Closing Grain Commentary 5/18/10
May 18, 2010
Corn opened the session higher in line with overnight gains, and ended up settling 3 ¾ cents higher for the July contract. In our opinion corn appears to remain in a trading range and looks to gain buying interest down towards the $3.50 area in July and $4.00 seems to be fair value for the new crop December contract. The European debt crisis remains a key point of interest for all investors (see Euro chart below). It appears to us that for some time a common trade has been the purchasing of commodities and selling the dollar. As a result, as this trade is unwound the dollar has seen a sharp rally and we have broken the grain markets towards the lower end of the ranges. We are at key technical points in all of the grains and this is something that needs to be closely monitored. With regards to the upcoming weather, most weather forecasters are in agreement with the idea of a drying 6-10 day forecast for the majority of the corn belt.
Soybeans were eight cents higher overnight and opened four cents higher for the day session before settling 1 ½ cents lower for the July contract. Beans continue to remain weak as we approach the major trend line on the weekly continuous chart (see chart below.) In our opinion we may be nearing a test of the $9.00 level for the new crop November contract. If beans happen to settle below this trend line it appears to us that a continuation of a sell off could potentially continue.
Wheat opened up slightly higher on the day before settling 1 ¼ cents lower for the July Chicago contract. Once again the situation in Europe and the declining value of the Euro is making European exports more attractive. In our opinion this is going to cause pressure on our US wheat as we try to remain competitive on an export level. Outside of short covering rallies wheat appears to be on a continuing break and producers should be looking to lock in profitable levels. We have been putting together strategies for wheat producers, please give your broker a call to discuss some of the strategies that are available.
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