Grains still focusing on weather
Jul 12, 2012
Corn overcame its losses from yesterday to close at new settlement highs. December corn finished up 28 ¼ cents at $7.32 ¼, November soybeans 6 ½ cents higher at $15.29, and December wheat up 21 ½ cents at $8.59 ¾.
The past two trading sessions have really shaken the market, especially for corn. The December corn contract had a 62 ¾ cent range yesterday and another 34 cent range today! Why did we see the price fall yesterday only to see another sharp rally today? For one the weather forecast was a bit drier on the midday models this morning. If weather continues to be a problem we can obviously see more upward pressure on the market. The past few Commitment of Traders reports have revealed that much of this rally has been due to short covering. The managed money and the non-reportable traders have liquidated a very large portion of their short positions. Will investment and end-user hedging continue to push the market above the all-time highs of $8? Time will tell, but until we know more about the crop size we don’t want to make any "sudden changes" to our marketing plans. The past few times corn has been able to make it above $7 it hasn’t stayed for very long. This may be the year to change this but we know that demand is being rationed at these levels already. The USDA has already cut its corn demand estimates by 650 million bushels for feed, 100 million for ethanol, and 300 million in exports due to the recent spike in prices. They have also dropped the demand for US beans by 150 million bushels. The point is the market is trying to ration the demand and a lot of speculation goes into this until we know the actual crop size. At this point we know it will be lower but extremely difficult to peg just "how low". We want to remain in sustainable hedges until more is known about the final crop size.
In such a volatile weather market, price direction will still likely come from any changes on the morning and midday forecasts. If you would like to sign up for a trial of the EHedger daily emails including hedge recommendations, please sign up using the link below. Thanks and have a great weekend!
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.