Walsh Commercial Hedging 5/17/12
May 17, 2012
Good afternoon. The complex has seen continued buying from “Turnaround Tuesday” on strong demand news, calmer outside markets and weather issues here in the states and across the “pond”. The threat of smaller crop yields from warm, dry weather drawing down soil moistures has enticed traders to continue adding risk premium to prices. July wheat continues to be the catalyst in the market finishing up 19 cents at 657 ¾ and is up as much as 66 ¼ cents from Monday’s lows. July Kansas City wheat closed up 16 at 672. The funds have a sizable short position in wheat and have been covering their positions the last couple of days. The trade is worried about the dry and hot conditions in southern Russia, Ukraine, and less than ideal conditions in parts of Eastern Europe. Back here in the states, traders continue to be concerned about deteriorating crop conditions in western Kansas. Also, dry conditions “Down Under” is keeping the wheat planting pace slow. Net weekly export sales for wheat came in at 321,800mt for the current marketing year and 389,600 for 2012/13 for a total of 711,400 which was well above trade expectations near 550,000. The corn complex had a choppy two-sided trade earlier in the session but the strong support in wheat finally weighed too much on corn. July corn finished up a nickel at 625 and its highest close since May 1st. New crop December corn was up 2 for the day and settled at 528 ¼. In spite of historically high basis levels, producer selling is still light thus bringing a stronger premium of old crop corn to new crop. The CN/CZ spread settled at 96 ¾ and has come back from its low of 71 ¼ after the report last week. Net weekly export sales for both marketing years came in at 865,100mt which was lower than the 1,100,000mt the trade was expecting. The soy complex saw follow-through buying from the overnight session on thoughts that the recent sharp break was overdone. July beans settled 16 higher at 1438 and new crop up 4 ¼ at 1306 ¼. The SN/SX spread made a new high of 134 during the session and settled up 11 ¾ at 131 ½. More China buying of old crop soybeans and a little less pressure from outside market forces helped to support strong buying early in the session with the market already up as much as 74 cents from Monday’s lows. Weekly sales were a bit slow but a bulk of the sales was for old crop and this was seen as positive. On top of the weekly sales report, the USDA announced a sale of 480,000 tonnes of U.S soybeans to China for the 2011/12 season.
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