Post-report comments 3-09-2012
Mar 09, 2012
It was a choppy, two sided trade today at the Chicago Board of Trade which led to some large intra-commodity swings. Corn was the upside leader finishing 9 ½ cents higher in the may contract. At one point it was trading as much as + 16 ½ cents higher during the day session. May soybeans settled ¾ of a cent lower at $13.37 ¾, which is almost 20 cents from its day session high. May wheat finished 8 ¼ cents higher at $6.43.
The USDA report this morning was somewhat of a surprise to the market in a few ways. For one the US carryout numbers were NOT lowered like the market was expecting except for a small decrease in the US wheat. The world soybean numbers were however lowered due to more production cuts in Argentina and Brazil. With a drop in world soybean, corn, and wheat carryouts this initially could have been viewed as slightly bullish but the reaction in the OTC market said otherwise. At about a half an hour into the trading session the corn market started to make its way higher. The rumors were that China had bought a significant amount of corn. By the time Informa’s estimates were released we had already made the highs.
Informa’s estimates were a surprise in themselves with a whopping 95.5 million corn acres estimated for 2012/2013! This is beyond most of the estimates we have seen so far for corn plantings and would certainly be a concern for the bulls. For soybeans they are still estimating 75.1 million acres which was also an increase.
Today’s Commitment of Traders report shows the "managed money" increasing their net long positions in corn by 30,449 contracts and are now long 246,137 contracts. This is a net increase of 53,637 contracts from January 3rd. For soybeans, the "managed money" increased their net long soybean position by 38,689 contracts bringing it to a net total of 156,366! This is a net long increase of 123,346 contracts (616.73 million bushels and/or 20% of the total 2011 US production) of soybeans in only 2 months! In this same timeframe, we have rallied May soybeans $1.20.
So where do we go from here? Now that we have passed the first March USDA report, we still have the stocks data as well as the Planting Intentions report, which could arguably be the most important report of the year. If we get the massive amount of expected acres planted we could have quite a bit of downward pressure going into the summer markets. Ultimately much of the price will obviously depend on the weather, but knowing that we have a lot of leeway with acres is going to be a major factor for the market. Even with the decline in world wheat carryout estimates on today’s report we still have a significant amount of feed wheat in the world to help carry us through to the next growing season. This is ultimately going to help keep the price of corn in check in our opinion. As for beans, for the US carryout to dwindle from current levels for the 11/12 crop will be difficult without seeing a large increase in demand in the short term. I would expect those rallies to taper off at some point just as we found resistance on today’s rally. Please call an EHedger broker today at 1-866-433-4371 if you would like to get set up with a free trial of our research. 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.