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EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

EHedger Afternoon Grain Commentary 3-1-2012

Mar 01, 2012

Soybeans were the upside leader today with New crop finishing 5 ¼ cents higher at $12.94 ¼.  December corn finished 1 ¾ cents lower at $5.66 ¾ and July wheat finishing 4 ½ cents lower at 6.76.

Soybean strength is still fueled by the concern of production cuts in South America.  It will be interesting to see if the USDA reduces their production estimates on the March 9th Supply and Demand report and if so by how much.  The Feb USDA soybean production estimate for Argentina was 48.0 MMTs and 72.0 MMTs for Brazil.  This is an overall 4.5 MMT decrease from the Jan report.  Some of the numbers we have been hearing have been calling for another 6-8 MMT decrease in production which may be enough to set the market up for disappointment on report day.  From what we have been seeing rains have been timely and favorable for many of these areas to close out their growing season and such a significant drop in production seems unlikely.  We will have to wait and see how they come in.

 

May corn is still holding resistance below the trendline which started back in November (see chart).  December corn is having a very similar pattern keeping it resisted.

 

Chart: May Corn

May Corn

Chart: December Corn

Dec Corn

The Weekly Export Sales Report was out this morning.  Here are the results:

                                                Estimated Range                              Actual

Corn                                     650,000 – 850,000 MTs                   716,000 MTs

Wheat                                  500,000 – 700,000 MTs                   509,100 MTs

Soybeans                              400,000 – 800,000 MTs                   976,400 MTs

Source: Reuter’s Poll

 

The Spring Federal crop insurance prices are set at $5.68 for corn and $12.55 for soybeans.  Now that these prices are set we want to make sure we have adequate downside coverage between your crop insurance, cash sales, and futures/options positions.  The month of March will be extremely important with the Supply and Demand report on the 9th, but more importantly the Planting Intentions report which is on the 30th.

 

November soybeans have gained quite a bit back on corn (relatively speaking).  Even with this move we believe corn acres will still be in that high range near 94 million acres.  We see soybeans gaining about a million acres bringing our estimate to 76 million.  We expect the market to add back in up to 9 million acres in the US and 6 million acres in Canada that didn’t get planted last year due to weather issues.  Cotton and spring wheat prices are likely to get "outbid" on additional acres by corn and beans due to the price advantages in the market this year.  The USDA is forecasting a 1.623 billion bushel carryout for corn and 209 million for soybeans.  These estimates are AFTER increasing demand sharply from last year.  We certainly think demand may increase, but it will be AFTER the prices drop. In our opinion we are trading at very good prices compared to where we could be next fall if we get a normal growing season.  Corn getting back to $4.50 and beans under $10 isn’t so hard to believe with the potential production of this year.  Also, the ethanol report again showed an increase in stocks and a decrease in production which isn’t a great trend outlook from a demand perspective.  We also have to remember that this is all at the same time that the specs are loaded up with net long positions. 

 

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www.ehedger.com/signup/

Best Regards,

EHedger

866-433-4371

www.EHedger.com

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

 

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