Jordan Rizzuto - Seeking Alpha 'Jordan Rizzuto' Tag RSS Syndication from SeekingAlpha.com SeekingAlpha.com http://seekingalpha.com/author/jordan-rizzuto China and the U.S. Dollar Push Grain Prices Higher http://seekingalpha.com/article/140763-china-and-the-u-s-dollar-push-grain-prices-higher?source=feed 140763 The following excerpt is taken from our monthly Agriculture Outlook Report, issued to subscribers on the last Friday of every month.

China

]]> Tue, 02 Jun 2009 03:31:09 -0400 Jordan Rizzuto The following excerpt is taken from our monthly Agriculture Outlook Report, issued to subscribers on the last Friday of every month.

China


Complete Story »]]> ADM AGU ANDE CF DBA JJG MON MOO MOS POT SYT TRA Jordan Rizzuto Grain Prices: Looking into the Crystal Ball http://seekingalpha.com/article/138622-grain-prices-looking-into-the-crystal-ball?source=feed 138622 Market participants constantly search for leading indicators to assess longer-term price direction. The stocks-to-use ratio ["STUR"] can often provide that edge for the agriculture markets. The ratio is calculated as Ending Stocks / Total Consumption for the current marketing year.

Layman’s terms: the STUR tells us how much grain is left over at the end of the year (i.e. excess supply) after all consumption (i.e. demand), as a percentage of total demand. Thus the STUR gives us an excellent gauge for assessing just how tight current supplies are relative to demand.
The key here is to monitor the direction and rate of change in the ratio. Knowing the nominal value alone, while helpful, simply gives us a static view of the current supply-demand balance. Here are the recent marketing year trends for the (DBA) agriculture ETF constituents, namely corn, soybeans, wheat and sugar:
Source: USDA
Economics 101 teaches us that prices should be inversely correlated to various measures of supply and demand. Does the relationship hold over time when we employ the STUR? Indeed it does. Here is an illustration of the year-over-year change in the STUR versus the year-over-year change in the average futures price (rolling front month) for U.S. corn:
Sources: USDA, Bloomberg
The relationship between the annual change in the STUR and the annual change in average price demonstrates an inverse correlation of -65.8% since the 1960/1961 marketing year.
The stocks-to-use ratio is a powerful tool for assessing longer-term grain market direction. Position traders will be well-served to follow this ratio closely as they judge the probability of price trend support over time.

Disclosure: No positions

]]> Wed, 20 May 2009 04:09:22 -0400 Jordan Rizzuto Market participants constantly search for leading indicators to assess longer-term price direction. The stocks-to-use ratio ["STUR"] can often provide that edge for the agriculture markets. The ratio is calculated as Ending Stocks / Total Consumption for the current marketing year.

Layman’s terms: the STUR tells us how much grain is left over at the end of the year (i.e. excess supply) after all consumption (i.e. demand), as a percentage of total demand. Thus the STUR gives us an excellent gauge for assessing just how tight current supplies are relative to demand.
The key here is to monitor the direction and rate of change in the ratio. Knowing the nominal value alone, while helpful, simply gives us a static view of the current supply-demand balance. Here are the recent marketing year trends for the (DBA) agriculture ETF constituents, namely corn, soybeans, wheat and sugar:
Source: USDA
Economics 101 teaches us that prices should be inversely correlated to various measures of supply and demand. Does the relationship hold over time when we employ the STUR? Indeed it does. Here is an illustration of the year-over-year change in the STUR versus the year-over-year change in the average futures price (rolling front month) for U.S. corn:
Sources: USDA, Bloomberg
The relationship between the annual change in the STUR and the annual change in average price demonstrates an inverse correlation of -65.8% since the 1960/1961 marketing year.
The stocks-to-use ratio is a powerful tool for assessing longer-term grain market direction. Position traders will be well-served to follow this ratio closely as they judge the probability of price trend support over time.

Disclosure: No positions


Complete Story »]]> ADM AGU ANDE CF DBA JJG MON MOO MOS POT SYT TRA Jordan Rizzuto Grain Prices: Back to the Futures http://seekingalpha.com/article/137040-grain-prices-back-to-the-futures?source=feed 137040 We noted in our May 1st Monthly Outlook summary points that the fundamentals promise bullish support for corn and soybeans prices in the near term, while less so for wheat prices. We often look to the CFTC’s weekly Commitment of Traders (COT) report to give us a better sense how the underlying futures speculation supports or casts doubt on the near term price outlook.

