Closing Grain Commentary July 20th
Jul 20, 2010
Another set-back for corn/wheat, but soybeans managed to close higher. Follow-through selling from yesterday was mainly due to favorable weather and fund activity. There was news that China was buying Sept beans which was supportive for Old and New crop today.
Today the funds were overall sellers of corn, beans, and wheat which helped keep the market lower for most of the day. On last Friday, the COT report showed that by last Tuesday, Large Traders/Funds had bought over 200,000 contracts of corn, over 75,000 contracts of beans (between beans/soy meal/soy oil,) and over 70,000 of wheat. This is important now because there are fresh longs in the red. Much of the corn bought on Thursday and Friday was above $4.04. This kind of negative pressure could force some large traders out, essentially pushing the market lower. We will look to this Friday's COT report for more insight as to Fund activity.
The forecast calls for favorable rains in the next two weeks which could continue to keep corn/soybeans on the defensive. There is a chance for dryness in the Delta and some parts of the Midwest but weather remains favorable for most of the Corn Belt.
There are still many unknowns in the market. It is unknown what the production loss will be for Russia's wheat crop, or the course grains in Canada/Europe. China's stocks report is coming July 27th, which will give us more insight to China's future demand. This could move the market either direction. With such a massive spec long position recently entering the market, it is a big gamble for them to take and the moves could be quick and volatile. Having orders in above the market is important if you need to get caught up on sales. Between our September calls we bought and put/call strategies, we believe we have enough upside potential to stick with our current positions in case of another sharp rally from here.
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