Closing Grain Commentary July 15th
Jul 15, 2010
Another sharply higher day for corn, wheat, and soybeans as strong export sales, a falling dollar, and weather concerns kept prices strong. To start the day we had weekly export sales this morning at 7:30 am. Corn exports came in at the high end of estimates at just over 1 million metric tons between new/old crop. Soybeans came in above estimates at 1.2 Million MT’s and wheat was at 309,400 MT’s. The US dollar was sharply lower posting over a 1000 point loss which is typically bullish for grains. The latest 6-10 day forecasts have factored in a chance for hot-and-dry weather towards the end of July. Dryness is more likely to be seen in the eastern Corn Belt. We will continue to monitor the updated forecast to see how this develops.
For the past few months the world market has had cheap Russian wheat which was cheap enough for feed. We went from one of the most bearish world wheat scenarios to not so bearish. Canadian wheat was the first to get damaged from weather this year. Now with the Russian weather concerns running wheat on a $1.30+ rally off the lows, it opens the door to more US corn exports. With these changes as well as drier changes in the forecast, the market was able to break through the recent resistance and settle up at 405 ¼ (December Corn.) This is above the spring insurance price level and is a good place for producers to catch up on sales. With the calls that we have bought, as well as the recent put/call strategies we have placed, we believe we have enough upside potential to stay with our current hedge strategies.
Tight old crop supplies as well as weather forecast changes have led to the recent soybean rally. One of our concerns is with the recent weather damage to oilseeds, especially rapeseed. Canadian/European rapeseed are both expected to have lower production. South America has increased their vedge oil usage, and supplies will likely tighten. This could lead to a rise in Soybean Oil prices, but we do not believe this would warrant a similar rally in soybeans. This combined with a record South American bean output this year could be enough to see the price of beans head lower into harvest. This is how it stands right now; obviously have to first get through August without any major weather concerns.
For making wheat sales, we have seen a great difference in cash prices depending on quality. In the soft red wheat we have seen higher quality cash wheat bid for 50 cents to $1 over the futures while the lower quality was discounted as much as $3 under, so please check with your broker before you sell any cash wheat. If you would like more explanation to any strategies discussed please call you broker.
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