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May 2009 Archive for EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

EHedger Weekly Grain Wrap-Up 5/29/09

May 29, 2009
Weekly Grain Wrap-UP
 
SETTLEMENTS 5/29
         
 
July 09 Corn
436 1/4
+ 7 1/2
Dec 09 Corn
459 1/4
+ 7
July 09 Beans
1184
+ 5
Nov 09 Beans
1062 1/2
+ 9 1/2
July 09 Wheat
637 1/4
+ 6 3/4
July 09 KC Wheat
687
+ 6 1/4
July 09 Min Wheat
772
+ 4 1/2
July 09 Meal
382.5
- 1.3
July 09 Oil
39.05
+ 1.24
 
 
 
 
 
 
 
 
 
 
 
 
 






Corn, soybeans and wheat all closed higher today. The collapsing dollar is helping to lift commodity prices. New money has been pouring into our markets in anticipation of a weaker dollar and rising inflation down the road. This was the main driver of our markets this week. How long this trend continues is anyone’s guess, so I will not pretend to know how much money will enter our markets or for how long.
 
Corn closed 7-cents higher on the day, 7-cents higher on the week and 36-cents higher on the month. This is the highest weekly close since last October. Corn has been in a large, sideways range since last October and is now at the top of that range. Corn has been torn in two directions. Weak demand and large farmer ownership has been weighing on corn rallies and a wet spring, weak dollar and strong outside markets have all supported corn on breaks. With most of the corn now planted, there should continue to be corn for sale above the market. If the new buying slows down, we could see a nice setback in corn as we head into June. Soon, the corn will be knee-high and people will be talking about “how good the crop looks”…just like every other year. By mid to late June however, the market will start looking towards the June 30th report to see how/if acres have changed since the Planting Intentions report. The possibility of losing corn acres should keep corn supported on any large breaks until then. Although demand is currently taking a back seat, eventually it will matter. Hog prices made new lows today and cattle are hovering right above their lows. This is causing further herd liquidation in the hog market. The cattle industry has not seen the liquidation yet, but that could happen soon. Margins continue to fall deeper and deeper into the red. The chicken producer has been liquidating for a year and the dairy industry is in ruins. So, if the corn market runs up to $5 or higher on production fears and/or new buying, a producer should take advantage. A sharp run-up from here would likely cause the cattle industry to start liquidating the herd size. So even though I understand why we could see corn prices rally over $5 this summer, I do not see how we can keep prices there unless something changes. Once we liquidate animal numbers, it takes time to build them back up.
 
            Soybeans closed 5-cents higher on the day, 18-cents higher on the week and $1.29 higher on the month! Soybeans have now rallied $4/bushel since last December! Relentless Chinese buying, a bad Argentine crop, strong commodities markets and a sharp reduction in U.S. acres all led to the rally.   June will be a very important month for the soybean market. China has been supporting their domestic prices by stockpiling nearly 7 million tons. This has caused the Chinese crusher to import cheaper soybeans. Because Argentina harvested a crop that was 35% less than originally thought and the farmer refused to sell soybeans due to high export taxes, Brazil and the U.S. had to make up the difference. Week after week of strong sales to China, left the soybean market no other choice but to ration demand. The soybean market inverted sharply and remains inverted in all contracts through November of 2010. With the Planting Intentions report showing a sharp drop in total acres, a tightening ’08-09 carryover caused many to raise demand forecasts and lower the carryout for the ’09-10 crop year. So now what? The Chinese have said that they will buy up to 7 million tons of domestic soybeans through June 1. June 1st is on Monday. Now that the Chinese crop is planted, does the government release some reserves to help the domestic hog and chicken producer and/or roll some of their purchases to new crop to take advantage of the $1.25 discount? Most of the large Chinese purchases have been for new crop lately, so we will have to see what happens this month. 
On June 30th, we will get the next acreage estimate from the USDA. Did soybean acres increase since the March Intentions report? The market has tried its hardest to get all the acres it can, so I would think acres would increase in the report. Corn has rallied 80-cents since the Planting Intentions survey, soybeans have rallied $2.70/bushel and spring wheat has rallied $1.83/bushel.  Can’t a farmer make money planting $4.50 corn, $10.50 soybeans or $7.80 spring wheat? If so, why would he let millions of acres go fallow? If the farmer did decide to plant these acres, wet weather in the Delta, Eastern Midwest and Northern Plains this spring should have caused the majority of these acres to go to soybeans. We will have to wait and see what the report shows, but once again, June will be a very important month for the soybean market.
 
