EHedger Afternoon Grain Commentary
May 27, 2010
Corn finished higher on the day but was outpaced by soybeans and wheat. Again it was the outside markets which led the way in grains. The US Dollar was down 1000 at one point in the day with a large correction off its recent highs. The Dow, S&P, and Crude oil were also sharply higher. The outside markets continue to whip around and are causing volatility to be a very common theme in our grain markets. No major changes as the weather still looks favorable for growing conditions. If the weather stays good through pollination, we will likely see December futures trade under $3.50 and head even lower towards harvest. If the weather turns for the worst here in the U.S. and/or in China this growing season we should see corn prices find a bottom in the coming months. Corn export sales came in this morning at 1,030,800 MT for this year and -174,000 MT for next. This was down 24 percent from the previous week and was likely some of the resistance we saw in the corn market today. At this time I still think we are well positioned with our hedges.
Beans were strong today with July Soybeans finishing up 13 ¾ at $9.51 ¾. The market was bull-spreading finishing the July/Nov spread 5 cents higher on the day. Much of this strength can be attributed to the higher stock market and lower US Dollar. But there could have also been some profit taking on the Corn vs Beans spread as that has had a large move since the end of April. Tomorrow is the last trading day of the month and we may continue to see some month-end liquidation in that spread. As a result of the sharply higher crude oil market bean oil saw another sharp rally today. This morning's Census Crush number came in below estimates at 136.5 versus the trade estimates of 138.2. Exports were also below expectations at 175,400 MT this year and 120,000 MT next. Based on the fundamentals that we have right now we feel that the bean market may be susceptible to a further break from these levels if the weather continues to hold. The record South American crop continues to come online and global stocks this fall will be 45% larger than last year. We will still have to grow a crop here in the U.S. obviously, but if we do have trend line yields we could see much lower prices this fall. A lot can change (and usually does!) but if you are not caught up on sales I would look for a rally back towards $9.30-9.50 in November soybeans to do so.
Wheat led the way higher with beans today coming off long term lows in the wheat vs corn spreads. Wheat finished 6 cents higher in the July Chicago contract at $4.67 ¾. We continue to come up against bearish fundamentals with global stocks rising and harvest pressure coming out of the south. With the Euro Currency on a nice rebound today it is not surprising to see a small rally off the lows. As I have discussed in previous emails, the Euro Currency’s free fall has had a negative effect on US wheat prices as we have to break to be competitive with European wheat. Wheat export sales this morning were at 148,800 MT for this year and 336,700 MT for next. This was on the high end of estimates. Please be sure to call your broker to make sure you are all caught up with current strategies/sales.
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