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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 6/10/09

Jun 11, 2009
 
 
SETTLEMENTS 6/10
         
 
July 09 Corn
435 ¾
- 8 ¼
Dec 09 Corn
458
- 8 ¼
July 09 Beans
1246
+ 2 ½
Nov 09 Beans
1079 ¼
+ 6 ¾
July 09 Wheat
596
- 17 ¾
July 09 KC Wheat
648
- 17 ½
July 09 Min Wheat
726 ½
- 16 ½
July 09 Meal
413.4
+ 5.6
July 09 Oil
38.61
- 0.84
 
 
 
 
 
 
 
 
 
 
 
 
 





Corn and wheat closed lower and soybeans closed higher. The June Supply and Demand report came in around expectations. Old crop soybean stocks were trimmed by 20 million bushels due to an increase in both crush and exports of 10 million each. This dropped the carryout to 110 million bushels. The new crop also dropped by 20 million bushels due to the lower carry-in from old crop. New crop soybean demand still looks way to high to me. 
In the report, the USDA lowered meat production in every sector besides turkey. They also stated that low profitability in the animal sector combined with weak demand for meat should continue to cause producers to cut back production. In response to this, the USDA lowered corn demand and wheat demand. However, the USDA left soybean demand unchanged for next year. The USDA has soybean crush rising by 25 million bushels next year. Domestic meal consumption is estimated to rise by 300,000T. Why would demand for every other feed ingredient decrease next year except for soybean meal? The two largest consumers of soybean meal are hogs and poultry. Both sectors have been cutting production as margins continue to dive deeper into the red. Old crop soybeans are more than likely going to remain in a tight situation for the remainder of the year. This bullish sentiment has spilled over into new crop soybeans. The rationing that is taking place right now will have major implications for ’09-10 demand. It doesn’t take a lot of imagination to see new crop demand drop by 150 million bushels next year for soybeans. If acres are to increase in the June 30th report, we could easily see the ’09-10 carryover well over 300 million bushels if not 400 million. I know that we still have to grow the crop, and if we have a drought this summer we will probably keep going higher. I also know that things can change, but right now the demand figures look very optimistic.
Corn has the most bullish fundamentals for new crop, in my opinion. Although I think weakening demand will ultimately drive prices lower, the possibility of losing 2 million corn acres to soybeans is more important right now. If this happens, we could be looking at a carryout below 1 billion bushels. This will keep corn very nervous on any additional weather scares this summer. The USDA has already factored in lower feed demand for corn next year (unlike soybeans) and I think this will give the corn market less “wiggle room” than soybeans. With the crop now mostly planted, we could see an additional selloff over the coming weeks. If this happens, I expect corn to find support as we get closer to the June 30th report. 
The report was bearish for wheat. Even with a crop that is 500 million bushels less than a year ago, the stocks only decrease by 25 million bushels. Demand remains weak, and this should cause the wheat market to struggle on rallies, especially as we head into harvest. Wheat is on a large break, so we could certainly be due for a rally, especially if the funds continue to pour money into our markets. So far, we have not seen any signs that they are not still investing, so I would expect to see plenty of selling opportunities. If the money does slow down, wheat is probably very overpriced at these levels. As a producer, you should be hedged as we head into harvest.
 
 
 
 
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COMMENTS (2 Comments)

Anonymous
Ive farmed for almost thirty years and never really seen two crop years in a row being planted so late. Can the american farmer pull this one out before frost, Im turning less and less optimistic. The second one usually gets you. Its nice to see that it isnt really under our control anymore just like it isnt every other year. Mother nature.
10:48 AM Jun 11th
 
Anonymous
Not that anybody really cares but old crop soys in my area upped basis to $1.00 a bushel. Also a lot are starting to bid off of deferred months with lower prices. As one analyst said he thinks farmers are hanging onto old crop soybeans like they are lottery tickets, no longer, I think the farmers have the winning tickets but cant redeem them. Like I mentioned before we need some sort of mandatory price put into commodities with supply at the lowest levels in history or the market is broke.
8:08 AM Jun 11th
 
 
 
 
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