EHedger Afternoon Grain Commentary 11/8/12
Nov 08, 2012
CBOT markets were mixed Thursday as traders wait for the WASDE report Friday morning. December corn closed 3 cents lower at $7.41 ¼, January soybeans 11 ¼ cents lower at $14.95 ¾, and December wheat 8 ½ cents at $9.02 ½.
It was another liquidation day for the outside markets following Tuesday’s election results. Treasuries were sharply higher and equities sharply lower on ‘flight-to-quality’ trading.
Poor soybean export sales this morning kept a weaker bias in the market most evidently during the closing minutes of the day session. Corn has been rather range bound for over a month now and without significant changes to the estimates tomorrow we expect it to stay that way. Export demand has been very slow but interior basis levels remain above average. Wednesday’s EIA report showed an increase in ethanol production along with a sharp decline in ethanol stocks. Although this was short term positive for corn, we don’t see that side of the demand equation increasing unless we see a sharp rally in energy prices. We think 4.5 billion bushels will be a solid demand number for ethanol production.
The average guess of the polled analysts puts soybean production at 2.892 billion bushels. This is up 32 million from the October WASDE report and there is a 260 million bushel difference between the high/low guesses. Most analysts believe that the increased production will be offset by an increase in exports which I do as well. Today we got the first glimpse of lower export sales. Price action will still be very sensitive to any additional soybean demand as well as any weather problems in South America. Today’s forecast is mostly favorable for Brazil and Argentina, we will update with any changes.
US wheat prices have started to become more competitive in the world market. HRW dry weather is still a concern but favorable rains are expected in wheat country late next week. Friday’s USDA report should give the market a little more direction in the wheat market. If it is a bullish wheat report it will get interesting technically because we settled just below the trendline resistance for the December wheat contract (see chart).
Soybeans settled below $15.00 and looks poised to try to fill the gap made on the 4th of July which is $14.74 ¼. Tomorrow’s report will have the most impact on price so watch the 7:30 am market reaction.
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