Wheat closed 7-cents higher on the day, 25-cents higher on the week, and $1.01 higher on the month. Worries over spring plantings combined with a large influx of capital fueled the rally this month. Inflationary hedges have caused funds to buy all commodities. One of these commodities is wheat. With such a small crop size relative to the open interest, it is difficult for the wheat market to absorb such large amounts of buying. Even with demand remaining weak, good weather around the globe and the U.S. crop close to being harvested, the SRW market was able to rally nearly as much as the old crop soybeans this month. Without new money continuing to pour in, wheat should have a very sharp break from these levels as we head into harvest. However, that is a very large “if”. In these situations, the SRW contract becomes useless as a hedging mechanism. The CFTC and CBOT have been working on fixing the situation, and hopefully the changes that we see in July (increasing deliverable stocks by 80 million bushels and increasing storage costs) will help. 
 
 
Go to http://www.ehedger.com/sign-up/ for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 
 
 

EHedger Closing Grains Commentary 5/28/09

May 28, 2009
 
 
SETTLEMENTS 5/28
         
 
July 09 Corn
428 3/4
+ 2 3/4
Dec 09 Corn
452 1/4
+ 2 1/2
July 09 Beans
1179
- 8
Nov 09 Beans
1053
+ 3
July 09 Wheat
630 1/2
+ 4 3/4
July 09 KC Wheat
680 3/4
+ 5 3/4
July 09 Min Wheat
767 1/2
-12 1/4
July 09 Meal
383.8
- 2.4
July 09 Oil
37.81
unch
 
 
 
 
 
 
 
 
 
 
 
 
 





Corn, wheat and soybeans all pushed higher early Thursday, but ran into pressure as the session wore on and closed out the day mixed. July beans closed 8 cents lower, while July corn edged 2 ¾ cents higher. July wheat ended 4 ¼ cents up.
 
The early gains came on the back of continued investor buying interest spurred by the enduring strength in crude oil and the continuing appetite for raw materials that allegedly help fend off inflation. However, profit taking and producer selling emerged at the day’s highs to trim the early gains, and pressure the major grain and oilseed markets lower by the close.
 
Looking toward Friday’s trade, we believe we remain at risk of more aggressive spurts of selling across the board in nearby contracts, especially in the wake of the recent strong gains in wheat, soybeans and soy meal. July wheat early Thursday scaled 5-month highs, while July meal retested 10-month highs just above $392 a ton. These are very high levels, and given that the World has ample stockpiles of wheat and that major end-users of soy meal are already unprofitable, we think such strength is unjustifiable from a fundamental perspective.
 
Of course, outside investors could continue to chase these markets higher regardless of the fundamentals, but once that interest subsides, we expect a fairly quick retreat in nearby grain prices. Hints of that softness were seen in the July/Nov spread Thursday, which has been at the center of attention for several weeks now. The spread narrowed by 11 cents Thursday as the July contract endured pressure while new crop prices remained fairly well propped up. If more pressure emerges in July beans, then whatever firmness that market lent to other ag markets may dissipate as well, leading to a potentially steep decline across the grains as the week winds down.
 
Tomorrow’s trade will take an early cue from the USDA weekly export sales report. Estimates for corn sales are between 700,000 and 950,000 metric tons, while for beans are 700,000-900,000 tons. Wheat sales are seen coming in around 350,000-450,000 tons, and meal sales are expected at around 200,000-250,000 tons. Given the delicate state of end-user profitability right now, it’ll be interesting to see if there are any surprises to the upside. Certainly, a bean sale total of around 1 million tons would be very supportive, especially if it involves substantial old crop tonnage. But, a soft number in the beans could spark a round of selling, and lend a bearish tint to other markets as well.
 
So there’s much to look out for as we end the week, but we think the bigger picture theme of dwindling (or non-existent) end user profitability should start to play a greater role in determining price direction going forward. So, if there are still producers out there who like the look of these prices, but have not yet hedged their 2009 crop, we strongly advise you look to take action soon in case we start to lose ground as the summer rolls on.
 
