Closing Grain Commentary 5/20/10

Published on: 09:54AM May 21, 2010
Corn opened the day lower and quickly traded to the lows of the session early. About midday the US Dollar index had a large turn off of its highs where corn rallied into the close finishing 2 ¾ higher in the July contract. Sales were strong today coming in at the high end of the average guesses at 1,354,100 for this year and 239,000 for next year. Most of these sales were to Japan and China. In our opinion corn appears to remain in a trading range and looks to gain buying interest down towards the $3.50 area in July and $4.00 seems to be fair value for the new crop December contract.  The European debt crisis remains a key point of interest for all investors (see Euro chart below). Today was a reversal of the dollar/euro trade causing the dollar to post as much as a 900 point loss at one point in the dollar. Other commodities also had large ranges today. Crude oil in the June contract posted a $7 range. Given the action that we have seen in all markets it feels like to us that we are in the middle of a liquidating market with investors choosing cash over riskier assets. Today the Dow finished on its lows down 349 points in the futures. Stories of Germany eliminating the use of short selling in their stock market have all investors wondering what will happen next.   The weather pattern looks favorable in our opinion for continued planting progress and there is talk that a long term ridging pattern may be in the cards. As a firm we generally do not put much stock in long term weather forecasts but having the September calls in place will protect you should the idea of hot and dry weather be on your mind. 
Soybeans had a large range today trading down to $8.93 in the November contract but finishing 2 ¼ higher on the day at $9.08. The July contract's low today touched the long term trendline and bounced to settle 5 ½ higher on the day.  This may offer continued technical support in the beans. Sales came in on the lower end of the range at 475,500 in the old crop and 86,000 new crop. The bean market saw more bull spreading of the July and November bean contracts.  If beans happen to settle below the weekly trend line it appears to us that a continuation of a sell off could potentially continue.
Wheat sales today were in line with estimates at 250,500 old crop and 205,200. Like corn and beans, wheat had a 2 - sided trade today finishing a ½ cent higher in the July wheat. As the Euro's value continues to deteriorate, European wheat exports look more attractive. In our opinion this is going to cause pressure on US wheat as we try to remain competitive on an export level.  Outside of short covering rallies wheat appears to be on a continuing break and producers should be looking to lock in profitable levels. We have been putting together strategies for wheat producers; please give your broker a call to discuss some of the strategies that are available. 

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