Walsh Commercial Hedging 4/19/12
Apr 19, 2012
Good afternoon. Instead of a “turnaround” Tuesday, the trade witnessed a “turnaround” Thursday as grains were higher overnight on rumors that China was looking to buy old crop corn. It seems whenever corn gets near that $6.00 level rumors start to swirl at the CME that China is in the market to buy corn. The surge in the corn market spilled over into wheat and soybeans. July Wheat finished at 630 up 14 ¼ as the surge in corn plus talk that funds hold a near record net short position in wheat sparked aggressive short-covering. July corn closed at 612 up 18 cents on the day while new crop December came to life too and finished at 541 ¾, up 13 cents for the day. Funds bought an estimated 15,000 contracts of corn on the rumor of Chinese buying. Wheat and corn were also supported on talk of some light weather concerns with forecasters saying temps could dip into the 30’s this weekend into Illinois but it doesn’t look like the cool temps are going to be move far enough south into the central and eastern corn belt to cause damage. After this weekend, the forecast is for warmer temperatures and ideal planting conditions. An interesting report from the University of Illinois came out yesterday that said, “Corn planting in 2012 will reach 50% completion date earlier than any other year since 1960 in Illinois and perhaps in Indiana as well. While Iowa is not likely to set a record early date, it is likely that Iowa will reach 50% complete well before its trend date. The main market implication is that a smaller than average percentage of the US corn crop is likely to be planted late (after May 20th) and incur the yield penalty associated with late plantings. As indicated in our post of March 23rd, a smaller than average portion of the crop planted late supports the expectation for the 2012 corn yield to be about two bushels above trend if there are no other offsetting factors later in the season.” Of course, we don’t know what Mother Nature has in store for the Midwest in the next 2-3 months so we don’t know if the yield trend is going to be higher. However, the previous seven earliest planted corn crops, of which this year is likely to be included, have all been at or better than trend.
Beans were supported today by the corn rumor and better than expected export sales. July beans finished at 1421 up 7 ½ and new crop November closed at 1342 ½ up 4 ¾. Beans were much higher for the day but profit taking late in the session dragged on the beans. Weekly export sales for soybeans for old/new crop combined came in at 1.219 million tonnes which was well above trade expectations and also supported beans early in the session. Also, Argentina cut its production estimate for the 2011/12 season to just 42.9 million tonnes as compared with 44 million as their previous estimate and compared with 45 million as the last USDA forecast. Like I said yesterday, there is still some good revenue on table to protect at these price levels.
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