The same applies for the 2010 wheat crop, on which we released a mid-session New Hedge Advisory today suggesting producers sell the first 10% of that crop. July 2010 prices traded above $7.20 Thursday, which given the growing global stockpiles is a very nice price.
 
As always, give us a call for more discussion and guidance.
 
Best,
 
EHedger
 
 
 
 
Go to http://www.ehedger.com/sign-up/for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 
 
 

EHedger Closing Grain Commentary 5/27/09

May 27, 2009
 
 
SETTLEMENTS 5/27
         
 
July 09 Corn
426
- 1 1/2
Dec 09 Corn
449 3/4
- 1/2
July 09 Beans
1187
+ 1 1/2
Nov 09 Beans
1050
+ 7 1/2
July 09 Wheat
625 3/4
+ 13 3/4
July 09 KC Wheat
675
+ 12 3/4
July 09 Min Wheat
779 3/4
+ 25
July 09 Meal
386.2
- 3.8
July 09 Oil
37.81
+ 0.06
 
 
 
 
 
 
 
 
 
 
 
 
 





Corn and old crop beans closed lower while new crop beans and wheat closed higher.
 
The wheat complex was the leader during the session. The disappointing spring wheat planting progress number added to today’s strength. However, the continued inflow of outside money and shorts continuing to cover their positions appear to be the main factor behind the wheat rally.
 
The corn market saw the planting progress numbers come in as expected. With planting finishing up, the June 30th stocks and acreage report will be the markets next focus. With the crop being planted late, the market will be watching that report very closely to see if any additional acres were lost. However, with the report still a month away, the corn market could be due for a nice pullback in the meantime.
 
Old crop fundamentals and the “roll” are still driving the soybean market. Basis levels remain very firm and Chinese demand remains strong. This is keeping old crop soybeans supported. At the same time, the funds are rolling long positions from old crop to new crop. This has pressured old crop soybeans and supported new crop soybeans. Once the roll is over, we could see new crop soybeans come under pressure going into the June report (that is as long as we see favorable weather).
 
 
 
 
Go to http://www.ehedger.com/sign-up/ for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 
 
 

Planting progress picks up pace 5/26/09

May 26, 2009

SETTLEMENTS 5/26
         
 
July 09 Corn
427 1/2
- 2 3/4
Dec 09 Corn
450 1/4
- 1 3/4
July 09 Beans
1185 1/2
+ 19 1/2
Nov 09 Beans
1042 1/2
+ 11
July 09 Wheat
612
- 1/2
July 09 KC Wheat
662 1/4
+ 1 3/4
July 09 Min Wheat
754 3/4
+ 9 3/4
July 09 Meal
390
+ 15
July 09 Oil
37.75
- 0.35
 
 
 
 
 
 
 
 
 
 
 
 
 






          Soybeans closed higher, corn and wheat closed mixed.   Better than anticipated planting conditions over the weekend weighed on corn prices. Planting progress came in as expected. Corn was 82% planted versus 86% last year and 93% average. Soybeans were 48% planted versus 49% last year and 65% average. Estimates were for corn to be 80-85% planted and soybeans to be around 50% planted. Spring wheat was 79% planted versus 97% last year and 95% average. This is still behind pace, but was a nice improvement from last week’s 50% planted figure. Corn had a late rally, so it wouldn’t surprise me to see corn prices lower overnight in response to these figures. With over 80% of the corn now planted and favorable weather seen for the second half of this week and next weekend, we could see corn prices setback. Obviously the weather could still change, but the current forecast should help planting wrap-up in most areas. Once the crop is planted, the next important report will be the June 30th stocks and acreage report. This will be a very important report. With the crop being planted late, the corn market will be watching that report very closely to see if any additional acres were lost. However, with the report is still a month away, the corn market could be due for a nice pullback in the meantime.
 
