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EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

Grains close sharply lower 6/03/09

Jun 03, 2009
Grains close sharply lower
 
SETTLEMENTS 6/03
         
 
July 09 Corn
432 1/2
- 17
Dec 09 Corn
455
- 17 ¾
July 09 Beans
1182
- 27
Nov 09 Beans
1047
- 35 ½
July 09 Wheat
617 ½
- 52
July 09 KC Wheat
671 ¾
- 47 ¼
July 09 Min Wheat
733 ¼
- 59 ¾
July 09 Meal
379.5
- 8
July 09 Oil
39.25
- 1.25
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Corn closed higher, wheat and soybeans all closed sharply lower. A rally in the dollar and weaker stock market helped trigger a sell-off in commodities. This combined with liquidation of animal herds helped pressure prices today. Wheat closed nearly limit-down and corn and soybeans closed near the lows for the day. Obviously the funds could come right back in tomorrow and rally the market, but we could be set for a large break. Collapsing hog prices are causing many producers to liquidate. With animal numbers already falling in the poultry, dairy and hog industries it will be very hard to see demand increase this year. Many analysts have large increases in demand in their ’09-10 balance sheets. This is how they come up with a sub-200 million bushel carryout in soybeans and a 1 billion bushel carryout in corn. I am not saying that the carryovers next year will not end up being at those levels. I am only saying that we will not have those carryouts because of record domestic demand, at least not at these prices.   That being said, I still think that corn will have the most support on large breaks from here. Until we see what the June 30th acreage report says, it should be hard for Dec. corn to break under $4. 
November soybeans and wheat, on the other hand, could have substantial sell-offs in the next 30-45 days in my opinion. Wheat rallied over $1.50/ bushel right before heading into harvest. Fundamentals remain bearish and the market has added 50,000 contracts to Open Interest since 5/22/2009! After today’s break, July futures are only 5-cents higher than before they added those 50,000 longs. Again, a wheat producer should sell cash and buy HRS calls.
 Soybeans have already priced in a “tight” situation for both old and new crop soybeans (This may have been the first time in history the soybean market was “inverted” through the entire complex for 18 months out). Old crop soybeans are likely to remain tight this year, but new crop soybeans could be a very different situation. The tightness in old crop soybeans has forced the market to ration domestic demand. With soybean oil stocks building and animal numbers falling, soybean meal and soybean oil are likely over-priced for new crop. New crop soybeans have rallied over $2.50/bushel since the Planting Intentions survey was conducted last March. This combined with a wet spring points to more acres. Add 2 or 3 million more acres to the mix and soybeans look very over-priced. Obviously weather will still be very important and we still need to see what the USDA writes down for acres. However as a producer, I would not want to have the majority of my new crop soybeans un-priced or un-protected.
 
 
 
 
 
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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.
 
 
 
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COMMENTS (1 Comments)

Anonymous
FYI - 2004 saw a July-Nov inversion of 2.50 and greater (peaking $3+ towards expiry). Interior processor margins have also been consistently rising, the market has not rationed demand.
7:20 PM Jun 3rd
 

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