EHedger Afternoon Grain Commentary 3-20-2012
Mar 20, 2012
Grains finished lower for the second day in a row on more profit taking and sharply lower crude oil. May corn finished 16 cents lower at $6.47 ½, May soybeans down 21 ½ cents at $13.45, and May wheat down 9 ¾ cents at $6.42 ½.
Yesterday it was wheat leading the way lower, today it was soybeans. Crude oil was also down over $2.50 per barrel today after the Libyan government announced that they would be increasing crude production in April. China also lowered their expected automobile sales growth based on higher fuel costs and a slowing economy.
We know that the "managed money" has dramatically increased their net long positions since the beginning of January, especially in the soybean complex. With only 10 days left before one of the most important reports of the year, this latest move lower may be a sign of profit taking. Generally analysts seem to agree that we can see more corn and bean acres on this report. The bullish mentality seems more related to old crop stocks as well as the potential for more demand out of China. Currently, we don’t see near term export pace raising enough for the US carryout to drop significantly on the next WASDE report. We did see a minor uptick in crush on the last crush report. If anything the market has done all it can to ensure that soybeans will gain/hold enough acres in the US to help cover any shortfalls that the South American crop had after this year’s weather related problems. Until then, World stocks-usage rates have not gone down significantly as we don’t even have a definite South American production number just yet. With soybean volatility still running at a relatively low level, hedging using the old crop options may not be a bad idea.
May corn traded down to its 50 day moving average and found support there (see chart). Looking at a chart of November soybeans, we have come a long way up leaving the moving averages well below current levels. We have to keep this in mind when considering where we will find support on breaks. Prices in South America have also come down recently.
Chart: May Corn (red, blue, grey lines = 50, 100, and 200 day moving averages)
Chart: November Soybeans (red, blue, grey lines = 50, 100, and 200 day moving averages)
We expect March to continue to be a volatile month as traders gear up for the Planting Intentions report and Quarterly stocks data. If you have any questions or would like to open an EHedger account, please contact a broker today by calling 866-433-4371. Thanks and have a great week!!!