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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 Afternoon Grain Commentary 2-29-2012

Feb 29, 2012

Grains finished mixed with May corn up ¾ of a cent at $6.58, May soybeans up 7 ½ cents at $13.20, and May wheat down ¼ of a cent at $6.68.

The USDA announced a few export sales before the morning session opened.  There was a private sale of 285,000 MTs of soybeans going to China (175,000 old and 110,000 new).  They also announced the sale of 120,000 MTs of option origin corn to Mexico.  Despite more cash sales the market opened up below where it was trading during the overnight close.

 

May corn once again is stalling out at that trendline resistance which started back in November (see chart).  The market may have held some resistance from the strength in the Dollar and weakness in equities and precious metals.

 

Chart: May Corn

Chart 2.29.12

 

Tomorrow morning the Weekly Export Sales Report will be released at 7:30 am.  Trade Estimates:

Corn                                     650,000 – 850,000 MTs

Wheat                                  500,000 – 700,000 MTs

Soybeans                              400,000 – 800,000 MTs

Source: Reuter’s Poll

 

Soybeans have had a large rally in February posting a gain of $1.14 ½ in the March contract!  Most of this can be attributed to South American production fears and a comparatively oversold status to corn.  March corn finished the month up 17 ½ cents while March wheat finished down 1 ¾ cents.   The Spring Federal crop insurance prices will be set at $5.68 for corn and $12.55 for soybeans.  Now that these prices are set we want to make sure we have adequate downside coverage between your crop insurance, cash sales, and futures/options positions.  The month of March will be extremely important with the Supply and Demand report on the 9th, but more importantly the Planting Intentions report which is on the 30th.

 

November soybeans have gained quite a bit back on corn (relatively speaking).  Even with this move we believe corn acres will still be in that high range near 94 million acres.  We see soybeans gaining about a million acres bringing our estimate to 76 million.  We expect the market to add back in up to 9 million acres in the US and 6 million acres in Canada that didn’t get planted last year due to weather issues.  Cotton and spring wheat prices are likely to get "outbid" on additional acres by corn and beans due to the price advantages in the market this year.  The USDA is forecasting a 1.623 billion bushel carryout for corn and 209 million for soybeans.  These estimates are AFTER increasing demand sharply from last year.  We certainly think demand may increase, but it will be AFTER the prices drop. In our opinion we are trading at very good prices compared to where we could be next fall if we get a normal growing season.  Corn getting back to $4.50 and beans under $10 isn’t so hard to believe with the potential production of this year.  Also, today’s ethanol report again showed an increase in stocks and a decrease in production which isn’t a great trend outlook from a demand perspective.  We also have to remember that this is all at the same time that the specs are loaded up with net long positions. 

 

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Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. 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 EHedger LLC, its affiliates, officers, directors, employees or agents.

 
 
 
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