Closing Grain Commentary June 10th
Jun 10, 2010
The corn market saw a nice turn around today finishing 5 cents higher and settling at $3.43 ¼ for the July contract. The USDA Supply and Demand report came back with a reduction in both 2009-10 ending stocks and also reduced stocks for the 2010-2011 crop. The reason for the reduced stocks numbers is the increase in corn demand from the ethanol industry. The 2009-2010 corn demand for ethanol rose from 4.4 billion bushels to 4.55 billion bushels. Next year’s demand rose from an estimated 4.6 billion bushels to 4.7 billion bushels. Below you will find a chart with all of the figures that were released from the USDA Supply and Demand Report. In our opinion we still need to be monitoring the daily weather runs to be sure that no weather concerns pop up. According to the weather sources that we monitor, the weather appears to be favorable for continued planting progress and growth. For producers that need to catch up on sales we feel that a rally back to the $3.75-$3.80 area in the December contract is a position to place orders. One thing to think about is the fact that the start of pollination is only about three weeks away. We realize that this is still a long time, so as I mentioned earlier having resting orders in above the market is a good idea should we see a quick bounce. This morning export sales numbers for corn were friendly. This is a good sign given the recent break in prices. With the recent break that we have been on it was clear this week that we found a level that enticed export business for US corn. We feel that we are well positioned at this time, if you have any questions about your position or need to look at strategies for further protection please give your broker a call.
Soybeans had a rough day. The July contract finished 8 ½ cents lower at $9.35 while the November contract lost 1 ¾ cents to close at $8.94 ¾. There was heavy bull spreading in the bean complex ahead of the USDA report and today was an unwinding of that spread. In our opinion the USDA report offered nothing friendly to the overall fundamental story for beans. The last few months have offered disappointing crush numbers and export sales have been nothing special. Today we did see a positive export sales number given the recent break in prices. This is a good sign for producers that still need to get caught up on sales. We still feel that with a large South American crop coming online our export business will likely continue to decrease. Having orders in above the market will be a good idea to possibly capture a bounce in the market. If you are in need of a strategy to protect your soybean crop please get in touch with your broker to discuss the available strategies.
The wheat market saw the July Chicago contract finish higher by 5 ¼ cents to close at $4.33 ¼ . The USDA report this morning showed this year’s carryout down 20 million bushels as a result of our exports. Next year’s production is estimated to be higher by 24 million bushels while an increase in feed demand by 10 million bushels was also reported. In our opinion we are still in a comfortable place with regard to where wheat stocks stand on a global level. The fundamental picture still remains bearish in our opinion. For producers that are able to store wheat there are strategies to sell deferred futures and capture the carry that remains in the market. Another thing to think about going forward; we have settled below the support line on the weekly continuous chart of Corn, Wheat, and Beans all added together as a basket (this has been discussed in previous letters -see chart below.) The red support line is where we recently broke this long term trend. The blue line is the 10 year moving average of corn wheat and beans as a basket which is still about $2.33 below today’s settlement. From a technical standpoint this could mean further weakness from here. If you are not caught up to our recommended levels of protection, please call you broker to discuss your hedging opportunities going forward.