Walsh Hedging 11/14/12
Nov 14, 2012
It feels like the complex is starting to re-focus on the fundamental aspects of the marketplace after Friday’s bearish report sent “managed money” to the exits sending prices lower. Strong demand and strong cash markets surfaced after the recent plunge in futures. First, we saw the sale of 158,496 MT of US corn to an unknown destination yesterday (most likely Mexico) and then today the USDA announced a sale of 120,000 MT of soybeans to China. The pick-up in demand wasn’t limited to exports, as domestic usage by soybean processors has increased amid the lower prices as well. The National Oilseed Processors Association said 153.5 million bushels of soybeans were crushed in October, above the average estimate of 144.4 million from analysts surveyed. The boost came from favorable margins for processors as domestic crushers took advantage of increased availability of soybean supplies from autumn harvests in the Farm Belt. Soybean futures also saw support from technically based buying amid the views from some in the trade the market’s recent declines was overdone. The spot January bean contract finished the day up 11 ¾ at 1419 ¾. For the time being, demand looks like it will be the driving force of the marketplace because the weather in South America looks good for the next couple weeks. For the corn complex, it was a good sign that December contract was unable to test the September 28th low of 705 yesterday and bounced higher. However, in my opinion, the December contract will need to get to and stay above that $7.50 mark before I can get excited about corn. Like I mentioned on Friday, my opinion is that the USDA is giving end users an early Christmas gift by not adjusting harvested corn acreage. Yesterday, the European firm Astrium projected the US corn yield at 116 bpa, lower than the USDA’s most-recent estimate of 122.3. The firm uses a combination of satellite imagery, people on the ground and weather data to make its predictions. We live in a technological advanced society now and one has to wonder why the USDA doesn’t change its policy of not adjusting harvested acreage from the October to November report for the past 16 years. December corn finished the day up 2 ¼ at 725 ¾. Producer selling has dried up on the price decline and commercials are anxious to get corn in position to move into export channels in advance of possible barge restrictions or even the closure of the Mississippi River south of St. Louis because of the drought this summer. Export sales won’t be out until Friday due to the holiday on Monday. December Chicago wheat finished the day down 2 cents at $8.49 despite yesterdays poor winter wheat crop conditions report but the breakdown by region is even more important. July Kansas Wheat finished the day in the green while the Chicago contract finished in the red because the SRW wheat crop in the east remains in favorable condition compared to the HRW wheat crop in the west. All in all, demand should dictate price direction for the coming weeks unless “managed money” starts to liquidate their positions with the end of the year around the corner.
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