EHedger Closing Grains Commentary 5/28/09

Published on: 16:10PM May 28, 2009
July 09 Corn
428 3/4
+ 2 3/4
Dec 09 Corn
452 1/4
+ 2 1/2
July 09 Beans
- 8
Nov 09 Beans
+ 3
July 09 Wheat
630 1/2
+ 4 3/4
July 09 KC Wheat
680 3/4
+ 5 3/4
July 09 Min Wheat
767 1/2
-12 1/4
July 09 Meal
- 2.4
July 09 Oil

Corn, wheat and soybeans all pushed higher early Thursday, but ran into pressure as the session wore on and closed out the day mixed. July beans closed 8 cents lower, while July corn edged 2 ¾ cents higher. July wheat ended 4 ¼ cents up.
The early gains came on the back of continued investor buying interest spurred by the enduring strength in crude oil and the continuing appetite for raw materials that allegedly help fend off inflation. However, profit taking and producer selling emerged at the day’s highs to trim the early gains, and pressure the major grain and oilseed markets lower by the close.
Looking toward Friday’s trade, we believe we remain at risk of more aggressive spurts of selling across the board in nearby contracts, especially in the wake of the recent strong gains in wheat, soybeans and soy meal. July wheat early Thursday scaled 5-month highs, while July meal retested 10-month highs just above $392 a ton. These are very high levels, and given that the World has ample stockpiles of wheat and that major end-users of soy meal are already unprofitable, we think such strength is unjustifiable from a fundamental perspective.
Of course, outside investors could continue to chase these markets higher regardless of the fundamentals, but once that interest subsides, we expect a fairly quick retreat in nearby grain prices. Hints of that softness were seen in the July/Nov spread Thursday, which has been at the center of attention for several weeks now. The spread narrowed by 11 cents Thursday as the July contract endured pressure while new crop prices remained fairly well propped up. If more pressure emerges in July beans, then whatever firmness that market lent to other ag markets may dissipate as well, leading to a potentially steep decline across the grains as the week winds down.
Tomorrow’s trade will take an early cue from the USDA weekly export sales report. Estimates for corn sales are between 700,000 and 950,000 metric tons, while for beans are 700,000-900,000 tons. Wheat sales are seen coming in around 350,000-450,000 tons, and meal sales are expected at around 200,000-250,000 tons. Given the delicate state of end-user profitability right now, it’ll be interesting to see if there are any surprises to the upside. Certainly, a bean sale total of around 1 million tons would be very supportive, especially if it involves substantial old crop tonnage. But, a soft number in the beans could spark a round of selling, and lend a bearish tint to other markets as well.
So there’s much to look out for as we end the week, but we think the bigger picture theme of dwindling (or non-existent) end user profitability should start to play a greater role in determining price direction going forward. So, if there are still producers out there who like the look of these prices, but have not yet hedged their 2009 crop, we strongly advise you look to take action soon in case we start to lose ground as the summer rolls on.
The same applies for the 2010 wheat crop, on which we released a mid-session New Hedge Advisory today suggesting producers sell the first 10% of that crop. July 2010 prices traded above $7.20 Thursday, which given the growing global stockpiles is a very nice price.
As always, give us a call for more discussion and guidance.
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