EHedger Afternoon Grain Commentary 3-23-2012
Mar 23, 2012
Grains traded higher for most of the day with soybeans finishing sharply higher. May corn closed 2 cents higher at $6.46 ½, May soybeans up 16 ¼ cents at $13.65 ¾, and May wheat up 8 cents at $6.54 ¼.
Soybeans and corn were stronger coming in from the overnight trading hours after statements made by the Argentine Government helped spur another round of buying. They estimated the Argentine corn crop at 21.2 MMTs and the soybean crop at 44 MMTs. This compares to the last USDA estimate of 22 MMTs of corn production and 46.50 of soybeans.
We are one week away from the March Planting Intentions Report which will likely provide the market with a baseline direction going into the spring/summer time period. At the same time, we have the quarterly stocks data released on the same day. Since the last major stocks report in January, we have rallied soybeans sharply over the price of corn (relatively speaking). At this point the "new crop" corn/bean ratio is back above 2.36 to 1 level which supports planting soybeans in many areas again.
We know that the "managed money" has been buying soybeans as their net long positions have increased sharply since the beginning of the year. Even on today’s Commitment of Traders report we can see that they added yet another 25,123 soybean contracts bringing it to a total net long position of 1.006 billion bushels using futures and options. For corn they are net long 1.308 billion bushels. The question is- will they take this position into the report or lighten the load over the next 4 trading days before Friday?
Like any other report of importance, the presence of a large position in either direction can make for large market moves in either direction. Making sure you have your ideal hedge positions in order before Friday is important so please contact your EHedger broker if you have any questions about your strategy. I have included a chart to show the corn-bean ratio spread. You can see how the price of November beans has heavily gained to the price of December corn ever since the end of last year. Interestingly, on January 3rd the managed money was holding only 165.1 million bushels in net long soybeans and 962.5 million in net long corn. As a ratio of where they are stacking their positions, at the time they were long 5.829 corn contracts to every 1 contract long soybeans. Now they are long only 1.3 contracts of corn to every 1 contract they are long soybeans. So obviously on a relative scale, the managed money thinks there is more upside for soybeans. Have a great weekend and please feel free to sign up for a free trial of our research by clicking the link below.
Chart – November 2012 Soybeans Divided by December 2012 Corn
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