Walsh Commercial Hedging 5/2/12
May 02, 2012
Good afternoon. The complex saw a big sell off today as corn and beans followed wheat lower. July wheat finished down 28 ½ at 614 ½. July Kansas City wheat had its lowest close since July of 2010 finishing down 26 ½ at 630 ½. Minneapolis wheat finished down 23 ¼ at 751 which was its lowest close since November 2010. The annual Kansas wheat tour is underway and the tour has estimated that the Kansas crop shall yield 54.2 bu/acre, up from last year’s drought damaged 41.6 bushels. 54.2 is a huge crop of hard red winter wheat. The harvest is now estimated to be 2-3 weeks earlier than usual. If we do have the harvest coming in 2-3 weeks earlier than usual, we may actually see a large sum of acreage in parts of Kansas try to double crop soybeans given the high price of new crop November beans. Given the fast pace of spring wheat plantings and a favorable weather outlook, the market will need to absorb a very large US crop in the months just ahead. Like I mentioned yesterday, the upside in wheat looks limited in the near term unless the weather pattern changes and/or something happens to the corn crop. The selloff in wheat quickly spilled over into the corn market as July corn finished down 17 ½ at 611 ½ and new crop December corn down 7 ¾ at 531. Fund selling in corn intensified late in the day as traders are indicating that US corn is expensive to wheat, Argentina corn, and Brazil corn. Also, there’s talk that the Brazil crop could be higher than expected for next week’s USDA report.
Soybeans eventually succumbed to the selloff in the grain market but not before making a new contract high in the July contract at 1512 ¼. July beans finished down 18 ½ at 1485 and new crop November beans down 24 ¼ at 1368 ¼. This reversal after taking out the range of the past 3 trading sessions is seen as a negative technical development. Beans opened up on their highs on continued news of more export sales. Private exporters reported the sale of 204,000 tonnes of US soybeans to unknown destinations for the 2012/13 season. With talk of up to 2.5 million more bean acres coming primarily from cotton, double-cropped wheat, and corn it will be interesting to see where beans go from here. One thing for certain is it will stay volatile in the soy complex, as fund traders still hold a huge net long position. I would urge producers of any of these commodities, especially soybeans; have some sort of protection in place through option strategies to protect your investment.
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