Walsh Commercial Hedging 5/30/12
May 30, 2012
Good afternoon. It was another “risk off” trade in the complex today as the weather took a back seat to European economic woes. Overnight, the stock market slumped as rising worries about the health of Spanish banks reopened another front on global investors’ worries over the Euro Zone’s debt crisis. This caused the U.S dollar to rise sharply again against the Euro, thus putting pressure on the grain complex. July wheat finished down 3 at 653 ¾ and July Kansas City Wheat finished up a penny at 679. Winter wheat harvest pressure, favorable spring wheat ratings, and more rains in Russia all weighed on the wheat complex. Mixed reports coming out of Kansas in regards to yields caused a two-sided trade in Kansas wheat. Southeast Kansas is seeing high yields but Southwest Kansas is seeing yields around 20-30 bushels an acre as the drought and heat took a toll on the crop. July corn finished down 3 at 653 ¾ and new crop December corn finished up 3 on continued spreading by fund traders out of their old crop corn positions. Continued talk of cheaper Brazilian corn and ideas that China could begin to import Argentina corn in the next 60 days once the GMO issues are resolved has all weighed on old crop corn. However, buyers are moving away from feed wheat after the recent surge in wheat prices in the past few weeks and this may help improve demand. December corn was supported by reports of rootless corn problems in parts of Iowa and Illinois and concerns over the continued dryness issues in parts of the Midwest but the outside markets weighed too much on new crop to go higher. The forecast for the Midwest is for ½ to 1 inch of rain with 70-80% coverage into the weekend and the amounts expected are down slightly from yesterday. July beans was the biggest loser of the day and finished down 13 ½ at 1373 ¼. The bearish outside markets and long liquidation from funds where fund traders still hold a hefty net long position weighed on old crop beans for most of the day. November beans settled down a ½ at 1293 on late day buying on longer-term weather uncertainties. Yesterday, Hamburg-based Oil World said, “Fundamentals are strong and China’s demand for imported soybeans remains healthy despite recent cancellations. China is likely to import 56.8mmt of soybeans in the 2011-12 marketing year, up from 52.3mmt in 2010/11. With the recent purchases and vessel lineups this quantity may actually turn out on the low side.” Also, the International Grains Council yesterday cut its estimate of South American soybean production this marketing year for the seventh time since September. All in all, as analysts continue to adjust bean ending stocks estimates lower than the USDA outlook, weather here in the states needs to be ideal as we continue forward.
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