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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.

Closing Grain Commentary June 1st

Jun 02, 2010

More follow-through selling came in after the long weekend, keeping grains on their lows. July corn finished the day down 5 cents at $3.54. Even though the outside markets came well off their overnight lows, by the grain close there looked to be some more long liquidation, especially in the wheat. We are right back down to the low end of the range for corn. The weather still looks favorable for most areas. We should continue to see progress with already planted crops and also areas that need to catch up. If the weather stays good through pollination, we will likely see December futures trade under $3.50 and head even lower toward harvest. If the weather turns for the worst here in the U.S. and/or in China this growing season, we should see corn prices find a bottom in the coming months. Export inspections came in better than expected this morning at 47,412,000 bu. (estimated at 34-40). Crop progress shows corn at 97% planted compared to a five-year average of 93%. Crop conditions are at 76% in the good to excellent ratings. This is seen as bearish as it outpaced estimates of 70%-72% and the five-year average is at 70%. We are hearing reports out of the West of farmers selling corn to make room for the upcoming wheat harvest. This could continue to put pressure on the corn market as we go forward. I still think we are positioned well at this time. For those producers who still need to get caught up on the hedge recommendations that we have issued, please call your broker and discuss the available plan for your operation.

Soybeans closed towards the lows of the day, with November beans having the lowest close since October 2009 at 902¾. Inspections were at 5,718,000 bu. for beans this morning (estimated at 5-9 million). Crop progress today shows beans at 74% planted compared to a five-year average of 68%. Based on the fundamentals that we have right now, we feel that the bean market may be susceptible to a further break from these levels if the weather continues to hold. The record South American crop continues to come online and global stocks this fall will be 45% larger than last year. We will still have to grow a crop here in the U.S., obviously, but if we do have trendline yields, we could see much lower prices this fall. A lot can change (and usually does!), but if you are not caught up on sales, I would look for a rally back toward $9.30-$9.50 in November soybeans to do so. For those producers who have their hedges in place, we would continue to stay hedged.

The wheat market sold off in the last 10 minutes of the session, finishing down 7 cents in the July Chicago contract. Wheat continues to struggle based on the fundamentals that are in place as well as outside markets. As previously mentioned, we have been hearing that farmers out west are beginning to ramp up corn sales to make room for the upcoming wheat harvest. If you are a wheat producer who has the ability to store your wheat, we have been discussing strategies to sell deferred futures and store the wheat in order to take advantage of the carry that is in the market. Please call your broker to see if this is a strategy that can benefit your operation.

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