EHedger Afternoon Grain Commentary 1/29/13
Jan 29, 2013
March Soybeans closed 4 cents higher at $14.51 ¾. Dryness concerns in Argentina are still the main topic of discussion. Wheat was unable to hold onto its early gains despite the poor crop conditions reported yesterday. Although the market has already discounted the low ratings, we have to consider the magnitude of the current drought levels in the HRW belt. For those who have not had a chance to see the current drought monitor, please see the link below:
Drought Monitor (the next update will be on Thursday)
Harvest delays are also a concern for sections of Brazil. If these persist we could start to see some orders switch back to the US which would be bullish for old crop soybeans especially. Our old crop recommendations have been at 100% sold or protected for quite some time, it is the re-ownership strategies that we want to manage. Our soybean re-ownership strategy was to buy the March futures and sell the July. As of Tuesday the spread settled at +22 ¼ cents. Our short term target on the spread is +45 cents which is just below the 100 and 200 day moving averages.
New crop corn and soybean prices are still at great levels for hedging in our opinion. Although old crop supplies are tight the large acreage expected for 2013 may continue to provide a ceiling for new crop prices. Many times when we come off of a terrible growing year such as 2012, the market tends to overestimate yield reductions for the following year. Just looking at how far below trendline yield many estimates are coming in at, there is a hefty premium built into the price. At this time we still want to leave a healthy amount of upside potential in the market in case the drought conditions get worse for the Midwest but we want to make sure that the extremely high cost of inputs are covered. Creating a custom plan using AgYield is what we recommend to make more informed decisions regarding your marking plan.
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