EHedger Afternoon Grain Commentary 8-8-2011
Aug 08, 2011
Grains sold off today with the rest of the outside markets. The Dow Jones was as much as 675 points lower on the day towards the close. This weakness is stemming from the US debt downgrade from last Friday. Crude oil was down over $6 making new lows for the move today. In fact, two of the only markets trading higher were precious metals and treasuries as the market sees capitulation to "safe haven" products.
We obviously are getting a lot of negative outside market influence in the grains. At this point the market is trading a national average yield that is lower than what the USDA currently has marked down. On Thursday’s Supply and Demand report we can see a change to this number, but it may not be a large enough change to get a large rally from the market, especially given that the market has already discounted a yield reduction. For now we want to make sure to have enough downside market risk protection. Soybean puts are still low in volatility and can be a good downside hedge.
Crop progress was released this afternoon and was largely in line with estimates for corn, and slightly better than expected for soybeans:
Corn Current 5-year average
Silking: 93% 93%
Doughing: 32% 38%
Dented: 7% 10%
Corn lost 2% in the good to excellent category from last week and is currently 60% good-excellent.
Soybeans Current 5-year average
Blooming: 87% 89%
Setting Pods: 51% 63%
Soybean ratings actually gained a percentage point in the good-excellent category.
Right now we like to make sure we have adequate coverage before Thursday’s Supply and Demand report. After the grains closed today we had another sharp break in energies/equities and we may see this setback carryover into the grains at the 6:00 pm open tonight. Please call your broker if you have any questions.
Have a great week!
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