Closing Grain Commentary June 8th
Jun 08, 2010
Grains traded both sides of the market before finishing mixed on the close. Corn finished the day stronger with July finishing up 1 ½. The July 10 contract low is 3.33 ¾ and held support above that level today. A weaker dollar and stronger equities market also helped corn hold support. Crop progress shows corn at 94 percent emerged with crop conditions at 76% good to excellent. The market was expecting a big number for this so this may be already worked into the market price. We are still looking at favorable weather for most areas throughout the corn-belt for the next 6-10 days. One thing to think about is the fact that the start of pollination is only about three weeks away. If the 2-week forecast continues to look great the market could keep dropping weather premium out of corn. Also, in the KC wheat contract we are seeing some places bidding wheat for under the price of corn. With a large wheat crop coming to the market, it could be possible to see up to a couple 100 million bushels of demand move away from corn to wheat. Asian buyers have already started buying some feed-wheat in place of corn. As the Euro Currency weakens, Euro denominated feed-grade wheat looks cheaper, and is one more thing corn has to compete with.
Soybeans were weak for most of the day with a sharp break on the close. Much of the liquidation was after the market traded 9 month lows in new crop. The last electronic trade was at 8.88 ½ for November which is down 11 ½ on the day. The settlements are still taken from the pit trade which made the settlement down only 5 ¾ cents at 8.94 ¼. The overnight trade may see a slight decline to bring this more in-line with the electronic close. Crop progress shows beans at 84 percent planted and 66 percent emerged. The Crop Condition for soybeans was rated at 75% good to excellent. This was better than expected and the best first rating seen for a US bean crop. The record South American crop continues to come online and global stocks this fall will be 45% larger than last year. We will still have to grow a crop here in the U.S. obviously, but if we do have trend line yields we could see much lower prices this fall.
Wheat settled unchanged after falling from the highs of the day. Wheat continues to struggle based on the fundamentals in place as well as outside markets. I talked a little about this in the corn commentary but I will mention it again. As the Euro Currency continues to deteriorate, European wheat looks cheap. Much of our demand could be shifted to Europe leaving our fundamentals weaker. We have been hearing that farmers out West are beginning to ramp up corn sales to make room for the upcoming wheat harvest. If you are a wheat producer that has the ability to store your wheat, we have been discussing strategies to sell deferred futures and store the wheat in order to take advantage of the carry that is 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.) 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.
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