EHedger Afternoon Grain Commentary 5/4/2012
May 04, 2012
Old crop corn and soybean contracts finished higher on heavy bullspreading. July corn closed 5 ¾ cents higher at $6.20 ¼, July soybeans 4 ¾ cents higher at $14.78 ¼, and July wheat down 6 cents at $6.09 ½.
Before the day session even began we had some unfavorable economic data that sent the outside markets into a downward spiral. Crude oil traded as much as $5 lower on the day and the Dow Jones futures over 180 points lower. This helped prompt a selloff in the grains. May corn stayed supported during this break and ended up leading the other contracts off their lows. At one point May corn was trading 49 cents over July! The CIF corn basis jumped sharply today and was a major part of this corn rally. July corn got to an even $1 premium to December during the trading session and July – Nov soybeans traded back to $1.13 ½ premium. Even with the strength in the old crop today, it didn’t stop December corn from making new lows for the year at $5.15. The favorable weather has kept sell pressure on the new crop corn even as export sales pick up. This morning the USDA announced another 240,000 MTs of new crop corn to Mexico and 116,000 to South Korea. They also announced 120,000 MTs of new crop soybeans to "unknown".
Informa increased their total acreage estimates for corn and soybeans combined. They estimated soybean acreage at 75.8 million and corn at 96.12 million. These numbers would typically be viewed as "bearish" but the market didn’t seem to be too affected by them. The trade seems set on keeping old crop contracts supported to new crop contracts. Looking at the "fund" activity on the weekly COT report we can see the "managed money" reducing their net long corn position (again) and increasing their net long soybean position (again). Wheat continues to get sell pressure on expectations of strong production in the US but the "managed money" did reduce their net short positions.
Lastly I just wanted re-mention the changes that the CME will be making to the grain trading hours. They will be expanding the CBOT electronic trading hours to 5pm-4pm (Sunday to Monday) and 6pm-4pm (Monday to Friday). This will take effect May 21st, 2012.
We will continue to watch export sales for direction as well as any changes to the forecast. For now we like staying with the current EHedger recommendations. To receive a free trial of the EHedger research including hedge recommendations, please sign up using the link below. Have a great weekend!!
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