EHedger Closing Grains Commentary 6/22/09

Published on: 17:01PM Jun 22, 2009
July 09 Corn
385 ¼
- 14
Dec 09 Corn
405 ½
- 14
July 09 Beans
1151 ½
- 27 ½
Nov 09 Beans
- 25
July 09 Wheat
- 9 ¼
July 09 KC Wheat
605 ½
- 9 ¼
July 09 Min Wheat
693 ½
- 5 ½
July 09 Meal
- 13
July 09 Oil
- 0.60

  • US Soybeans 91% planted, versus 90% a year-ago. Corn 70% good to excellent versus 59% a year ago.
  • Export inspections were below estimates for wheat at 13.3 million bushels, above estimates for corn at 38 million (versus 29-33 estimated) and at the top end of estimates for soybeans at 13.4 million. Spring wheat 77% good to excellent, versus 72% a year ago.
The grains and oilseeds markets closed lower across the board after a low-key session that saw each of the main agricultural crops start the day under pressure and remain on the defensive throughout. The firmer tone of the US dollar and the softness in crude oil (which closed more than $2.50 lower on the day at around $67.30 a barrel) helped weigh on commodities generally, and look set to be major drivers of the raw materials markets going forward.
Overall, it looks as though the recent strong buying spree from investors of nearly all commodities markets has subsided, and now the early waves of profit taking are starting to come through. We have been saying for some time now that without investor interest these crops look very vulnerable to steep setbacks, and so it has proved. Dec corn has lost more than 60 cents a bushel since June 1, while Nov beans have fallen more than $1. More losses could certainly be seen in the days ahead if more investor liquidation emerges.
Another major factor impacting our markets is the weather, which has turned quite crop-friendly in the US lately following the very wet and cool spring. The latest forecasts for the US Midwest are for less rain and higher temperatures, which is just what we need for the crops here to develop further. Conditions have also improved in growing regions in Canada, Europe and Australia, so concerns about any major crop development issues should die down.
That leaves the market looking more and more at the demand side of the equation, which upon close inspection does not look all that healthy for any industries that use corn or soymeal as a major input. Hog farmers are under particularly intense pressure right now, while cattle feeders are also suffering from razor thin/negative profit margins. This is not an environment that can persist if corn and soymeal are to enjoy firm demand prospects over the coming months, so either the price of those commodities continues to decline or the sale price of meat begins to climb notably. It looks like the former is starting to take place now, but it is clear that there is plenty more room to the downside before profit margins for feeders improves to the degree that would spur growth in those industries.
We expect the prices for corn, soybeans and wheat to retain a bearish bias over the near term, but acknowledge that the odd rally heading into the key month-end USDA report on stocks and acreage can’t be ruled out. Indeed, we should expect the occasional rally, but strongly suggest farmers use such price strength as a chance to top up sales and place hedges before the report is actually released.
Overall, the market is anticipating a rise in soybean acres of roughly 2-3 million acres, while corn acres are expected to decline by 750,000-1,000,000 acres or so. We will be releasing an EHedger post-report outlook once the report is digested by the market, so look out for it towards the end of next week.
As always, please give us a call if you have any questions or for a consultation about your positioning heading into the June report and growing season.
Best regards,


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