iowa accounting for about half that damage. These damage estimates relate only to crop production as of the last week of June.
They do not include livestock, infrastructure, building and equipment losses. Additionally, the estimates assume normal weather conditions
for the remainder of the growing season.
Buyers in China, the world's biggest soybean importer, may have purchased seven to nine cargoes of the oilseed this week, Shanghai JC
Intelligence Co. said. The soybeans bought this week will be shipped from Brazil and the U.S. in July and August, the market researcher
said today in an e-mail. Buyers didn't order from Argentina because a labor conflict, which disrupted shipping, hasn't been resolved, it said.
The order this week compared with between four to five cargoes ordered last week, according to Shanghai JC. Each ship carries about
60,000 metric tons.
PRE REPORT THOUGHTS : an experienced trader once told me that producers should be covered going into a major report and specs out
of the way of the market--- yesterday we suggested rolling out of short hedges into put spreads or just out of the way. This is a pure money
management situation. My guess, based on our survey, is that the USDA will report that intended will not have changed much on June 1 as
many were still “intending” to plant both corn and beans---however floods have changed intentions to reality and there lies the rub. Not only
are analysts, including some in the administration suggesting 2 mil acres or more in both beans and corn were lost to water damage and the
rest of the stuff growing will likely be well under trendline yields. The market price action is reflecting this fact and also suggesting that a
much bigger job of rationing is needed and price pressure to be such that the USDA, and the Administration pull out all stops to prevent food
inflation, and massive liquidation of the livestock. I would expect such action to happen with odds of the CFTC doing something negative to
the spec trading a 50-50 proposition. The recent debacle in financials and now the equity market certainly has a lot of those in power now,
hoping to hold things together long enough to pass it off to the next administration and Congress. No one currently in office will want to be
accused of making radical changes that turn out more destructive than doing nothing!! On the chance that we get an explosive report
Monday, and thus some quick action or reaction from the Bush Administration, we have rolled our risk into put options and let the rest of
what we have unsold run its course for a few days/week etc. So to recap and make final adjustments:
 We moved outright short futures into Sept put spreads---End users long corn/meal through 2008 minimum.
 Roll ALL long July futures (if you have them) into Aug or beyond--- first notice coming and you do not want to have to deliver
 Anyone who is in jeopardy of not producing a corn/bean crop---needed or needs long Aug or Sept call spreads
 Cross hedges are still held in soybeans---long BOQ, SQ , SMQ against short SX futures or out of short SX futures. Consider cross
hedges against short wheat or reduce wheat hedge exposure
 Livestock--- hedged in 2009 June and Aug 2008
 OPTION IDEA: For your consideration (experienced traders) and to take advantage of volatility currently in options and with the
idea that government or the market will not allow extremely higher prices to last long barring further catastrophic developments in
weather--o Sell both the December $7.80 calls AND puts (straddle)--- AND buy the $6 puts AND the $10 calls--- max risk is dollar
per bushel--- could collect $1.20 to $1.30 on the straddle—If prices explode, we’ll lift the short put---if prices collapse on
some kind of intervention or negative USDA report or collapse in usage---we take profits on the short call---if prices go to
$10 quickly---the $10 call should appreciate as well as there is a lot of time to Dec--- known risk!
o Producers--- put spreads give us some downside protection with minimum cost/risk
o End Users--- the straddle is a consideration or outright long call spreads in Sept or Dec options---
This copyrighted report is intended for the use of clients of SMS, Inc only and may not be reproduced or electronically transmitted to other companies or
individuals, in whole or in part, without the prior written permission of SMS, Inc, Strategic Marketing Services. The information contained herein has been
taken from trade and statistical services and other sources we believe are reliable. SMS, Inc. does not guarantee that such information is accurate or
complete and it should not be relied upon as such. Opinions expressed reflect judgments at this date and are subject to change without notice. There is risk
of loss in trading futures and options and is not suitable for all investors. Please carefully consider your financial condition prior to investing.