            The soybean market is still be driven by old crop fundamentals and the “roll”. Basis levels remain very firm and Chinese demand remains strong. This is keeping old crop soybeans supported. At the same time, the funds are rolling long positions from old crop to new crop. This has pressured old crop soybeans and supported new crop soybeans. Once the roll is over, we could see new crop soybeans have a nice correction also. As long as planting conditions remain favorable, new crop soybeans could be under pressure heading into the June report. It seems likely that soybean acres will increase in the next report. The big question will be by how much.   Right now, the Nov. contract looks very expensive. November soybeans are the highest priced contract in the ’09-10 crop year. November soybeans are 10-cents higher than May 2010 soybeans and 25-cents higher than July 2010 soybeans. Since it is unlikely that we will “run out” of soybeans in November, it makes sense for producer to sell during this timeframe rather than for spring or summer delivery.
 






















Go to http://www.ehedger.com/sign-up/ for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.

EHedger Weekly Grain Wrap-Up 5/22/09

May 22, 2009
Weekly Grain Wrap-UP
 
SETTLEMENTS 5/22
         
 
July 09 Corn
430
+ 6
Dec 09 Corn
452
+ 6 1/2
July 09 Beans
1164 3/4
- 10 1/4
Nov 09 Beans
1030 1/2
+ 7
July 09 Wheat
613 3/4
+ 20 1/4
July 09 KC Wheat
660 1/2
+ 13 1/2
July 09 Min Wheat
745
+ 18 1/2
July 09 Meal
375.5
- 3.7
July 09 Oil
38.00
+ 0.02
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corn, new crop soybeans and wheat all closed higher. The main features during today’s session were the continued concern of the falling US dollar, unwinding of the old crop/ new crop beans spreads, and uncertainty over the weekend weathers effect on corn planting. 
 
The corn market continues to find support from the delayed planting and the inflow of investor money into commodities due to inflations concerns. How the weather ends up this weekend and next week will determine whether corn prices need to be closer to $5.00 or closer to $4.00 as we head into rest of the growing season. The latest forecast has a number of chances for rains from now until Tuesday for the delayed areas. After Tuesday, the weather looks to dry out for the rest of the week into next weekend. However, with the way the weather models have been changing we will have to wait and see what the actual coverage and totals are when we resume trading after the holiday weekend. In addition, the markets will be closely watching the Tuesday’s crop progress report.
 
Soybeans remain driven primarily by old crop fundamentals. However, old crop beans were the weakest on the floor today. The weakness in the old crop beans appears to be funds rolling out of their long postings. China continues to buy soybeans and soybean meal. Despite Brazil being cheaper than the US, sales were extremely impressive again this week. Also, Interior basis levels continue to rally and very little soybeans are moving. The relentless buying by the Chinese importer is quickly creating a supply squeeze. November soybeans closed on new highs for the move. Therefore, if money continues to enter our markets and China continues to buy our soybeans, then we could see another leg higher. I still think there is the risk of a lot more soybean acres, but we won't get those numbers until the June 30th report. With sales as strong as they are, the soybean market is getting very uneasy.
 
              Wheat closed the strongest today. Although it has the weakest fundamentals, it has the largest Open Interest compared to crop size and when "new money" comes in it has the hardest time finding natural sellers. The weak dollar and the recent rally in Black Sea wheat have provided support. In addition, spring wheat is still way behind pace and people are concerned that we will still lose acres. I feel that a winter wheat producer should sell their winter wheat and buy HRS calls. HRS wheat still has to get through the growing season and winter wheat is finishing up, and in good shape in many areas (I realize some areas are in bad shape). HRS (Minneapolis) calls are "priced" much lower than comparable SRW (Chicago) calls. Good rains have rolled through Argentina and Australia and this should help boost production. Wheat stocks look to remain very large and will need to pick up demand. The USDA has a large "feeding" estimate written down for wheat. Currently, the market is not priced to feed ANY wheat. Although new money could continue to rally wheat from here, a failure to feed wheat in the U.S. this year could cause ending stocks to rise to 800 million bushels.
 
