Evening Grain Commentary | 4-17-13
Apr 17, 2013
Grain markets were mixed on Wednesday with heavy bear spreading in corn and bull spreading in soybeans. The threat of late planting has traders buying corn and selling beans with the idea that some acres will have to switch if planting delays continue. Our outlook remains the same. We want to stay hedged and look to buy some short-dated calls to help protect the upside should spring problems persist.
Soybean basis was stronger again Wednesday on slow producer selling. Traders may also be trying to get long before tomorrow’s export sales report is released with expectations of "stronger-than-needed" old crop soybean sales. So far we contracted 1,334,800,000 bushels for export while the USDA is estimating total demand to be 1,350,000,000. With 21 weeks left in the marketing year we have to average less than a million bushels a week in sales to stay under the current estimate. Last year we managed 11.6 million per week during this timeframe, but obviously this was a different year/situation. South American production is much larger than last year but some traders are worried that shipments may not be quick enough to suit China’s near term appetite and we could see more old-crop US sales as a result. On the flip side, the March 1st stocks count found more bushels than expected and crush is showing signs of slowing down. That large South American production can quickly turn into a long tail of exports which may lower new crop US bean demand. The bottom line - old crop/new crop soybean spreads once again hinge on the upcoming export demand.
I read an interesting article today about late planting written by Bob Nielson of the Purdue Agronomy Department. Please follow the link below to read about some historical data on late planting.
The Planting Date Conundrum for Corn
However the planting delays ultimately affect yield, they certainly affect sentiment. If the planting delays continue into May the markets may get antsy and start putting additional premium into prices. For this reason we want to protect our hedges using the short-dated new crop July calls. For more details on our current hedging strategy, please sign up for our newsletter using the link at the top.
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