Steve Freed

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Steve Freed

• Vice President of Research
• ADM Investor Services

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Keys to market direction

• 1) The duration of the US/World recession
• 2) Impact the recession will have on demand
• 3) Dow, Crude and Dollar price action
• 4) Fund trade-more selling/buying?
• 5) Grain demand especially export and feed
• 6) China demand for soybean imports
• 7) 2009 Demand versus acres and production

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Dow futures vs Chicago wheat
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Dow futures vs Soyoil futures
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Dow futures vs Soybean futures
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• Critical Pivot point this week off Bank Earnings
  Cap Flows Report
• Fear factor is declining
• Getting beyond Big 3 Reconstruction
• Cyclical stock earnings a drag but create limited
  anxiety
• Even a jump in Monthly Unemployment wasnt a big
  undermine

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Dow futures vs Crude oil
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Resistance is 50.00 Still a deflated price?
Psychological support is 40.00

• Nearly 50 million barrel crude oil surplus over
  2008
• More Stocks building
• Residual Demand weakness
• Dollar Strength
• 50 the new value zone

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Dow vs US Dollar fututres
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Resistance is 87.50
Critical support is 84.22

• Flight to quality Dollar buying to end?
• April 9th Recovery views lifted Dollar off best
  return
• Dollar seems to have the edge regardless
• A bad trade with a slide below 84.52 into Bank
  earnings

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Resistance 5.73
Support 4.55

• US and China weather has improved with most
  northern hemisphere crops now in good condition
• Strong US dollar and more importantly, cheap
  Ukraine and eastern Europe wheat to keep US wheat
  demand slow
• Ending stocks highest since 2001 soft red at
  record high
• World ending stocks jump to 158.1 mmt vs. 122.4
  year-ago.

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• 2009 crop weather
• Black Sea world production
• Recessionary demand
• Outside markets

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Resistance 11.40
Support 9.59

• USDA report showed lowest ending stocks since
  03/04, record soybean exports old crop and
  further decline in world ending stocks due to
  sharp drop in Argentina production.
• Old crop situation continues to tighten while new
  crop may see sharp adjustment higher in planted
  area and possibility of much higher yield with
  more than 2 million acres in southern Midwest
  shifting to full season soybeans instead of
  double crop.

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• Extra acres ?
• Recessionary meal demand
• Outside markets
• 2009 yield outlook?

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• Recessionary demand?
• US weather/35 planted by end of year?
• Energy prices / ethanol
• Outside markets

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Planting Conditions Will Be Better This Year Than
They Were A Year Ago. Aggressive Fieldwork Is
Expected Across The Southern States, But Limited
Soil Moisture And Below Average Precipitation May
Induce Some Pockets Of Dryness That Might
Threaten Production Later In The Season.
Meanwhile, The Lower And Eastern Midwest Will
Have Some Planting Delays Early This Spring While
The Most Significant Planting Delays Will Be In
The Northern Midwest Where Abundant Rain Will
Limit Fieldwork, Especially In April And May.
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OPTIONS
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TYPES OF OPTIONS

• CALLS
• Contains the right to BUY
• PUTS
• Contains the right to SELL

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PURCHASING STRATEGIES
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PURCHASING STRATEGIES

• LONG FUTURES
• LONG CALL
• SHORT PUT
• LONG CALL SHORT PUT

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TIME VALUE CURVE

• TIME VALUE
• Decreases at an increasing rate
• Time value is zero at option expiration

Time value Cents/bushel
0
Days to expiration
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A COMMERCIAL VIEW OF WORLD AGRICULTURE

• 
  PARRY DIXON
• JANUARY
  17, 2009

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