Keep in mind that the COT report is a rear-view look at the previous week’s trading. Even so, we can use this information to validate our assumptions of how the large speculators’ recent trading activity is supportive or restrictive of the current price move.

]]> Tue, 12 May 2009 04:21:26 -0400 Jordan Rizzuto We noted in our May 1st Monthly Outlook summary points that the fundamentals promise bullish support for corn and soybeans prices in the near term, while less so for wheat prices. We often look to the CFTC’s weekly Commitment of Traders (COT) report to give us a better sense how the underlying futures speculation supports or casts doubt on the near term price outlook.

Keep in mind that the COT report is a rear-view look at the previous week’s trading. Even so, we can use this information to validate our assumptions of how the large speculators’ recent trading activity is supportive or restrictive of the current price move.


Complete Story »]]> ADM AGU ANDE CF DBA JJG MON MOO MOS POT SYT TRA Jordan Rizzuto Bulls Are Hungry for Grains http://seekingalpha.com/article/135624-bulls-are-hungry-for-grains?source=feed 135624 The following excerpt is taken from our monthly Agriculture Outlook Report, issued to subscribers on the last Friday of every month.

]]> Wed, 06 May 2009 05:57:45 -0400 Jordan Rizzuto The following excerpt is taken from our monthly Agriculture Outlook Report, issued to subscribers on the last Friday of every month.


Complete Story »]]> ADM AGU ANDE CF DBA JJG MON MOO MOS POT SYT TRA Jordan Rizzuto Grain Prices: Reality Catches the Flu http://seekingalpha.com/article/133848-grain-prices-reality-catches-the-flu?source=feed 133848 Perception is often reality. Many medical experts have been quoted that people cannot contract the swine flu by eating swine, yet China, Russia, Thailand, Jordan, Indonesia and the Philippines have temporarily banned imports of U.S. pork products. There is no way to determine how long these import bans will last, but we can consider what the worst-case scenario implications are for feed demand.
The U.S. exported more than 2 billion pounds of pork last year. Here is a quick breakdown of the major buyers of U.S. pork in 2008:
click to enlarge
To estimate the total feed required to grow these exports, we employ the feed-conversion ratio for pork, i.e. the pounds of feed required per pound of live weight produced. While industry estimates vary, we can use an estimate of 4.0 for our feed-conversion factor. At 56 pounds per bushel of corn and 60 pounds per bushel of soybeans (assuming standard moisture content for both grains), U.S. pork exports last year required roughly 106 million bushels of corn and 43.5 million bushels of soybeans.
This means that U.S. pork exports account for roughly 1.0% of estimated domestic corn consumption, and roughly 1.4% of estimated domestic soybean consumption. These are hardly awe-inspiring numbers, yet corn and soybeans futures sold off in Monday’s session on fears of reduced feed demand. Even with a prolonged import ban, the impact on the grains’ balance sheet seems to be minimal. Weather’s impact on planting conditions will prove to be far more influential on grain prices in the coming weeks.
Disclosure: No positions
]]> Wed, 29 Apr 2009 05:27:47 -0400 Jordan Rizzuto Perception is often reality. Many medical experts have been quoted that people cannot contract the swine flu by eating swine, yet China, Russia, Thailand, Jordan, Indonesia and the Philippines have temporarily banned imports of U.S. pork products. There is no way to determine how long these import bans will last, but we can consider what the worst-case scenario implications are for feed demand.
The U.S. exported more than 2 billion pounds of pork last year. Here is a quick breakdown of the major buyers of U.S. pork in 2008:
click to enlarge
To estimate the total feed required to grow these exports, we employ the feed-conversion ratio for pork, i.e. the pounds of feed required per pound of live weight produced. While industry estimates vary, we can use an estimate of 4.0 for our feed-conversion factor. At 56 pounds per bushel of corn and 60 pounds per bushel of soybeans (assuming standard moisture content for both grains), U.S. pork exports last year required roughly 106 million bushels of corn and 43.5 million bushels of soybeans.
This means that U.S. pork exports account for roughly 1.0% of estimated domestic corn consumption, and roughly 1.4% of estimated domestic soybean consumption. These are hardly awe-inspiring numbers, yet corn and soybeans futures sold off in Monday’s session on fears of reduced feed demand. Even with a prolonged import ban, the impact on the grains’ balance sheet seems to be minimal. Weather’s impact on planting conditions will prove to be far more influential on grain prices in the coming weeks.
Disclosure: No positions

