Walsh Commercial Hedging 5/23/12
May 23, 2012
Good afternoon. We saw a “risk off” trade in most of the complex today as the Euro Zone crisis was back in the headlines. There was talk that Greece might be leaving the Euro which weighed heavily on most markets throughout the day with the dollar trading sharply higher. July wheat finished down 17 ¼ at 668 ¼. Continued talk that the recent rally in the wheat complex was overdone and further talk that Russia will be receiving some rain to ease their drought concerns put pressure on wheat. Traders are seeing good weather for the spring wheat crops even though hot and dry conditions in hard red winter wheat are forecasted for this weekend. July Kansas City wheat finished down 11 ¾ at 689 ¾. July corn finished up 7 ¾ at 604 ¾ and new crop December up 2 ¾ at 524 ¾. Yesterday, a rumor surfaced that China might be trying to roll some of their old crop corn commitments to new crop which helped fuel the downward spiral. July corn rebounded today as traders realized there was no confirmation of this rumor and thoughts that the bull spread liquidation was a bit overdone yesterday. Also, the firm cash markets for old crop corn have many in the trade believing that the tightness in July corn hasn’t been resolved. July corn was in the green for most of the day even with the dollar sharply higher and the Dow down nearly 200 points at one time. December corn just couldn’t get going after yesterday’s change in the 6-10 day forecast. However, there’s still going to be some areas that will not receive the forecasted rains next week and this has some in the trade nervous especially since the weather is suppose to be hot and dry going into the forecasted showers next week. The trade will be closely watching any weather updates going into a three day weekend. The soy complex continued its downward trend and long liquidation with July beans finishing down 16 ¾ at 1365 ½ and new crop November beans down 23 at 1259 ¾. Thoughts that the weather shift to better rains next week suggests less germination issues thus keeping yield expectations high weighed on the bean market. However, just like the corn complex, it will be important for the bears to see confirmation of the rains next week in models over the next 2 days. If the rains do come to fruition next week and the funds still holding a huge net long position in the soy complex, it can get ugly really fast in the beans. I would urge producers of both corn and beans to have some sort of “put” protection in place in case these rains do develop.
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