Walsh Commercial Hedging 5/3/12
May 03, 2012
Good afternoon. Old crop beans continued their sell off from yesterday while the grains took a breather after taking a beating yesterday. July beans finished down 11 ½ at 1473 ½ and new crop November beans fared much better finishing down only a half cent at 1367 3/4. November beans seems to find itself trapped between trend line support near $13.62 and overhead resistance at $13.95-$14.00. July beans made that key reversal yesterday, posting a new contract high before closing below the previous day’s low. There is talk of a massive increase in double crop soybeans this year with producers in the Eastern Corn Belt trying to plant them as far north as I-80. Also, Hard Red Wheat farmers, whose crops are very far along, will be tempted to plant a double crop of soybeans. All in all, with funds having a record net long position in beans, it won’t take much to see a $1.00 or more turn lower in beans so it’s pertinent to have some sort of “put” protection in place to protect your investment.
The trade felt that the selloff yesterday was a bit overdone in wheat and corn. Even with the excellent new crop corn export sales of 2,140,300 tonnes, new crop corn continues to lag behind old crop as traders expect a massive increase in new crop ending stocks for corn. Also, a very strong cash market and ideas that the USDA will need to raise exports and tighten old crop ending stocks in next week’s report will support the old crop until we know more from the report. July corn finished up 3 cents at 614 ½ and new crop December corn finished down a penny and a half at 529 ½. Weather forecasts continue to support a great start to corn sowings and should keep new crop corn in check until the report. July wheat finished up a penny at 615 ½ on talk that wheat got a little overcooked yesterday. However, the 40,000 contract drop in open interest since mid-April in wheat has traders thinking that was a sign of short-covering and believe that the market has already corrected some of the oversold condition. Coupled with a lack of a US weather threat, improving spring wheat production, and possibly a record yield coming out of Kansas, this possibly opens the door for another leg down into harvest. All in all, the market seems to be in a fragile state right now and anymore fund selling in one of these sectors can have a ripple effect through the market like we saw yesterday.
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