Closing Grain Commentary 6-30-10

Published on: 11:26AM Jul 01, 2010

Another day of volatility in grains as the USDA report helped recoup much of the recent losses seen in corn and wheat. The report was the driving factor in today's trade, with corn showing some surprising numbers in acreage and stocks. The market was expecting the June USDA Corn Acreage to increase to 89.3 million, but to the surprise of the market it actually showed a decrease in acreage to 87.872 million. This, combined with a reduction in corn stocks to 4.31 billion bushels (expected about 4.613 billion), was the reason the market traded limit up in the first few minutes of trade. Corn did trade off-limit throughout the day, finishing 29½ cents higher (December) by the close. We came into this report on new contract lows in an oversold market; with numbers like these, the market was quick to bid up 30 cents. Tomorrow is the first of the month/first of the quarter. We could certainly see some follow-through buying in corn/wheat from today's action. We did not settle limit up, so we will not have expanded limits tomorrow. Also, there was a new recommendation today for 2010 corn, so please call your broker if you still need to place this order. The forecast remains favorable for growing conditions. 

The USDA report was mixed for beans, as we saw a higher than expected acreage number but a lower than expected stocks number. The market's initial reaction was bullish, as we saw November beans up 16½ cents in the first two minutes of trade. But the market quickly sold off, briefly trading below $9 again before settling at 902½ (November). There was heavy bull-spreading in the July/November bean spread, which was most likely a result of the lower stocks/higher acreage report. Also, today was the first notice day for July soybeans. In our opinion, the fundamentals remain bearish for soybeans and rallies should still be sold. With a large South American crop, we could continue to see thin export sales. If you are not caught up on sales and need to get orders placed, please give us a call to discuss the available strategies.

Wheat stuck to its recent trend of trading alongside corn today. Wheat was supported by the wheat/corn feed ratio. The USDA numbers showed higher acreage than expected as well as higher stocks than expected, suggesting a lower trade on normal trading days. But with how cheap wheat has been compared with corn, this ratio kept wheat well supported today. Also, we have seen the basis improve tremendously for the soft red wheat. This could be a result of the huge carry trade built into the market, as everyone wants to hold cash wheat to store for future delivery. We have seen strong export sales the last couple of weeks, another positive sign in a bearish market. The recent corn break has been a large factor in wheat's price drop. If corn has follow-through buying from this report, we could see wheat follow higher as well. From a producer's standpoint, if you are able to store your wheat, we feel selling deferred futures to capture the carry is a wise play in this market.

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