Closing Grain Commentary July 19th

Published on: 20:52PM Jul 19, 2010
Grains had a big reversal off the highs today, with new crop corn and soybeans 13 cents lower. Weather was the main factor behind today’s break. Sunday night the market opened sharply lower and carried that weakness through today’s close. Export inspections today were as-expected for corn, weak for soybeans, and better-than expected for wheat.
Friday’s COT report showed that by last Tuesday, Large Traders/Funds have bought over 200,000 contracts of corn, over 75,000 contracts of beans (between beans/soy meal/soy oil,) and over 70,000 of wheat. This is important now because there are fresh longs in the red. Much of the corn bought on Thursday and Friday was above $4.04. This kind of negative pressure could force some large traders out, essentially pushing the market lower.
Crop progress this afternoon was mixed. For corn the good/excellent rating fell by 1 percent to 72%. The percent silking jumped from 38% to 65%, well above the 5-year average of 47%. For soybeans, the good/excellent rating was up 2% to 67%. Winter wheat is 71% harvested compared to 74% on average.
There are still many unknowns in the market. It is unknown what the production loss will be for Russia’s wheat crop, or the course grains in Canada/Europe. China’s stocks report is coming July 27th, which will give us more insight to China’s future demand. This could move the market either direction. With such a massive spec long position recently entering the market, it is a big gamble for them to take and the moves could be quick and volatile. Having orders in above the market is important if you need to get caught up on sales. Between our September calls we bought and put/call strategies, we believe we have enough upside potential to stick with our current positions in case of another sharp rally from here.  *** Updates made today: see latest hedge recommendations ***
The forecast calls for more rains in the next 6-10 days. This was quickly worked into the market on Sunday’s open. We will have to continue to monitor the forecast to see what develops. If the weather turns hot and dry we could certainly see another move higher from here. If the weather remains unchanged at favorable, we would likely see this premium come out of the market like we saw today. As always please call you broker with any questions or for the latest recommendations.

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