EHedger Closing Grain Commentary 1/21

Published on: 18:03PM Jan 21, 2010
Market Settlement Change Low High 
March corn 372    4    364 372
March wheat 499 1/2 2    493 500.5
March soybeans 954    4    948.5 959.5
March soymeal 287.50 1.30 286.4 290.8
March soyoil 37.00 0.43 36.65 37.24
Feb live cattle 86.85 -0.6 86.45 87.15
Feb lean hogs 70.800 0.35 70.00 71.15

Corn, soybeans and wheat all closed higher on the day. All three markets traded on both side of unchanged throughout the day. The outside markets were very volatile today and this kept the grains choppy. The stock market was sharply lower once again on fears of increased bank regulations. President Obama also outlined a plan to cut down on proprietary trading at firms that have received government backing over the past 18 months. This has some concerned that commodities could be at risk if these banks have to get out of their positions. However, most index fund positions are held by customers and not by the banks themselves and this should not be a problem. Talks Brazil importing U.S. ethanol helped corn prices rally late in the day. Sugar prices are at 28-year highs and there is currently a small window of opportunity for this to happen. The question is whether or not this does happen. There is a new crop of sugar that will be harvested soon and this will likely make it uneconomical to import U.S. ethanol after the new supplies hit the Brazilian crushers. However, sugar does have some very strong fundamentals and it takes a long time to increase acres so this could be the development of a new trend over the next couple of years. 
 All three markets are on very large breaks and are due for some kind of rally. I would look for a rally near $4.25 in the corn and $9.75 in the soybeans to get caught up on sales if you need to. I am not very sure that the market will be able to reach these levels without a weather scare in South America. The market is liquidating and most players are caught on the wrong side of the market. Until this situation changes, any large rally will likely be short-lived. However, the market continues to surprise me and we continue to see larger than expected moves. The weather in Argentina looks dry for the next 10 days before the next meaningful rain event. We will likely see this forecast change for the worst sometime in the next week. This “weather scare” could give the market a boost, so I would make sure to have some orders in above the market if need be. 

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