EHedger Closing Grain Commentary 9-15-10
Sep 15, 2010
Corn and soybeans close higher while wheat closes lower.
The corn market continues to make new highs on high open interest. We haven't been at this price level since October 2008. Until the market is convinced that corn yields aren't going down we should continue to see the market supported on any kind of setbacks. We are probably starting to ration some demand up at these levels but with only a billion bushel carryout we can't afford the yields to go down much. Although we have seen some improvements in yield reports recently it will be imperative this trend continues. We expected to see a lot more harvest pressure by this time but early yield reports have been mixed and the producer has been holding back from making sales. Currently we are at severely overbought levels. The first set of moving averages are over 30-50 cents below current prices. Over a million Dec corn futures will be rolled between now and the middle of October. As we get to the end of the quarter and as harvest pace picks up, this could give us a correction in the corn market back to these moving averages 30 - 50 cents lower. We are sticking with our hedges at this time. If you have any questions about our recommendations or would like to look at getting additional protection on as we progress through harvest please get in touch with your broker.
The soybean market largely depends on what the corn market does from here. The corn/soybean ratio for the 2011/2012 crop year has gone from 2.36 in early August down to 2.19 today. This reflects corns need to buy acres for next year. In years where corn needs to buy a lot of acres this ratio can go to 2.0 or even lower, and we expect to see this for next year. As this ratio approaches 2.0, it will be even harder for soybeans to break without corn breaking. Early yield reports for beans have been very positive and it still appears in our opinion that beans have the most bearish fundamentals going forward, but again, look for corn to be a large influence either way.
Weekly sales come out tomorrow morning at 7:30. Expectations range from 500-900 for corn, 400-800 for beans, and 700-1400 for wheat. We will have actual sales in the morning letter.
It was reported yesterday that the Australian Bureau of Agricultural and Resource Economics (ABARE) revised its 2010-2011 wheat crop estimate from 22.138 mt to 25.09. This revised estimate helped follow through selling today as the world wheat supply fears fade a bit. Wheat is still concerned about harvesting delays and quality concerns in Russia, Canada, and Europe. Today is the last day for the crop insurance price to be set and it appears that the price is going to be right around $7.15. At this level it feels like we will have a strong increase of acres here in the US at these levels. We will also begin to look at futures and option strategies based on this guaranteed price so please get in touch with your broker to discuss these strategies.
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