Closing Grain Commentary May 12th
May 12, 2010
Interesting trade in the corn market today. News that COFCO, a Chinese Government owned and run corporation, had purchased six cargoes of optional origin corn quickly sent the corn market higher. The significance of this news in our opinion is that the origin is optional thus not necessarily meaning it comes from the United States. We do feel however, that the action of China importing corn is a story that needs to be monitored as this is a new event that we haven’t seen for some time. Basis levels were weaker which signals that we came up against farmer selling towards the highs of the day. Our overall opinion remains the same that we are going to be range bound. As July futures reach the $3.90 level we have seen that farmer selling begins to pressure the market and there is good solid demand for cash corn from an end user perspective down around the $3.50 area. Today we issued a trade recommendation for our producers to sell the July $3.70 calls that we bought for $.25 cents. Any producer that had their order in before the market opened got filled on that order. Should we see another break or experience changing fundamentals we may look at re-owning these calls for summer protection. Lastly, we issued another recommendation this morning to have standing orders to sell another 10% of 2010-2011 corn for $4.02 or better.
The soybean complex opened stronger as a follower to the corn market and traded seven cents lower by mid-session before settling for the day unchanged in the new crop November contract. The export sales report tomorrow morning will be closely monitored as we have seen decreasing demand for beans the past few weeks. Without changing fundamentals we feel that these levels will end up being very profitable as we make our way through harvest. We do understand that things can change but having good solid hedges in place at these levels are very important in our opinion.
Wheat continues to be an interesting commodity to say the least. An early rally this morning on no news sent the Chicago Wheat contract as much as 15 cents higher before selling off sharply and finishing the day 1 ¾ lower in the July Chicago contract. Fundamentally the wheat market is losing export business and still has a surplus of supplies worldwide. This will make the Chicago wheat contract susceptible to an even further break despite the occasional short covering rally. There are solutions that we have been implementing for our wheat producers so please call us if you are a wheat producer that needs to get production on.
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