 
 
Go to http://www.ehedger.com/sign-up/ for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 
 
 
 
 
 
 
 
 
 
 
 
Go to http://www.ehedger.com/sign-up/ for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 
 
 

Weather forecasts control the grain market 5/14/09

May 14, 2009
 
 
SETTLEMENTS 5/14
         
May 09 Corn
421 1/2
+ 2
July 09 Corn
428 1/4
+ 1 3/4
May 09 Beans
1166
+ 16
July 09 Beans
1147 1/2
+ 19 1/2
May 09 Wheat
581 1/2
+ 2 3/4
July 09 Wheat
593 1/4
+ 4 1/2
May 09 Meal
381.5
+ 3
May 09 Oil
38.60
- 0.30
 
The grains closed higher today rebounding from lower overnight markets. Export sales were out this morning showing solid figures for corn and beans, while a weak number for wheat. Corn sales were 936 thousand MT of old crop and 246 for new crop. Bean sales were 402 thousand MT for old crop beans and 353 for new crop. Meanwhile, wheat’s dismal sales were 103 thousand MT for this year and 132 for next year. Bean sales have almost already met the current USDA projection, needing only to average 54.1 thousand MT for the remainder of the marketing year and corn sales are well on pace to meet projections. Additionally, meal sales were strong. With these sales figures and the known tight ending stocks old crop beans are finding support and continue to close near their daily highs. The most important news continues to be the weather. Forecasters are calling for another system to move across much of the Midwest Friday/Saturday and then next week finally finding some drier days. The better weather next week is greatly needed for many farmers to catch up. If planting progresses quickly this will keep a lid on sharp rallies for the time being, however, the corn market still needs to keep a premium in price to keep the acreage in corn. Open interest in corn is now at its highest level for 2009 thanks to this week’s surge. Beans are at their highest open interest level since last summer. A continued wet pattern will have people worried about losing too many corn acres to soybeans. If that happens, we could see Dec. futures test this year's high of $4.72 and maybe even $5.00. The calls we bought this week should be used as "ammunition" to make cash sales if/when futures rally to those levels. 
 
If you are bullish corn because of the wet weather, you should probably be equally bearish new crop soybeans. We will likely see cotton acres in the Delta, corn acres in the Eastern Midwest and Spring wheat acres in the Northern Plains switch to soybeans...the question is how many acres. The bullish old crop fundamentals have "pulled" up new crop soybeans to near $10/bushel. The USDA slashed total acres in their last Planting Intentions report. By our count, there are up to 6 million acres still unaccounted for. This combined with a wet spring could lead to a massive increase in soybean acres.  
 
            Wheat closed higher today. The fundamentals for HRW and SRW wheat differ greatly from those of the HRS market. HRS wheat looks to lose acres in the U.S. and possibly in Canada. HRW and SRW fundamentals are bearish and getting worse. Global stocks continue to build and demand remains weak. As a producer of winter wheat, you should be caught up on sales and re-own HRS calls if you are worried about planting delays in spring wheat.
 
 
Go to http://www.ehedger.com/sign-up/ for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 
 
 

EPA lays out new Renewable Fuels Standard 5/05/09

May 05, 2009
SETTLEMENTS 5/05
         
May 09 Corn
398 3/4
+ 3/4
July 09 Corn
404 1/4
- 1 1/4
May 09 Beans
1115 1/2
+ 1/4
July 09 Beans
1101 1/4
- 2 1/4
May 09 Wheat
544
+ 5 1/2
July 09 Wheat
552 1/4
+ 1 1/4
May 09 Meal
358.5
+ 0.9
May 09 Oil
37.69
- 0.25
 

 
 
The grains closed mixed once again. Corn traded on both sides of the market today. Weather forecasts continue to vary throughout the day on the amounts of precipitation expected to fall in the next week to ten days. With the eastern belt falling behind average pace, the amount of precipitation that falls over the next 2 weeks will be very important. Some planting has been taking place this week in the eastern belt. If the rains turn out to be insignificant this week, these areas should be able to continue planting. However, another round of 1-2” showers would setback many of these areas once again. With weather forecasts changing every 12 hours, we should see the corn market remain choppy until we see how much rain actually falls this week/weekend. The EPA proposed a new alternative-fuel standard today. The proposed rule outlines two emission scenarios for a range of bio-fuels and production methods. One scenario favors the use of corn-based ethanol, and the other would prohibit all but one corn-ethanol production process. The scenario that is chosen will decide the future of corn-ethanol. If the first scenario is chosen, corn-ethanol should continue to expand. If the second scenario is chosen, corn-ethanol production should peak shortly. These two scenarios will likely be debated over for some time before we see any decisions. You can follow the link below for additional information:
 




Go to http://www.ehedger.com/sign-up/ for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.


