EHedger Closing Grain Commentary 03/30/2010
Mar 30, 2010
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Soybeans closed higher today led by the old crop soybeans and old crop meal once again. We have also seen large spreading between soybean oil and soybean meal. Most of this is likely unwinding of a very popular trade (long soybean oil and short meal) that was enacted after the EPA decision to raise the amount of biodiesel that is to be blended through 2010. Also, meal prices have been rallying in Europe and China announced that it would take measures to curb soybean oil imports as their domestic market is saturated. Continued strikes in Argentina are also leading some to believe that we will continue to sell soybeans until supplies free up in the Southern Hemisphere. This has caused the funds to buy over 30,000 contracts last week and this trend continues. Port workers at three ports are on strike and have blocked access to grains export terminals, demanding their wages are doubled. The private ports companies have offered 25 percent wage increases this year and 15 percent next year. Going on strike this time of year has become a regular practice, so we will have to see if things get cleared up in Argentina or not. We will see what the report says tomorrow, but this bullish combination of events is giving the U.S. producer a great chance to price and/or protect the remaining ’09 supplies.
Corn closed lower. Futures made fresh lows for the year today. Old crop supplies continue to plague the corn market and temper any rallies. The weather continues to stay favorable and this is also weighing on prices. The report will also be very important for the corn market. A bearish report could easily push prices back towards contract lows ($3.50 December futures) ahead of planting. A bullish surprise could easily help prices rally back towards the high-end of the recent range ($4.15 Dec. futures). Either way, expect a volatile trading session on Wednesday.
The wheat market closed higher after posting a “key reversal”. Funds continue to build on their already record short positions. Winter wheat acres are already down 6 million and could decrease further. HRW wheat looks to be in good shape and SRW looks to be in mixed condition. Global supplies continue to undercut U.S. prices and weigh on export demand. Until these large global supplies are cleaned up, it could be difficult to stage any sort of wheat rally. Producers of SRW should be storing their grain and selling forward futures prices. The changes to the wheat contract at the CBOT have made storing wheat a very profitable business. This could cause futures prices to continue to fall and cash wheat prices to hold steady after harvest. There are various strategies that can be used to help lock in some good wheat prices. Different classes of wheat require different strategies in our opinion. Please call if you have any questions.
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