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 9/21/12
Sep 21, 2012
Grains traded both sides of the market but had a last minute rally to close higher. December corn settled up 2 ¼ cents at $7.48 ¼, November soybeans up 3 cents at $16.21 ¾, and December wheat up 17 ¾ cents at $8.97 ¼. The daily closes were strong but corn and soybeans are still sharply lower for the week. December corn dropped a total of 29 ¼ cents while November beans fell by $1.14 ¾. December wheat closed ¼ cent lower than it did last Friday.
With such a large setback in price and no change to open interest the market was wondering "who was selling?" Today’s Commitment of Traders reports that from Wednesday the 12th through Tuesday the 26th the "managed money" was reducing their net long positions in corn, soybeans, and wheat. They decreased their longs by 14,870 contracts while increasing their short positions by 11,434 (they still hold a net long position of 270,162 of corn using futures and options). The managed money also reduced their net long soybean position by dropping 15,185 longs and increasing 3,760 shorts (they still hold a net long position of 209,875 of soybeans using futures and options).
These are still very large positions and it begs the question – when and will they liquidate? We are in harvest but haven’t got a clear picture of how good or bad the production is compared to market expectations. In fact it may not be until the January stocks number until the market is convinced one way or the other about crop size. This latest break may have been from typical early harvest pressure during an overcooked market. That doesn’t mean I would get out of hedges. Another drop before/during the October timeframe will be the worst case scenario for the crop insurance payouts. There is a major technical gap for corn down at $6.76 and exports were extremely poor for corn recently.
For now we want to remain with sustainable hedges as we progress through harvest. To sign up for a free EHedger trial please click on the link below.
Chart: December Corn
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