Ehedger Afternoon Grain Commentary 1-27-2012
Jan 27, 2012
Corn finished strong today with March up 7 ¼ cents at $6.41 ¾. Beans and wheat on the other hand reversed some of their gains from yesterday with beans down 3 ¾ cents and wheat down 6 ¼ cents.
Before we started the day session the USDA announced an export sale of US corn to Mexico for 170,200 MTs as well as 133,200 MTs of wheat to "unknown destinations." Weaker than expected GDP and Final Sales data was released this morning which put downward pressure on the outsides and kept grains resisted. The corn/bean ratio spreads continued to move back in favor of corn today. Looking at open interest we did see a slight decline in Chicago wheat contracts from Wednesday. This doesn’t suggest the liquidation that we could have seen from the managed money. Looking at the CFTC’s Commitment of Traders data released today we can see that the managed money increased their open interest in the Chicago wheat contract by 20,059 contracts but reduced their NET long position by 631 contracts total. This means they are still holding a NET short position of 48,865! Their net long position in corn on the other hand was reduced by 14483 contracts, but they are still net long 161,827 contracts. They increased their net long soybean position by 11,836 and are net long a total of 45,384.
We believe that wheat is still going to be a big dictator of the nearby corn market in the short term. The price of energy is also a major factor to look out for. We have been hanging around the $100 level for crude oil for some time now. If energy prices end up getting back of towards the highs that we saw in 2011 again this should obviously have a positive effect on the nearby corn markets. The bottom line is that we want to keep the marginal positions in the Front month contracts to a minimum and try to stick with the cash sales. This is especially the case with a strong basis like we have. Have a great weekend!
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