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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 Grain Commentary 10/20/2011

Oct 20, 2011

It was a choppy, two sided trade today in the grains.  December corn finished at the highs up 11 cents.  December wheat finished 11 ¼ cents higher and November soybeans finished unchanged.

Overnight markets started off bearish but were able to rally back to unchanged.  Amazingly the same thing happened for beans in the Day session before rallying into the session close.  Export sales were at the low end of expectations for corn, wheat, and beans and weren’t expected to give the market much support.  With the Euro Summit this weekend, there were wild fluctuations between the US dollar and Euro currency. When the dollar fell today the commodities markets were able to find support.

 

Export sales were as follows:

                           Estimated Range                                              Actual

 

Corn                   1,800,000 MTs - 2,500,000 MTs                   1,845,800 MTs

Soybeans            750,000 MTs - 1,100,000 MTs                       594,700 MTs

Wheat                 450,000 MTs - 650,000 MTs                         399,400 MTs

 

December corn has been testing the 200 Day Moving average for the last 8 trading sessions, but today it finally settled above it.  This may prompt some more technical buying in the short term.  For the past few trading sessions it looks like there has been a big "unwinding" of long beans short corn spreads.  Beans had benefited the most from the October S&D report, and we are witnessing an exit of this trade.  Looking at the corn/bean ratio for NEW crop, we are at spread contract lows.  Many companies are forecasting an increase in bean acres next year when we believe any acreage increases will flow to corn with the price incentive.  I have included a chart of November 12 beans vs December 12 corn on a 1:2 scale.

 

The fact that Chinese bean demand has been weak and world bean supply is not currently a problem is not helping beans hold support.  Unless we see another yield reduction on the November Supply and Demand report, it may take an adverse weather event in South America for beans to trade higher.  Corn demand has obviously picked up a bit with the large Chinese sale last week.  For the corn market to try to post a significant rally again we may need to see further yield reductions on the November report (which we don’t think we will get) or a significant increase in demand (which may be difficult given all the feed options the world has).

 

Chart:  Long 1 November 12 bean to Short 2 December 12 corn.

 

 

 

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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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