Corn and soybean meal break sharply 7/15/09

Published on: 17:15PM Jul 15, 2009
Sep 09 Corn
329 ¼
- 9 ¼ 
Dec 09 Corn
336 ¾
- 8 ¾ 
Aug 09 Beans
- 16 ½  
Nov 09 Beans
902 ½  
- 15 ½  
Sep 09 Wheat
534 ¼  
+ 4 ¼
Sep 09 KC Wheat
+ 3
Sep 09 Min Wheat
619 ½  
+ 6
Dec 09 Meal
- 7.4
Dec 09 Oil
+ 0.29

Corn and soybeans closed lower and wheat closed higher.   Corn, soybeans and wheat all opened sharply higher. A strong close in the corn and soybeans yesterday combined with very strong outside markets and a very weak dollar helped rally the grains early. By mid-day, Tyson announced that it would pair back their hog-breeding herd by 28% within the next 10 weeks. Although the actual number of sows being sent to slaughter isn’t that large, it is another sign of the demand destruction caused from the high meal and corn prices this summer. This news caused the corn and soybean meal markets to break sharply. Corn quickly broke 12-cents and soybean meal broke $15. The USDA and many analysts have record soybean demand estimates written down for next year. These estimates are looking very high. Besides “wanting” demand to be a record, there is nothing that suggests it should be a record. Animal numbers are still declining and this trend will need to reverse before we can assume an increase in feed demand next year. Feeding margins have certainly improved considerably, but we are still far from expanding animal numbers at current levels. Old crop soybeans could still be “tight” in the end, but the soybean fundamentals going forward look weak to me. We still have to get through the rest of the growing season, but if the weather stays like this we should see very good yields. 
The outside markets closed very strong and if the sales figures are strong tomorrow, we could see another rally tomorrow morning. The grains continue to give you selling opportunities. Corn rallied over 20-cents from it’s lows, soybeans rallied 56-cents from it’s lows and wheat rallied nearly 30-cents off of the low. I wish I could say that corn, soybeans and wheat should all rally from here but I don’t see a good reason for that to happen. Corn has started to pick up some end-user demand at these levels and that has kept prices from falling for now. U.S. corn is the cheapest in the world and this should keep exports strong. Ethanol margins are also back to positive levels. These are all good things for the corn market. Hopefully we can continue to build back demand and keep prices towards the $3 mark. Once again, margins have improved but we are still far from a major jump in demand. Weather will still “trump” all other fundamentals for now. If the weather stays cool and wet, it will be hard for the corn market to stage a large rally. Again, anything can change but I would still use these 2-3 day rallies as selling opportunities. As always, give us a call if you have any questions.
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