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EHedger Report

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 Afternoon Grain Commentary 7-8-2011

Jul 08, 2011

It was a strong day in the corn market after good export sales were announced this morning. December corn settled the day up 21 ½ cents to close the week at $6.37. The soybean market had export sales come back at the low end of the estimates and the November contract settled 8 ¾ higher finishing the day at $13.46 ½. The wheat complex saw sales come in below the trade expectations and still managed to finish the day 15 cents higher in the December Chicago contract closing the week at $ 6.90 ½.

Today the grain trade was anxiously awaiting the Informa report estimates that came back with a corn crop of 1.3759 billion bushel vs. the USDA June estimate of 1.3200. Informa estimated the US 2011 soybean crop at 3.203 billion bushels vs. the USDA June estimate of 3.285. The all wheat estimate came back at 2.095 billion vs. the USDA June estimate of 2.058. The market rallied on this data and the talk quickly turned to the extended forecast. There was massive discussion all day about the potential for hot and dry temperatures throughout the corn -belt in the two-three week timeframe. The near term forecast appears to favor growing conditions for the majority of the belt. Our opinion is that weather is obviously very difficult to predict. It is quite possible that the extended forecast could change numerous times next week. At this stage of the game we are getting caught up on cash sales for corn and soybeans as these are still very profitable levels for a lot of producers. Please get in touch with your broker to discuss your AMMO Account to see what the best strategy going forward will be for your operation. Looking ahead to next week, we will have an updated Supply/Demand and Production report that will be released on Tuesday July 12, 2011 at 7:30am. Below you will find the EHedger report preview with our estimates at the bottom.

USDA REPORT NEXT TUESDAY:

The USDA Supply and Demand Report will be released next Tuesday.  I have included our estimates for the supply and demand tables and where it places carryout for next year in the chart below.  As you can see we put the new June 30th acreage report's numbers in for 2011/2012 production and how they compare to the last S & D report in June.

You can see that I have factored in a drop in corn usage for ethanol by 100 million bu for 10/11 as well as Feed and Residual as more of that demand switches to wheat, also due to a jump in the June 30th stocks report.  This would put a much larger number of 930 million bushels carried "in" to the 2011/2012 crop year for corn.  And if we get a 161 yield, we could easily see corn carryout back above 1 billion bushel for next year.

For wheat we now have the ending stocks number of 860.7 million bu.  Next year we expect to see feed and residual usage climb up to 275 bringing carryout next year down to 659 million bu. 

For soybeans, we lowered exports down to 1525 this year and 1500 for next due to lower demand pace. Competition from such a large South American soybean crop has had a large impact on demand for US beans.  We also plugged in the USDA acreage change down to 75.2 million acres.  Even with the lower exports, this would bring us down to an extremely tight carryout situation of 160 million bushels.

Of course the yield fluctuations can have tremendously different outcomes for carryout at the end of the year.  Right now the fundamentals seem to support beans and wheat over corn and it is a good idea to make sure you are covered.  We still like selling corn rallies from here.  Bean volatility is still very cheap and buying November bean options is a great way to hedge risk. 

Please get in touch with your broker if you have any questions. Have a great weekend!

Chart 7.8.2011

Best Regards,

 

EHedger

 

For a free trial of EHedger services including the morning automated phone call, daily afternoon market commentary, and/or a free consultation, please contact EHedger at 866-433-4371. You can also visit us at www.EHedger.com.

 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees, or agents.

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