Grains Struggle as Funds Exit Outsides

May 13, 2011 10:40 AM

This information is provided by Archer Financial Services, Inc. 800-933-3996.

There was a lot of activity in the grain markets this week; however, in the end the markets did not settle far from where they closed last Friday with the exception of July wheat.

The corn market endured a continued liquidation of the outside markets as well as a negative USDA report on Wednesday. The trading funds were net sellers of nearly 35,000 contracts through Tuesday and that number grew as the week went on. Most corn traders were surprised by the aggressive cuts to the demand side of the equation on Wednesday. Of special note was the 100 million bushel cut in next year’s export projection in corn. This cut flies in the face of those who expect China to be a solid buyer of U.S. corn later this year and next year.

Ethanol margins have surged in recent days and are now at their strongest level almost seven months. Solid planting progress was made this week in the Central and Western corn belts, but the Northern and Eastern planting rates continue to lag. Look for planting progress to exceed 60% on a national basis next Monday, but concerns will linger for solid corn producing states such as Minnesota, North Dakota, Indiana and Ohio. Getting the last 25% of the corn crop planted may prove to be a challenge given the current forecasts. December corn should have good support at this week’s lows through the June Acreage and Stocks Report, while the upside will likely be capped by the contact high of $6.84 until a more substantial weather problem develops. It is important to manage your hedges within this range.


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