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RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

EHedger Closing Grain Commentary June 11th

Jun 11, 2010

Grains finished off the week strong with corn, wheat and beans all closing higher. The corn market was stronger throughout the day and settled December corn 11 ½ cents higher on the week.  Much of corn's strength is follow-through buying from Thursday's USDA Supply and Demand Report. The report came back with a reduction in both 2009-10 ending stocks and also reduced stocks for the 2010-2011 crop. The reason for the reduced stocks numbers is the increase in corn demand from the ethanol industry. The 2009-2010 corn demand for ethanol rose from 4.4 billion bushels to 4.55 billion bushels. Next year's demand rose from an estimated 4.6 billion bushels to 4.7 billion bushels. Below you will find a chart with all of the figures that were released from the USDA Supply and Demand Report. In our opinion we still need to be monitoring the daily weather runs to be sure that no weather concerns pop up. According to the weather sources that we monitor, the weather appears to be favorable for continued planting progress and growth.  For producers that need to catch up on sales we feel that a rally back to the $3.75-$3.80 area in the December contract is a position to place orders. As I mentioned earlier, having resting orders in above the market is a good idea should we see a quick bounce from here. This week's exports were friendly and there have been rumors of more cargos sold to China.  This is a good sign given the recent break in prices. It was clear this week that we found a level that enticed export business for US corn. We feel that we are well positioned at this time, if you have any questions about your position or need to look at strategies for further protection please give your broker a call. 

Soybeans had a strong day to recapture much of the weakness we saw earlier in the week. The November contract finished 14 ½ higher on the day and 9 ¼ higher on the week. There was heavy bull spreading in the bean complex ahead of the USDA report and the last two days the market has been unwinding the spread. In our opinion the USDA report offered nothing friendly to the overall fundamental story for beans.  Today's sharp bean rally mostly came in the last 20 minutes of the session following the corn/wheat rally.  This is great for those who still need to get caught up on new crop sales. On another positive note we did see two announcements from the USDA this week, both of them were sales of 40,000 T of soyoil each to China for this year.  We still feel that with a large South American crop coming online our export business will likely continue to decrease.  Having orders in above the market will be a good idea to capture bounces in the market like the one we saw on the close today. If you are in need of a strategy to protect your soybean crop please get in touch with your broker to discuss the available strategies.

The wheat market saw a sharp rally today first in the Chicago wheat, followed by very large intra-day rally in the Minneapolis wheat.  July Minneapolis was up as much as 37 ¾ cents but only finished 11 ½ higher on the day.  The market has been beaten down more than corn/soybeans have over the last 30 days and we saw some short covering today. The USDA report showed this year's carryout down 20 million bushels as a result of our exports. Next year's production is estimated to be higher by 24 million bushels while an increase in feed demand by 10 million bushels was also reported.  In our opinion we are still in a comfortable place with regard to where wheat stocks stand on a global level. We can still see a few swings like today but the fundamental picture still remains bearish in our opinion. For producers that are able to store wheat there are strategies to sell deferred futures and capture the carry that remains in the market.  If you are not caught up to our recommended levels of protection, please call you broker to discuss your hedging opportunities going forward.

 

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