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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 Closing Grains Commentary 7/23/09

Jul 23, 2009
 
SETTLEMENTS 7/23
         
 
Sep 09 Corn
327 ¾  
+ 19 ¾ 
Dec 09 Corn
339 ½ 
+ 20 ¼ 
Aug 09 Beans
1024 ¼  
+ 5 ¾  
Nov 09 Beans
933 
+ 25 
Sep 09 Wheat
531 ¾  
+ 9 ¾
Sep 09 KC Wheat
561 ½ 
+ 6 ¾
Sep 09 Min Wheat
601 
+ 3
Dec 09 Meal
283.6
+ 10.3
Dec 09 Oil
35.40
+ 0.18
 
 
 
 
 
 
 
 
 
 
 
 
 





Grains Close: USDA Re-Survey News Sparks Corn Rally
 
  • USDA Resurvey Story Spurs Short Covering Surge In Corn
  • Strong Buying Also Seen In New Crop Soybeans, Crude Oil & Stocks Mkt
  • Weather Still Friendly For Crop Development
 
Overview:
 
News that the USDA was set to resurvey corn and sorghum plantings in several states in the wake of the wet weather that hindered fieldwork from early June sparked a strong turnaround in the corn price Thursday that resulted in Dec prices settling nearly 20 cents higher. Short covering and fresh momentum buying also lifted corn on the day alongside a majority of other commodities markets.
 
The USDA’s resurveying will take place in seven states: Illinois, Indiana, Kentucky, Missouri, North Dakota, Ohio and Pennsylvania, and is anticipated by many to result in a downward revision in overall corn acreage from the June 30th planted acres estimate of 87.035 million acres. The results of the resurvey are expected in the August 12 monthly supply and demand report. Certainly several Illinois farmers had a tough time getting corn planted this year, and so we would not be too surprised to see a small reduction in planted acres in that state next month. However, a steep acreage decline is unlikely as most producers seem to have persevered through the grim conditions, and any abandoned corn acres are almost certainly destined to be planted with beans.
 
Nonetheless, this news clearly gave the corn market a lift today, and could well usher in a period of strength here that gives producers a fresh opportunity to catch up on sales following the recent aggressive slump.
 
Corn:
 
December corn gained 19½ cents or 6.1% Thursday to reverse the recent downward trend. A combination of the USDA news, strong general commodity buying and abrupt short covering all fueled the day’s gains, and could well continue to offer support to corn in the sessions ahead.
 
However, we continue to stress to farmers that such strength must be viewed as a selling opportunity given the favorable growing weather that prevails across the Corn Belt. It’s very unlikely that the overall corn acreage number declines by more than 1 million or so acres, but it is likely that the conducive weather across key growing areas gives the national yield a notable boost beyond trendline estimates. And it doesn’t take a brilliant mind to deduce that a 5 bushel-per-acre increase in yield on roughly 85 million acres more than offsets a 1 million acre decline in overall planted acres.
 
Also, we’re still concerned about the state of overall demand amid the continuing global recession that is crimping profit margins of all corn end users in every region. So, until we get a better read on actual US production, and see a genuine improvement in end-user demand, we recommend producers use periods of strength in the corn price to top up sales and hedges.
 
Soybeans:
 
New crop beans pushed higher in line with corn, and closed at its highest level since July 6. However, the buying interest seen has every chance of proving short lived, since it coincided with strong interested in copper, crude oil and other materials and flew in the face of ag market expectations that this year’s soybean crop will be a bin-buster. Also, the strong advance failed to break prices out of their recent sideways channel, and so did little to improve Nov beans’ technical appeal.
 
In addition, today’s news of a corn acreage resurvey is likely to raise projections of soybean plantings, as every corn acre that was abandoned due to poor conditions is likely to have gone to beans once the fields finally dried out.
 
So, while today’s firm close in beans has buoyed the mood of some market participants, we continue to suggest producers look to use any forthcoming price advances as a chance to top up sales and hedges if they neglected to do so when Nov prices stretched above $10.50 a bushel last month.
 
Wheat:
 
CBOT Dec wheat joined in with corn and soybeans Wednesday in heading higher, but again looks vulnerable to renewed weakness once the recent buying spree lightens up.
 
Some further bouts of short covering may extend wheat’s solidity in the days ahead, but the main bias of this market remains lower given the growing piles of wheat stocks all over the world and the fact that overall consumer interest has diminished in recent months.
 
Continue to look to sell into any sharp rallies on the assumption that this market will need to break aggressively lower at some point in order to clear the excess supplies that the world has built up over the past year.
 


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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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