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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.

EHedger Afternoon Grain Report

Apr 26, 2010
Corn closed a penny lower on the day. Prices started the day strong on rumors that China had purchased 5-7 cargoes from the U.S. over the weekend. So far these rumors are unsubstantiated.  Chinese corn prices remain very high, and the government continues to release corn reserves to “cool” their domestic market. China has been a very strong buyer of DDG’s (Dried Distillers Grain) as they are currently exempt from the large import duty that is put on corn imports. So, to our knowledge this is an untrue story. Planting Progress was released today and the USDA pegged corn plantings at 50% complete! This is above the previous record of 30% set in 2005, last years’ pace of 5% and the average of 22%. Widespread rains over the weekend should help the corn crop to the best start in history. This great start to the growing season should press corn prices lower for now. New crop corn prices remain only slightly above the 2010 lows around $3.75 and we should see prices test these lows and possible break through these lows this week. With large supplies of wheat around and plenty of Old crop corn still left to be sold, look for another leg lower in corn prices.    
 
Soybean closed 1-3 cents lower. Prices opened around 10-cents higher, but were unable to remain in positive territory. The USDA did not release a national total for soybean plantings as the first report will be next week. However, by looking at the State by State breakdowns, soybean plantings look moving along quickly (see below). The soybean market has been on an incredible rally as Managed money traders have built impressive “long” positions over the past several weeks. The large speculator added another 30,000 or so long positions by last mid-week. This puts the “fund” position long well over 100,000 contracts once soybean meal and oil are considered. As long as this buying continues, prices will have a hard time breaking. However, knowing what the “funds” will do is a tough job. With the growing season off to a good start, it should be hard for soybeans at current prices without a weather problem. Brazilian basis levels have finally started to break implying that the record supply down there is finally “hitting” the export market. Chinese importers are reportedly covered through July now and this should slow down our export pace significantly. Weekly exports were about half of last week’s and last year’s figures. Cheap corn and wheat prices should start to weigh on soybean prices as well. While 50% of the corn is planted already, 50% is not planted. The sharp run-up in soybean prices and sharp break in corn prices is incentivizing many producers to plant more soybeans. This is especially true in the “fringe” areas of the Midwest. Whereas Illinois, Indiana and Iowa typically see 200+ corn yields and a “switch” to more soybeans is not likely considering the record planting pace; switching in the other areas of the belt makes a lot of sense. Unfortunately we will not get another acreage report until the end of June. 
 
Wheat closed 17-cents lower on the day. Wheat climbed to new highs for the move before plummeting 30-cents in less than 1 minute! This is reportedly due to a 4,000 contract “sell stop” order that was triggered. This quickly caused wheat to break to $4.49 or 44-cents lower on the day!  Prices quickly rebounded to only 12-cents lower. This is a good example of why it is important to “have your orders in”. Although a rare occurrence these days, these “swipes” happen several times every year. If you have sell or buy targets make sure you put in your orders (GTC orders make sure your orders are working every day until you cancel them).  Crop conditions showed that the wheat crop remains in good shape overall, especially in HRW wheat. The SRW crop still looks poor especially in Illinois and Missouri and this has caused some growers to disc up fields with poor stand in favor of planting corn and soybeans. Besides stories that we have heard from our growers, this was cited in the Missouri state breakdown this afternoon. Current supplies remain plentiful, but this trend will have to be watched. Producers should store wheat and hedge on the futures market. There is a huge “carry” in the futures market and a discount in the basis right now. With the potential for a sharp reduction in the SRW crop, we could see cash prices improve rapidly after harvest. Because of the implementation of the VSR (Variable Storage Rates) forward futures prices are very high. This could present a very unique opportunity for the producer. Please call if you have any questions.
 
Percent Planted
State
2010
2009
5-year    Average
Alabama
7%
0%
9%
Arkansas
24%
11%
15%
Georgia
4%
4%
3%
Illinois
5%
0%
1%
Indiana
12%
0%
2%
Iowa
4%
2%
1%
Kentucky
3%
0%
2%
Minnesota
4%
2%
1%
Mississippi
60%
30%
48%
Missouri
5%
1%
2%
North Dakota
2%
0%
0%
Ohio
13%
0%
5%
 
 
 
 
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