EHedger Closing Grains Commentary 7/21/09

Published on: 16:31PM Jul 21, 2009
Sep 09 Corn
311 ¼  
- 12
Dec 09 Corn
321 ½ 
- 12 ¼ 
Aug 09 Beans
1014 ¾  
- 18 ¼  
Nov 09 Beans
905 ¾  
- 17 ¼  
Sep 09 Wheat
534 ¾  
- 7 ½
Sep 09 KC Wheat
564 ½ 
- 6 ½ 
Sep 09 Min Wheat
600 ½  
- 12 ¾ 
Dec 09 Meal
- 2.4
Dec 09 Oil
- 0.67

Grains Close:
  • Kind Growing Weather, Firm Dollar Pressure Grains, Oilseeds
  • New Crop Corn Settles At New Lows As Chart Pattern Also Sours
  • Final Wave Of Old Crop Corn Sales May Dunk Dec Corn Below $3
More red ink was scrawled across the board today as the grain and oilseed markets received another battering from long liquidation and fresh short selling. Broadly friendly growing weather combined with strength in the US dollar was deemed behind the weakness, and further shakeouts must be allowed for in the days ahead.
That said, it was interesting to note that the grains failed to find any support from the firmer crude oil market, which may mean the Ag arena is finally now dancing fully to its own tune rather than as part of the general ‘commodities pack.’ We’ll have to see on Wednesday whether things stay that way, or if we are merely a bit slow to respond to crude oil’s lead while our focus is so fully fixed on growing conditions.
December corn lost another 11 ¾ cents a bushel, or 3.5%, to settle at fresh lows for the move and its lowest level since early December 2006. Large planted acres emerging amid broadly favorable conditions are serving to chase bulls out of this market right now, while bearish chart patterns are also serving to drive prices lower.
The momentum here is clearly lower, so fresh weakness must be allowed for in the sessions ahead. However, end users of corn must be licking their chops right now as few would have thought it would be possible to secure large quantities of corn in the low $3s less than two months after new crop prices traded above $4.70. It may take quite some time for a sustained jump in consumer demand to turn corn prices around, but we suspect that strong cash market interest will start to offer support to this market quite soon.
That said, what worries us is the prospect of final waves of old crop corn sales emerging into any corn price rallies over the remainder of the growing season. Farmers who had been hoping for a chance to fire off some sales above $5 are now coming to grips with the grim reality that those chances are now long gone. So, there’s a good chance that hundreds of thousands of bushels will come out of private storage and into the market as those producers make way for the hefty new crop - snuffing out any chance of a meaningful pre-harvest rally in the process.
This selling may not just limit corn’s upside, but could easily drive this market far lower than any producer may bear to think about right now. Such a move would certainly spark an aggressive rebound in demand, but would still deeply hurt any growers who had to sell down there in order to free up some cash ahead of the harvest season. So don’t get caught up in such a mess if it occurs, and instead...
Both old and new crop beans suffered double-digit setbacks Tuesday as the prospect of a large US crop that is emerging in non-threatening conditions continues to propel selling interest. Chart-based signals also spurred selling, as both old and new crop prices failed to break out of their recent trading bands to the upside late last week and early Monday despite aggressive buying interest.
We’re expecting more volatility in the beans over the coming days, as many traders and analysts continue to harp on about nearby tightness and worries about the state of the late-planted US crop. However, we continue to suggest using any strong rallies as selling opportunities in Nov futures, as eventually the record US planted acreage will turn into huge fresh supplies that will have the potential to apply tremendous pressure to bean prices over the second half of 2009.
CBOT Dec wheat joined in with corn and soybeans Tuesday in heading lower, breaking its recent string of gains. Some bouts of short covering may limit wheat’s losses over the near term, but the main bias of this market remains lower given the growing piles of wheat stocks all over the world and the fact that overall consumer interest has diminished in recent months.
Continue to look to sell into any sharp rallies on the assumption that this market will need to break aggressively lower at some point in order to clear the excess supplies that the world has built up over the past year.
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