Walsh Commercial Hedging 5/15/2012
May 15, 2012
Good afternoon. We saw a “Turn Around Tuesday” in the complex today as the outside markets turned more stable and the technically oversold conditions in the complex brought out the buyers. However, given the global economic worries including fears of Greece leaving the euro zone and concerns about a slowing Chinese economy and no serious weather conditions back here in the states for the next 10 days it will be interesting to see if this was just a one day hiccup to the upside. July wheat finished up 10 ¼ at 608 ½ and July Kansas City wheat up 13 at 627 1/2. The USDA said that 60% of the winter-wheat crop was in good to excellent condition yesterday which was down from 63% a week ago. In Kansas, the nation’s top winter wheat producing state, the crop declined to 52% from 60% good to excellent amid concerns about dryness in the state. However, a decline in wheat’s quality rating isn’t unusual as harvest approaches due to the “browning” effect taking place near maturity. All in all, the winter wheat is above last year’s rating of 32% and the five year average of 50% good to excellent. Corn was supported by the deteriorating wheat conditions and the strong recovery from an oversold condition in the soybean market. July corn finished up 14 ¼ at 597 ¼ and new crop December corn settling at 514 ½ up 9 cents for the day. Even with corn plantings coming in at 87% yesterday which is the 2nd highest rate of plantings next to the 89% complete in 2004, the trade was talking about the oversold condition of the market after the sharp break last week. However, it will take a significant threat to crop conditions to turn the trend around in the corn market. The USDA will start reporting the condition of the corn crop in next week’s Crop Progress report.
The soy complex had a wild two-sided trade during the day session but found support from wheat and corn. July beans finished up 26 at 1413 and new crop November settled at 1305 up 10 ¼ for the day. We expect the bean complex to stay volatile with the “managed money” still holding 275,328 long contracts using futures and options. Even though the current weather forecasts look favorable for beans, the 2012/13 balance sheet is already tight and any future weather concerns could spark some new buying in beans. We won’t know until the June 30th acreage report to see how many additional acres of beans were planted. All in all, I would urge producers to have some sort of “put” protection in place in wheat, corn, and beans with all the uncertainties in the world right now and the weather window looking favorable.
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