Closing Grain Commentary 6/28/10
Jun 28, 2010
Corn and wheat both settled lower on the day while new crop beans rallied into the close. Likely we are seeing end-of-month book squaring and technical selling which brought December corn to new lows for the year settling at 3.52 ¾. Export inspections were in-line with estimates for corn/wheat but were below expectations for soybeans. Weather remains favorable with average temperatures expected over the next two weeks. Hurricane Alex is expected to bring moisture to the Midwest next week. Today’s corn crop rating dropped 2 points in the good/excellent category from 75 down to 73. This is still better than last year at this time when we were at 72% good/excellent. Wednesday’s acreage report is expected to increase corn acres from 88.798 Mil (March number) to 89.302 million (average trade guess.) With heavy fund selling in corn going into the report and end-of-quarter, we could see trade volatility continue into Wednesday even before we see the report.
Soybeans experienced heavy bear spreading today keeping the July Beans down 2 and the November up 6 ½. In the last few minutes the electronic market traded all the way up to 924 ¾ before settling at 918 ½. This volatility in the old-crop/new-crop spread has been especially noticed throughout the month of June. The fundamentals in our opinion are still bearish with a large South American crop as well as a great start here in the Midwest. Trade estimates for Wednesdays report show an average trade estimate of 78.292 Mil acres up from the March number of 78.098. If you are not caught up on sales and need to get orders placed, please give us a call to discuss the available strategies.
Wheat has been closely tied to the price of corn lately and today was weak as well. We have seen the basis improve tremendously for the soft red wheat. This could be a result of the huge carry trade built into the market as everyone wants to hold cash wheat to store for future delivery. We have seen strong export sales the last couple of weeks, another positive sign in a bearish market. This could give the market enough confidence to hold support in the Chicago wheat. The average trade estimate for Wednesday’s report is 53.774 mil acres. This is in line with March’s USDA number of 53.827. From a producers standpoint if you are able to store your wheat, we feel selling deferred futures to capture the carry is a wise play in this market.
In recent weeks we have discussed the basket trade of corn, soybeans, and wheat combined. The chart below illustrates this as it has been testing the long-term trendline on the weekly chart. We settled back below the support (red line) which could be seen technically as bearish. As always, if you have any questions please do not hesitate to give us a call and we can go over your individual operation with you.
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