Complete Story »]]> AGU CF COW DBA JJG MON MOO MOS POT SYT TRA Jordan Rizzuto Soybeans' Price Gains Are Fertilizers' Loss http://seekingalpha.com/article/132472-soybeans-price-gains-are-fertilizers-loss?source=feed 132472 The move in the soybeans:corn price ratio since March 31st continues to favor bean acres at corn’s expense. Consider the chart below, which illustrates this ratio since the USDA’s planting intentions report on March 31st:

This ratio provides clues to anticipating the marginal demand for fertilizer in the near term. For 2009 let’s assume a trendline yield of 156 bushels/acre for corn and 42 bushels/acre for soybeans. Using the 4/21/09 closing prices for the SX and CZ contracts, we see that the projected marginal revenue for growing corn has decreased 7.4% while marginal revenue for soybeans has increased 4.4% since March 31st.

]]> Thu, 23 Apr 2009 05:21:04 -0400 Jordan Rizzuto The move in the soybeans:corn price ratio since March 31st continues to favor bean acres at corn’s expense. Consider the chart below, which illustrates this ratio since the USDA’s planting intentions report on March 31st:

This ratio provides clues to anticipating the marginal demand for fertilizer in the near term. For 2009 let’s assume a trendline yield of 156 bushels/acre for corn and 42 bushels/acre for soybeans. Using the 4/21/09 closing prices for the SX and CZ contracts, we see that the projected marginal revenue for growing corn has decreased 7.4% while marginal revenue for soybeans has increased 4.4% since March 31st.


Complete Story »]]> AGU CF DBA JJG MON MOO MOS POT SYT TRA Jordan Rizzuto Fertilizer Manufacturers Face an Uphill Battle http://seekingalpha.com/article/131343-fertilizer-manufacturers-face-an-uphill-battle?source=feed 131343 We continue to see further evidence of weak fertilizer demand, particularly for phosphates and potash products. Potash inventories for North American producers were recorded at 56% above their 5-year average in March. DAP inventory levels (diammonium phosphate)are also running nearly 30% above their 5-year average. These are indeed formidable surplus levels to work through in any market.
Increasing phosphate and potash inventories should come as no surprise to those following the standoff between farmers and nutrient dealers dating back to last fall. These latest inventory readings suggest that high-priced product is still not moving through dealer pipelines as retail price cuts have failed to match the proportional drop in grain prices. The supply increases are even more disturbing when we consider that producers have already substantially cut operating rates in recent months in anticipation of weak demand.
Weather delays to planting progress now have the potential to reduce marginal demand even further. The longer that we see cold and wet conditions persist in the northern regions of the grain belt, the greater the probability that growers will switch corn acres to soybeans or spring wheat. While corn acreage is expected to be flat year-over-year, spring wheat acreage intentions are down 6% from 2008 plantings.
Most growers’ crop insurance policies have locked in a soybeans:corn ratio near 2.2, which historically has favored planting more beans. Since the USDA’s Prospective Plantings report on March 31st, the SX:CZ ratio has actually increased by 11%. The market is telling us that corn is failing to “bid” for more acres this spring – a bearish sign indeed for marginal fertilizer demand.
Implications: as we have noted in previous studies, corn acres typically consume roughly 5.6 times more fertilizer than soybeans (measured by pounds/acre, combined nitrogen + phosphate + potash). Wheat in turn consumes roughly 2.2 times as much fertilizer as soybeans. Therefore a shift to more soybeans at corn’s and spring wheat’s expense will further erode marginal consumption this season.
We will have a clearer picture of actual acres planted by June. Until then, the trade will closely monitor the weather conditions to anticipate where planted acres will cross the finish line.

