Walsh Commercial Hedging 12/19/2012
Dec 19, 2012
Without any fresh news in the markets, except for the Egyptian wheat sale this morning, corn and soybeans continued its technical selling with corn finishing on five month lows. Even though wheat was higher for much of the morning on news that Egypt bought 110,000 MT of HRW wheat and 180,000 MT of SRW wheat, once the pits opened at 9:30 everything went “south.” Another week of disappointing ethanol data once the pits opened might have been too much for the corn complex, and a wave of technical selling emerged throughout the complex. It didn’t take long for March corn to fall through its 1st support level of $7.14 ½ and then its 2nd support level of $7.08 ¾ to finish the day down 17 cents at $7.03. Even though corn was already sharply lower at 10:30, Informa Economics came out with their 2013 acreage estimates and pegged corn plantings at 99.03 million acres, up from its November estimate of 97.7, adding more pressure on corn complex. Managed money were estimated sellers of 14K corn contracts on the day. For tomorrow’s export sales report the trade is looking for corn sales to come in between 325-550,000 MT. Like I mentioned last week, I would urge producers that still have corn in the bin to have some sort of “put” protection in place. Soybeans continued its slide from yesterday’s cancellation of 420,000 MT of US beans. Even though cash soybean basis values have remained firm on the recent break as farm selling is non-existent, fund liquidation and the continued favorable growing conditions in Brazil weighed too much on soybeans with March beans finishing the day down 29 ½ cents at $14.31. China most likely determined that they could buy cheaper beans in South America thus cancelling their prior purchases with the US. Some analysts are beginning to raise their estimates for Brazilian soybean production. The USDA currently has Brazil production estimated at 81 million tonnes. For tomorrow’s export sales report the trade is expecting soybean exports to come in between 650-850,000 MT. In my opinion, I feel the soy market is getting a little over “cooked” the past few days given the historically tight domestic ending stocks and the strong demand we’ve seen for beans and soy products. Informa Economics pegged soybean plantings at 78.96 million bushels vs. prior estimates of 80.1 but that had no effect on the market. The wheat complex, in my view, held up nicely even though March Chicago wheat finished down 5 ½ at $8.05 ¾. It was good to see that US wheat is indeed competitive now and that March Chicago wheat held its $8.00 support level. However, if corn continues to fall, wheat should follow right behind.
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