Week Ahead Commentary 6/1/10
Jun 01, 2010
The last day of the month proved to be a rough one in the corn market as December corn finished 13½ cents lower at $3.80. On the week the December contract lost 5¼ cents. End of the month book squaring was a prevalent theme as traders were unwilling to go home long over the three-day Memorial Day holiday. In our opinion, we still appear to be in a range bound trade for corn as we have continuously seen farmer selling as we approach the $3.90-$4.00 area. Export sales were slightly lower than the previous week and this caused a bit of resistance whenever the market tried to rally. We are hearing reports out of the West of farmers who are selling corn to make room for the upcoming wheat harvest. This will continue to put pressure on the corn market as we go forward. Looking ahead to the weather situation, it appears that we will have favorable planting weather for the better part of the weekend with a system to roll through the Midwest early next week. We should continue to see progress with already planted crops and also areas that need to catch up. If the weather stays good through pollination, we will likely see December futures trade under $3.50 and head even lower toward harvest. If the weather turns for the worst here in the U.S. and/or in China this growing season, we should see corn prices find a bottom in the coming months. I still think we are positioned well at this time. For those producers that still need to get caught up on the hedge recommendations that we have issued, please call your broker and discuss the available plan for your operation.
On the heels of a weak Census crush report and low export sales, November beans finished the last trading day of the month down 11 cents, 9.07¾. For the week, beans actually picked up ¼ of a cent on the buying that came in early in the week. Based on the fundamentals that we have right now, we feel that the bean market may be susceptible to a further break from these levels if the weather continues to hold. The record South American crop continues to come online and global stocks this fall will be 45% larger than last year. We will still have to grow a crop here in the U.S., obviously, but if we do have trendline yields, we could see much lower prices this fall. A lot can change (and usually does!), but if you are not caught up on sales, I would look for a rally back toward $9.30-9.50 in November soybeans to do so. For those producers who have their hedges in place, we would continue to stay hedged. For the producers who still need to protect new crop bean sales, please give your broker a call to discuss the available strategies that we have.
The wheat market continues to struggle based on the fundamentals that are in place. For the week July Chicago wheat finished 14¼ cents lower at $4.57¾. As previously mentioned, we have been hearing that farmers out west are beginning to ramp up corn sales to make room for the upcoming wheat harvest. If you are a wheat producer who has the ability to store your wheat, we have been discussing strategies to sell deferred futures and store the wheat in order to take advantage of the carry that is in the market. Please call your broker to see if this is a strategy that can benefit your operation.