Disclosure: No positions

]]> Fri, 17 Apr 2009 09:24:30 -0400 Jordan Rizzuto We continue to see further evidence of weak fertilizer demand, particularly for phosphates and potash products. Potash inventories for North American producers were recorded at 56% above their 5-year average in March. DAP inventory levels (diammonium phosphate)are also running nearly 30% above their 5-year average. These are indeed formidable surplus levels to work through in any market.
Increasing phosphate and potash inventories should come as no surprise to those following the standoff between farmers and nutrient dealers dating back to last fall. These latest inventory readings suggest that high-priced product is still not moving through dealer pipelines as retail price cuts have failed to match the proportional drop in grain prices. The supply increases are even more disturbing when we consider that producers have already substantially cut operating rates in recent months in anticipation of weak demand.
Weather delays to planting progress now have the potential to reduce marginal demand even further. The longer that we see cold and wet conditions persist in the northern regions of the grain belt, the greater the probability that growers will switch corn acres to soybeans or spring wheat. While corn acreage is expected to be flat year-over-year, spring wheat acreage intentions are down 6% from 2008 plantings.
Most growers’ crop insurance policies have locked in a soybeans:corn ratio near 2.2, which historically has favored planting more beans. Since the USDA’s Prospective Plantings report on March 31st, the SX:CZ ratio has actually increased by 11%. The market is telling us that corn is failing to “bid” for more acres this spring – a bearish sign indeed for marginal fertilizer demand.
Implications: as we have noted in previous studies, corn acres typically consume roughly 5.6 times more fertilizer than soybeans (measured by pounds/acre, combined nitrogen + phosphate + potash). Wheat in turn consumes roughly 2.2 times as much fertilizer as soybeans. Therefore a shift to more soybeans at corn’s and spring wheat’s expense will further erode marginal consumption this season.
We will have a clearer picture of actual acres planted by June. Until then, the trade will closely monitor the weather conditions to anticipate where planted acres will cross the finish line.

Disclosure: No positions


Complete Story »]]> AGU CF DBA JJG MON MOO MOS POT SYT TRA Jordan Rizzuto Agriculture: Follow the Money http://seekingalpha.com/article/130743-agriculture-follow-the-money?source=feed 130743 The futures markets are giving us further signs of speculative interest returning to the grains. The large speculators substantially increased their net long positions last week in corn, soybeans and wheat futures:

]]> Tue, 14 Apr 2009 08:31:33 -0400 Jordan Rizzuto The futures markets are giving us further signs of speculative interest returning to the grains. The large speculators substantially increased their net long positions last week in corn, soybeans and wheat futures:


Complete Story »]]> DBA JJG MOO Jordan Rizzuto Grain Prices Find Support and Speculative Interest http://seekingalpha.com/article/130021-grain-prices-find-support-and-speculative-interest?source=feed 130021 As we recently noted, grain prices face an uphill battle to overcome bearish demand-side fundamentals and a resilient US dollar. While the dollar continues to maintain its recent strength, we are seeing initial bullish signs for corn and soybeans from the export and futures markets:

Corn

]]> Wed, 08 Apr 2009 03:49:20 -0400 Jordan Rizzuto As we recently noted, grain prices face an uphill battle to overcome bearish demand-side fundamentals and a resilient US dollar. While the dollar continues to maintain its recent strength, we are seeing initial bullish signs for corn and soybeans from the export and futures markets:

Corn


Complete Story »]]> DBA JJG MOO Jordan Rizzuto Grain Prices Require Substantial Support to Overcome Bearish Fundamentals http://seekingalpha.com/article/128821-grain-prices-require-substantial-support-to-overcome-bearish-fundamentals?source=feed 128821 Yesterday morning, the USDA published their annual Prospective Plantings report and their quarterly Grain Stocks report, which provides market participants with key fundamental information to better position themselves for the upcoming season. Here is a summary of the estimates and price implications:

Corn

Corn acreage intentions are down 1% from 2008 plantings to 85 million acres, slightly higher than the trade’s expectation of 84.548 million. While the consensus for a reduction was realized, this is still an impressive number in the face of expensive inputs, tight credit and a locked-in soybeans:corn ratio that favors bean acres for most growers’ crop insurance policies. While total stocks are up only 1% over last year, “on-farm” stocks (held at mills, elevators, warehouses, terminals, and processors) are up 8%, and off-farm stocks are down 7% year-over-year. This tells us that growers will still be looking to sell into price rallies to unload their remaining old crop.

