Joseph Vaclavik is the president at Standard Grain in Chicago. Standard Grain provides futures and options brokerage to farms, feedlots, elevators, processors, end-users and traders. Visit www.standardgrain.com for more information.
New Highs in Dec '12 and Dec '13 Corn...
Aug 09, 2012
The December corn contract is trading at new all-time highs this morning, as traders scramble to cover shorts and square-up ahead of tomorrow’s USDA report (“cheat sheet” on next page). Many fear that the USDA will lower corn yields, as well as harvested acreage, drastically. Many analysts believe that the market has not rationed enough bushels to satisfy our supply/demand situation despite significant evidence of demand destruction. Floor traders noted a tremendous amount of CALL option buying yesterday. Some early yield reports from the south and other scattered areas have been disappointing. Early harvested corn will likely be the worst this year. The soybean market has rebounded from recent lows, but still trades about $1 removed from the highs in the November contract. Rains during the first part of August have pressured the bean market. Many believe that the bean crop still has a chance to tack-on additional bushels. Wheat futures came back from a 20+ cent lower trade yesterday to finish higher on the day, and are seeing some follow-thru buying this morning.
Export Sales this morning at 7:30am CST, pre-report estimates:
· Wheat 425,000 – 600,000mt
· Corn 900,000 – 1,000,000mt
· Soybeans 275,000 – 400,000mt
Weekly ethanol production was reported at 817,000bpd in yesterday’s EIA report, up 8,000 from the previous week. Ethanol stocks were seen at 18.7mil/barrels, down 750,000 from last week. Ethanol production has been lagging in recent weeks, but has rebounded from the record low weekly number seen 2 weeks ago.
Rain averages in IL, IN, MN, NE and OH were actually above normal for the first 7 days of August, according to our lead forecaster. This is obviously a stark contract from rain amounts in June and July. Temperatures, however, continue to run at least 4 degrees above normal in most major corn and soybean producing states. The 1-3 day precip map continues to call for soaking rains across much of the eastern Corn Belt. Much of IL, IN and OH should see rains in excess of 1.00” between now and late Friday. Amounts in the west will be limited.
Tomorrow’s USDA report is the wild card of all wild cards. There is an extremely delicate balance between supply and demand in both the corn and soybean markets. The demand side of the balance sheet will be more interesting to us, as we believe that this year’s epic production (supply) disaster is a “known” in the market. As of right now, today is the best day in the history of the corn market to do some marketing for fall delivery.