EHedger Afternoon Grain Commentary 6/21/12
Jun 21, 2012
Grains lost some of their recent gains as they finished the day sharply lower. December corn closed 16 ½ cents lower at $5.50, November soybeans closed 24 ¼ cents lower at $13.71 ¼, and July wheat closed 2 ¼ cents lower at $6.61 ¾.
Globally it was a "risk off" trade today with sharp declines in many outside markets. The US Dollar Index was sharply higher, crude oil was over $3 lower, and the Dow Jones futures were over 250 points lower. This overall weakness certainly affected the agricultural markets especially after the 3 day rally they just had. Also, the midday forecast put some additional rains in the 6-10 day outlook for the central belt. They did reduce rains for the Southeastern Missouri to Indiana areas in the 7-10 day period.
Medium Term Outlook:
For corn, the main point we want to drive home is that the USDA has a 1.881 billion bushel carryout projected WITH an increase in demand of 1 billion bushels from last year. Basically without the estimated demand increase we were really looking at a carryout well above 2 billion. Sure we could see a yield reduction from weather but we have plenty of leeway in corn before seeing heavy demand rationing. It is soybeans that we see having the potential to rally even without a weather market as they have a much smaller window to replenish supply.
Ethanol production was pegged lower on this week’s report while supply increased. This could have been the reason July corn has led the move lower. Blending margins have really dropped for the new crop timeframe and with rumors of plants slowing down/temporarily closing we have to ask if that 5 billion bushel demand estimate by the USDA isn’t still too high?
Weather is still going to lead the fundamentals in price direction but there are plenty of reasons for the market to hold back. If you would like to receive a free trial of our research including hedge recommendations, please sign up using the link below. To discuss opening an EHedger account with one of our experienced agricultural brokers, please call 866-433-4371. Thanks and have a great weekend!
Chart: December Corn
Chart: November Soybeans
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.