]]> Wed, 01 Apr 2009 03:32:35 -0400 Jordan Rizzuto Yesterday morning, the USDA published their annual Prospective Plantings report and their quarterly Grain Stocks report, which provides market participants with key fundamental information to better position themselves for the upcoming season. Here is a summary of the estimates and price implications:

Corn

Corn acreage intentions are down 1% from 2008 plantings to 85 million acres, slightly higher than the trade’s expectation of 84.548 million. While the consensus for a reduction was realized, this is still an impressive number in the face of expensive inputs, tight credit and a locked-in soybeans:corn ratio that favors bean acres for most growers’ crop insurance policies. While total stocks are up only 1% over last year, “on-farm” stocks (held at mills, elevators, warehouses, terminals, and processors) are up 8%, and off-farm stocks are down 7% year-over-year. This tells us that growers will still be looking to sell into price rallies to unload their remaining old crop.


Complete Story »]]> AGU CF DBA JJG MON MOO MOS POT SYT TRA Jordan Rizzuto Fundamentals vs. Inflation: Tug of War for Commodities http://seekingalpha.com/article/128312-fundamentals-vs-inflation-tug-of-war-for-commodities?source=feed 128312 As we observed last week, grain prices have definitively broken their downtrend that dates back to last July. The market now faces a growing tug of war between the bullish potential of dramatic inflation on the horizon and the overall bearish supply-demand fundamentals covered in our Monthly Agriculture Outlook Report.

The bearish fundamental side:

]]> Sun, 29 Mar 2009 04:25:08 -0400 Jordan Rizzuto As we observed last week, grain prices have definitively broken their downtrend that dates back to last July. The market now faces a growing tug of war between the bullish potential of dramatic inflation on the horizon and the overall bearish supply-demand fundamentals covered in our Monthly Agriculture Outlook Report.

The bearish fundamental side:


Complete Story »]]> DBA JJG MOO Jordan Rizzuto Planting Seeds for Fertilizer Stock Revenues http://seekingalpha.com/article/127729-planting-seeds-for-fertilizer-stock-revenues?source=feed 127729 The recent weakness in fertilizer demand is a well-documented result of high retail prices, volatile grain prices and tight credit. We know where we’ve been, but where are we going in the near term, and what does this mean for fertilizer manufacturers and distributors? The answers lie in the upcoming planting intentions report and the intermediate-term weather outlook.

There is still a great deal of uncertainty and discourse in the grain markets over just how many acres will be planted for corn, soybeans and spring wheat. The announcement of farmers’ planting intentions will certainly have significant implications for fertilizer companies’ revenues in the upcoming quarter. Consider that corn acres consume roughly 5.6 times more fertilizer than soybeans and 2.5 times more nutrient than wheat (measured by pounds/acre, combined nitrogen + phosphate + potash). Wheat in turn consumes roughly 2.2 times as much fertilizer as soybeans.

]]> Wed, 25 Mar 2009 05:40:26 -0400 Jordan Rizzuto The recent weakness in fertilizer demand is a well-documented result of high retail prices, volatile grain prices and tight credit. We know where we’ve been, but where are we going in the near term, and what does this mean for fertilizer manufacturers and distributors? The answers lie in the upcoming planting intentions report and the intermediate-term weather outlook.

There is still a great deal of uncertainty and discourse in the grain markets over just how many acres will be planted for corn, soybeans and spring wheat. The announcement of farmers’ planting intentions will certainly have significant implications for fertilizer companies’ revenues in the upcoming quarter. Consider that corn acres consume roughly 5.6 times more fertilizer than soybeans and 2.5 times more nutrient than wheat (measured by pounds/acre, combined nitrogen + phosphate + potash). Wheat in turn consumes roughly 2.2 times as much fertilizer as soybeans.


