EHedger Afternoon Grain Commentary 6/5/12
Jun 05, 2012
Grains closed mixed today with July corn down ½ cent at $5.67 ½, July soybeans up 9 ½ cents at $13.49 ½, and July wheat down 14 ½ cents at $6.13 ¼.
Today was another low volume trading session but it was not without large swings especially in the spreads. The July – December corn spread closed 15 ½ cents higher on the day at +59 ¾. This same spread had a larger trading range than July corn had all alone! July corn held support for most of the day despite the selloff in wheat and the new crop corn contracts. CIF basis for corn and soybeans was up sharply at midday for the June/July timeframe and this was likely providing additional support to these markets.
So why did December corn have such a large selloff to close back down near the year’s low? It could be that the market was looking for a reduction to the crop rating which never came on yesterday afternoon’s report. The Reuters poll shows that they were expecting at least a 1% drop in the good-excellent corn ratings and instead the ratings remained unchanged except for a 2% swap from good to the excellent category. Soybeans on the other hand received a less favorable rating than expected at 65% good-excellent and in turn held strong support all day.
The main driving force for grains is still the weather. Changes to the morning and midday models will continue to have large impacts on the prices. We also have Fed Chairman Ben Bernanke speaking to Congress on Thursday and many are projecting another round of quantitative easing coming up soon. If this is announced, or even just the fear of this being announced, we could see another drop in the dollar and a financial push back into "hard assets" like gold or other commodities. If you need to catch up on sales having scale up orders in is not a bad way to get positioned in case we see a rally. We have found heavy resistance in December corn at the 50 and 100 day moving averages over the past 6-8 months. Currently the 50 day moving average is at $5.31 and the 100 day is up at $5.48. These may be good target levels to have orders placed.
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Chart: December corn (red – 50day, blue – 100day)
Chart: Nov. soybeans w/ Fibonacci retracement levels (next major target at $12.23 ¼)
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