Closing Grain Commentary July 14th

Published on: 18:26PM Jul 14, 2010

Corn, wheat, and soybeans opened higher and all traded sharply higher through the day.  Most of the strength today was from continued concerns over the Russian drought which helped carry the grains higher again. The US dollar was also down again today which helped provide support.  For the past few months the world market has had cheap Russian wheat which was cheap enough for feed. The latest USDA Supply and Demand report shows a decrease in expected wheat demand used for livestock and poultry. We went from one of the most bearish world wheat scenarios to not so bearish. Canadian wheat was the first to get damaged from weather this year. Now with the Russian weather concerns running wheat on a $1+ rally, it opens the door to more US corn exports.  With these changes as well as drier changes in the forecast, corn fundamentals could be enough to break through the recent resistance we have seen around $4 (December.)  With the calls that we have bought, as well as the recent put/call strategies we have placed, we believe this is enough upside potential to stay with our current hedge strategies.

Tight old crop supplies as well as weather forecast changes have led to the recent soybean rally. One of our concerns is with the recent weather damage to oilseeds, especially rapeseed.  Canadian/European rapeseed are both expected to have lower production. South America has increased their vedge oil usage, and supplies will likely tighten. This could lead to a rise in Soybean Oil prices, but we do not believe this would warrant a similar rally in soybeans. This combined with a record South American bean output this year could be enough to see the price of beans head lower into harvest. This is how it stands right now; obviously have to first get through August without any major weather concerns. 

So with this said I want to make sure everyone got the latest recommendations in corn/wheat/soybeans today.  For wheat, we have seen a great difference in cash prices depending on quality. In the soft red wheat we have seen higher quality cash wheat bid for 50 cents to $1 over the futures while the lower quality was discounted as much as $3 under, so please check with your broker before you sell any cash wheat. If you would like more explanation to any strategies discussed please call you broker.

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