Complete Story »]]> AGU CF DBA MOO MOS POT TRA Jordan Rizzuto Fed's Actions Are Bullish for Grain Prices http://seekingalpha.com/article/127095-fed-s-actions-are-bullish-for-grain-prices?source=feed 127095 Grain prices have taken their cues recently from the outside markets, as demand concerns from the weak macroeconomic environment have trumped any fundamental supply issues. Wednesday’s announcement by the Federal Reserve to inject another $1 trillion into the monetary system re-affirmed the Fed’s inflationary stance, and also put a bid under the traditional inflation-sensitive commodity instruments: gold, silver, oil, and of course, agriculture. The dollar index has now broken materially from its early-March highs, providing further confirmation of the market’s shift in inflationary expectations:

storm

The DBA (ETF basket of corn, soybeans, wheat, sugar) has stayed true to form by rising as the dollar has turned south, and has now definitively broken through its downtrend that extends back to the highs of last June. Even more convincingly, this move has occurred on increasing volume:

]]> Sat, 21 Mar 2009 14:19:14 -0400 Jordan Rizzuto Grain prices have taken their cues recently from the outside markets, as demand concerns from the weak macroeconomic environment have trumped any fundamental supply issues. Wednesday’s announcement by the Federal Reserve to inject another $1 trillion into the monetary system re-affirmed the Fed’s inflationary stance, and also put a bid under the traditional inflation-sensitive commodity instruments: gold, silver, oil, and of course, agriculture. The dollar index has now broken materially from its early-March highs, providing further confirmation of the market’s shift in inflationary expectations:

storm

The DBA (ETF basket of corn, soybeans, wheat, sugar) has stayed true to form by rising as the dollar has turned south, and has now definitively broken through its downtrend that extends back to the highs of last June. Even more convincingly, this move has occurred on increasing volume:


Complete Story »]]> DBA Jordan Rizzuto Grain Traders Look Ahead Towards Plantings Report http://seekingalpha.com/article/126554-grain-traders-look-ahead-towards-plantings-report?source=feed 126554 The grain trade eagerly awaits the USDA March 31st Prospective Plantings report, and current acreage estimates represent anything but consensus for corn. While most traders expect soybean plantings to be higher than last year’s 76 million acres, private estimates for planted corn acres now range from roughly 81-86 million acres. To put this spread in perspective for corn supplies, these 5 million acres translate to roughly 780 million bushels (assuming a trend yield of 156 bu/acre), or 6.4% of total U.S. production for 2008/09.

Recent price action suggests that traders expect a lower corn acreage number, as corn futures have outgained soybeans by 6.6% in the month of March. However, the acreage battle is far from over, as an unusually high number of farmers have yet to make their final planting decisions. The SX/CZ ratio (November soybeans to December corn), typically the most widely observed barometer of corn’s profitability relative to soybeans, has fallen from 2.23 at the start of the calendar year to 2.02. Historically, when the ratio falls below 2.0, farmers will favor planting corn versus soybeans. As retail fertilizer prices continue to soften and corn prices continue to firm, the profit potential for corn improves further on a relative basis.

]]> Wed, 18 Mar 2009 06:43:37 -0400 Jordan Rizzuto The grain trade eagerly awaits the USDA March 31st Prospective Plantings report, and current acreage estimates represent anything but consensus for corn. While most traders expect soybean plantings to be higher than last year’s 76 million acres, private estimates for planted corn acres now range from roughly 81-86 million acres. To put this spread in perspective for corn supplies, these 5 million acres translate to roughly 780 million bushels (assuming a trend yield of 156 bu/acre), or 6.4% of total U.S. production for 2008/09.

Recent price action suggests that traders expect a lower corn acreage number, as corn futures have outgained soybeans by 6.6% in the month of March. However, the acreage battle is far from over, as an unusually high number of farmers have yet to make their final planting decisions. The SX/CZ ratio (November soybeans to December corn), typically the most widely observed barometer of corn’s profitability relative to soybeans, has fallen from 2.23 at the start of the calendar year to 2.02. Historically, when the ratio falls below 2.0, farmers will favor planting corn versus soybeans. As retail fertilizer prices continue to soften and corn prices continue to firm, the profit potential for corn improves further on a relative basis.


Complete Story »]]> DBA JJG Jordan Rizzuto