Walsh Commercial Hedging 4/18/12
Apr 18, 2012
Good afternoon. The trade saw some volatility in the complex today. May corn opened up only 1 ¼ cents lower but quickly turned south as traders and spread traders liquidated their old crop corn longs and also old/new crop spreads which helped spark heavy selling in the May and July contracts. The July/Dec. spread finished at 65 ¼, its lowest close since January 20th. May corn finished down 15 at 601 ¾ and new crop December was a penny lower at 528 ¾. The weekly Corn Planting report showed that 17% of the crop is planted compared to 7% last week. The trade had expected planting to range from 17-21%. The highest percent complete prior to this year was 14% in 2004. Illinois was 41% complete as compared with 6% as the 5-year average. This is the 2nd highest planting percentage for this date since 1985, the last year the Chicago Bears won a Super Bowl. The only year higher was 2010 at 19%. Weather forecasts for the Midwest this weekend are cool/dry after some light rain to finish the week out, followed by warmer/drier weather next week and then turning warm/wet in the extended 11-15 day timeframe. If this does unfold like forecasted, this is ideal for corn planting for much of the U.S. Don’t be surprised to see the USDA raise its 164 bpa trend yield used in their Outlook Forum in their May S&D report if this scenario with the weather plays out.
Both old and new crop beans didn’t fare much better today either. May beans finished down 18 cents at 1407 ¾ and new crop November was down 17 ¾ at 1337 ¾. Fund traders emerged early in the session to drive the bean complex lower on profit taking. Continued talk that the soy market is overbought, record open interest, and talk that China may slow their import buying helped to spark the selling. I’m not sold on the fact that China is going to slow their imports even if their economy is slowing down. In fact, The China National Grains and Oils Information Center believes soybean imports in April will reach 4.63 million tonnes which would be a record high for April. This would leave the market on track to see an adjustment higher in China import demand in the next S&D update. Just today, private exporters reported a sale of 120,000 tonnes of U.S beans to China for the 2012/13 season. Traders see weekly export sales near 975,000 tonnes tomorrow morning as compared with 636,400 tonnes last week. All in all, there’s still some good revenue on the table to protect at these price levels.
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