EHedger Afternoon Grain Report
May 03, 2010
Corn, soybeans and wheat all closed lower on the day. Soybeans were the weakest on the day, led down by soybean meal which closed $8/ton lower on the day. Wheat was around 10-cents lower on the day until a rally late in the day that helped wheat close only 1-2 cents lower. Corn remained 3-5 cents lower for the majority of the day. Planting progress came in about as expected. Corn planting was pegged at 68% complete versus last year’s 32% and the 5-year average of 40%. Soybeans are 15% planted versus 5% last year and 8% average. Spring wheat is 60% planted versus 22% last year and 47% average. Winter wheat was rated 68% in good-to-excellent condition down 1% from last week.
A mostly favorable weather outlook is weighing on prices towards the current highs. Corn staged a quick 30-cent rally off of the lows last week. This attracted some farmer selling as was evident by the sharp break in basis levels. As long as the weather stays good, corn should continue to run into resistance as December futures run up towards $4/bushel. With such a good start to the planting season, we should see corn and soybean acres increase from the March Intentions Report as the total acres still look to low in our opinion. Demand remains good for corn and this should help support prices near last week’s lows until we know more about the growing season. This could keep corn in a 30-cent trading range for now. The December puts we sold and July calls we bought last week should have us positioned well going into the growing season. Please call if you have any questions.
Soybeans are also being planted at a record pace. Weekly export inspections were below expectations again this week and much below year ago levels. With basis levels deteriorating this could be signaling that enough soybeans have finally come out of South America to satisfy the large global demand. If this is indeed the case, we should see prices continue to setback as long as weather cooperates. We will have our first 2010-11 Supply and Demand estimates on May 11th. Using the acres from the March Intentions and trend yields, the carryover looks to easily surpass 400 million bushels. With soybeans at very high price levels and with option volatility at very low levels, the market is providing a unique opportunity in our opinion. For the first time we can recall, the market is giving you the opportunity to protect soybean prices from going higher and/or going lower for a very reasonable price. Usually option premium is much higher (especially with $10 soybeans) as we head into the growing season. This will change in our opinion, so if you need to protect unsold bushels or if you want to have some upside exposure against bushels you have already sold you should do so very shortly.
Wheat conditions declined slightly from last week. Overall, conditions remain very high. The HRW wheat crop looks big and getting bigger. Timely rains have helped produce what looks to be a bumper crop in many areas. We will get reports from the annual Kansas Wheat crop tour this week. This should confirm the many reports of high yields throughout the state. Wheat is on a nice rally as the funds continue to liquidate their short positions in Chicago. Once this short-covering is done, we could easily see prices break back towards contract lows as we head into harvest. If you need to get caught up on sales you should start right now. If you have storage, take advantage of the huge “carry” in the market and forward contract or sell deferred futures (i.e. December or March). Please call if you have any questions.
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