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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.

EHedger Closing Grains Commentary 5/28/09

May 28, 2009
 
 
SETTLEMENTS 5/28
         
 
July 09 Corn
428 3/4
+ 2 3/4
Dec 09 Corn
452 1/4
+ 2 1/2
July 09 Beans
1179
- 8
Nov 09 Beans
1053
+ 3
July 09 Wheat
630 1/2
+ 4 3/4
July 09 KC Wheat
680 3/4
+ 5 3/4
July 09 Min Wheat
767 1/2
-12 1/4
July 09 Meal
383.8
- 2.4
July 09 Oil
37.81
unch
 
 
 
 
 
 
 
 
 
 
 
 
 





Corn, wheat and soybeans all pushed higher early Thursday, but ran into pressure as the session wore on and closed out the day mixed. July beans closed 8 cents lower, while July corn edged 2 ¾ cents higher. July wheat ended 4 ¼ cents up.
 
The early gains came on the back of continued investor buying interest spurred by the enduring strength in crude oil and the continuing appetite for raw materials that allegedly help fend off inflation. However, profit taking and producer selling emerged at the day’s highs to trim the early gains, and pressure the major grain and oilseed markets lower by the close.
 
Looking toward Friday’s trade, we believe we remain at risk of more aggressive spurts of selling across the board in nearby contracts, especially in the wake of the recent strong gains in wheat, soybeans and soy meal. July wheat early Thursday scaled 5-month highs, while July meal retested 10-month highs just above $392 a ton. These are very high levels, and given that the World has ample stockpiles of wheat and that major end-users of soy meal are already unprofitable, we think such strength is unjustifiable from a fundamental perspective.
 
Of course, outside investors could continue to chase these markets higher regardless of the fundamentals, but once that interest subsides, we expect a fairly quick retreat in nearby grain prices. Hints of that softness were seen in the July/Nov spread Thursday, which has been at the center of attention for several weeks now. The spread narrowed by 11 cents Thursday as the July contract endured pressure while new crop prices remained fairly well propped up. If more pressure emerges in July beans, then whatever firmness that market lent to other ag markets may dissipate as well, leading to a potentially steep decline across the grains as the week winds down.
 
Tomorrow’s trade will take an early cue from the USDA weekly export sales report. Estimates for corn sales are between 700,000 and 950,000 metric tons, while for beans are 700,000-900,000 tons. Wheat sales are seen coming in around 350,000-450,000 tons, and meal sales are expected at around 200,000-250,000 tons. Given the delicate state of end-user profitability right now, it’ll be interesting to see if there are any surprises to the upside. Certainly, a bean sale total of around 1 million tons would be very supportive, especially if it involves substantial old crop tonnage. But, a soft number in the beans could spark a round of selling, and lend a bearish tint to other markets as well.
 
So there’s much to look out for as we end the week, but we think the bigger picture theme of dwindling (or non-existent) end user profitability should start to play a greater role in determining price direction going forward. So, if there are still producers out there who like the look of these prices, but have not yet hedged their 2009 crop, we strongly advise you look to take action soon in case we start to lose ground as the summer rolls on.
 
The same applies for the 2010 wheat crop, on which we released a mid-session New Hedge Advisory today suggesting producers sell the first 10% of that crop. July 2010 prices traded above $7.20 Thursday, which given the growing global stockpiles is a very nice price.
 
As always, give us a call for more discussion and guidance.
 
Best,
 
EHedger
 
 
 
 
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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 
 
 
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COMMENTS (2 Comments)

Anonymous
I agree i'm tired of hearin oh the prices are so good! Does anyone know how much it cost to grow the crop? It does'nt just magically grow it self every year.Prices for grain should be higher than where they are at now.Maybe the consumer might just as well face the facts that the cost of eating is going to go up!
8:20 AM May 29th
 
Anonymous
End users arent making enough money when prices go too high. Ethanol cant make a profit when corn goes over $5.00. Were approaching one of our lowest supplies in soybeans but yet not the highest prices. Winter wheat in bad shape, corn cant get planted, replanting, late crop, spring wheat acres way down,seems to be a lot of bullish topics but yet producers are bing told sell, sell. We need some sort of a mandatory price for such low inventories. I dont like how the market somehow overlooks short supplies. If we cant get old crop beans in the teens its sort of a tragedy. Just my opinion. This isnt the 70"s or 80s.
12:09 AM May 29th
 
 
 
 
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