MORNING COMMENTS
2/16/2016
Pg 3
STRATEGIES/POSITIONS
Watch for Mid-Day Update
GENERAL: Markets tough to trade here--- ignoring normally reliable technical signals and in wheat basic fundamentals
of improving harvest conditions and increases in world supply.
CORN: for end users long coverage into 2009 first qtr—Long call spreads (Sept) option spreads---—exited 40% of any excess long
spec positions a week or so ago. Market seems very supportive going into report.
End users if long our recommended 100% usage into first quarter of 2009---bought the Sept $7.20 puts and sell the $6.50 puts for a net cost
of about 30 cents---or rolled out of 50% of long futures and bought the $7.20 and sell the $8.20 CU calls for a cost of 33 cents net---if you
are planning to feed your locked in corn---it is not the next 30 cents that will kill you ---it is the next $1 or so----at $8 corn you might want to
just sell the corn and the feeders?
Producers: We sold an additional 5% in the futures Monday night/Tuesday --- in addition bought put insurance on another 15% of your
production for 2008 in the CU $7.80/$6.50 CU Put spread--Today: Mid day update yesterday had us roll out of any short futures into Long Put Spreads in September $7.60/$6.90 for net
cost of about 31 cents!
SOY COMPLEX: 100% long meal for remaining 2008--- Producers sold another 5% in SX futures this week–--TODAY: the soy complex is a world problem (corn is a US problem)--- we have no choice but to neutralize ANY short SX with either long
August futures or with August soymeal (1.5 meal for each SX) – or merely exit SX short futures. The risk is to great as we made new
highs for November--- The soybean complex is looking very dynamic---with new highs and new upside targets!
WHEAT
TODAY: wheat looks the weakest fundamentally---increase coverage to 70-80% if wheat is trading down on the day by 10
cents by after 12:30 noon –the close over 9.13 yesterday in July is bullish but report and world wheat bearish Wheat is defying
fundamentals! thus long corn, or BO or Beans against short wheat eases the margin pain—have some cross hedges in place or
reduce hedge exposure to no more than 30% of production plus the 25% in cash sales
The International Grains Council on Thursday raised its estimate for world wheat production in 2008/09 by 8 million tonnes to a record
658 million tonnes. The IGC put the 2007/08 wheat crop at 608 million. World maize production in 2008/09 was projected at 756 million
tonnes, down from a previous forecast of 763 million and well below the prior season's 786 million.
Natural Gas and Crude---- No positions---energy exploding--Lcattle Continues stronger last week---may have bullish COF discounted???
Update—we are basically flat with no positions---we’ll cautiously watch the trade for now--- breakeven now likely $120 for 2009 take a look
at far out 2009 prices---getting near breakeven---Cautious here as LC momentum slowing! Hedge 20% of 2008 in Oct 08 or Dec 08 and
for 2009 in April 09 and June 09 on straight sell stops 80 pts lower from yesterday’s closes!
Hogs: hedged 25% or less for third quarter---still concerned that there is a lot of pork to move! --- 2009 futures hedged 20%
June 2009 96.75. and hedged within your comfort zone in August 2008 as a hedge against liquidation—if not, do so in October if
not higher by 11:40 am this morning. Expectations are for less kept for breeding—higher kept for marketing—suggesting more
pork to get rid of, while far out supplies dwindle in 2009
Cotton: Specs are long again. Use a close below 79.50 to exit. Producers should start hedging again with a close below 79.50.
Rice: We began hedging again below 19---don’t get overly aggressive until after we see the report numbers on Monday.
SMS MORNING COMMENTS
2/16/2016
Page 4
This copyrighted report is intended for the use of clients of SMS, Inc only and may not be reproduced or electronically transmitted to other companies or
individuals, in whole or in part, without the prior written permission of SMS, Inc, Strategic Marketing Services. The information contained herein has been
taken from trade and statistical services and other sources we believe are reliable. SMS, Inc. does not guarantee that such information is accurate or
complete and it should not be relied upon as such. Opinions expressed reflect judgments at this date and are subject to change without notice. There is risk
of loss in trading futures and options and is not suitable for all investors. Please carefully consider your financial condition prior to investing.