 

EHedger Weekly Grain Wrap-Up 5/01/09

May 01, 2009

 

Weekly Grain Wrap-UP 

SETTLEMENTS 5/01
         
May 09 Corn
408
+ 11 3/4
July 09 Corn
415
+ 11 1/2
May 09 Beans
1103 1/2
+ 33 1/2
July 09 Beans
1092 1/4
+ 37 1/4
May 09 Wheat
557 1/2
+ 33 1/4
July 09 Wheat
570 1/2
+ 34
May 09 Meal
354
+ 11.5
May 09 Oil
37.37
+ 1.15
 
 
 
Overview:
 
What an active week. Concerns about wet weather, continued Chinese soybean buying, fresh inflows of investment into the commodities arena and bullish technical developments all propelled the grains and oilseeds markets sharply higher.
 
Dec corn ended the week 26 ½ cents better, Nov soybeans ended 37 ¾ higher, and Dec wheat ended 25 ¼ higher. Soymeal and soyoil prices also made strong advances, even in the face of demand worries stemming from the Swine flu pandemic.
 
Corn:
 
Corn’s performance on the week was impressive, but the up-move was driven primarily by a combination of strong technical interest and general commodity market buying rather than by real end-user consumption interest. Certainly the wet weather has played a supportive role, as farmers in Illinois and the Eastern part of the Corn Belt contend with wet fields, but end-user profit margins are already razor-thin at best so the higher corn goes the less real demand we’ll see.
 

This to us suggests the strength will not last long, and so we strongly suggest the farmers view this strength as a nice opportunity to get caught up on sales and hedges. The technical component of corn’s rally can’t be overlooked. As you can see in the chart below, prices broke out of the recent wedge formation to the upside to trigger a wave of automated follow-through buying.





 
 

Such a development will have been widely acknowledged and will almost certainly lead to some follow-through interest in the sessions ahead. However, it is the nature of technical buying to be short lived. Once the buy signals have been hit, they stop. And then what? Well, without real end-user interest there’s a good chance prices will fall again – especially if the weather outlooks improve enough to get farmers planting again.
 
In all, we saw a very large amount of farmer selling take place today, and encourage more of it in the days ahead. These are good prices, so scale up your selling and take advantage of it before gravity kicks in and worries about the state of real demand start to make the (large) speculative longs nervous.
 
 
Soybeans:
 
The beans were the complex leader all week, and look set to remain the main attraction for a while longer yet. Last week’s chatter about imminent shipment cancellations by China proved unfounded, and even the prospect of mass hog liquidations due to Swine flu couldn’t keep the market down.
 
July prices surged a mighty 57 cents on the week, and the July/November spread closed out the week at $1.20 as concern about declining US inventories amid strong Chinese buying interest sparked panic buying and only patchy selling.
 
There was talk of continued Chinese buying interest on either side of Thursday’s strong export sales report (30.7 million bushels of old crop and 12.3 million new crop), and China’s presence in the bean market in particular remains the dominating force here. That country’s recently announced stimulus package has the potential to impact nearly all commodities markets, but the beans have a particular sensitivity right now given the perception of tight US inventories and the continuing absence of export competition from Argentina.
 
Given the strong technical signals and consistent trader buying on the close, we can’t rule out more gains next week. But there’s always a limit to what any one nation or buyer will pay, and with July prices now nearly $1.50 a bushel higher than where they were on April 1st, we have to wonder how their appetite for beans is holding up.
 
We’re expecting more strength, but again recommend farmers use these attractive prices as opportunities to book sales and place hedges. If China steps away as a buyer even for one week, this market will look awfully bloated and heavy.
 
 
Wheat:
 
A rising tide lifts all boats. Chicago December wheat’s surge to close out the day more than 32 cents higher and 25¼ cents higher on the week had all the hallmarks of technically-inspired buying/short covering and general commodity fund interest. This market simply lacks a compelling fundamental story right now, as even though we’ve had the odd patch of grower troubles in the US and other regions, overall conditions are improving and World stockpiles are generally trending higher following a decent 2008 global crop and a subdued demand environment.
 
This leads us to suspect, once again, that the current price strength will be only temporary, so we strongly encourage farmers top up sales into any further rallies.
 
 
Go to http://www.ehedger.com/sign-up/ for a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
 

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.

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