EHedger Closing Grains Commentary 8/11/09

Published on: 17:03PM Aug 11, 2009
Sep 09 Corn
326 ¾ 
+ 2 ½
Dec 09 Corn
330 ¾
+ ¼
Aug 09 Beans
1210 ½  
+ 40 
Nov 09 Beans
1037 ½  
+ 27 ½  
Sep 09 Wheat
485 ¼  
- 9
Sep 09 KC Wheat
517 ½ 
- 7 ¾ 
Sep 09 Min Wheat
- 7
Dec 09 Meal
+ 6.1
Dec 09 Oil
+ 1.65

Grains Close: Soybeans Bounce Back; Awaiting USDA Report
  • Aug Soybeans Surge 46c, Nov Beans 28 ½c On Pre-Report Biz
  • Weaker US Dollar Offers Support To Commodities
  • Weather Still Friendly For Crop Development
Soybeans were the main attraction Tuesday and jumped back from Monday’s lows to recover all the ground lost at the beginning of the week. Aug futures pierced nearby resistance to draw follow-through short covering and secure its first close above $12/bushel for the first time since last September. Nov beans settled above $10.30 to stay within striking distance of the $10.50 level.
The beans are likely to remain the most active market here for a while, and plenty of last-minute positioning should be expected overnight ahead of tomorrow’s USDA report. Overall, there’s a growing assumption that the beans may gain acres in Wednesday’s revisions, but that a downward trimming in the bean yield may also be on the cards. Judging by the persistent price strength, it seems the general bias remains to the upside, so that the yield worries trump any concerns about a steep acres climb.
For our part, we see no reason to be more worried about the state of the bean crop than the corn crop. Both have had the same friendly weather, and with forecasts set to remain generally warm and wet, we expect crop development to continue nicely on both fronts. The only real difference between corn and beans is on the perception of tightness in the beans that doesn’t exist in corn. But even in this regard that tightness story only rests in the old crop – so Nov beans look plenty vulnerable to a steep setback at some point.
Bottom Line: If the USDA’s numbers lift bean acres and leave the yield flat, we think a heavy sell off in Nov beans can’t be ruled out, so continue to urge producers to top up new crop sales while we’re above $10.
Dec corn unable to build on Monday’s firmness and only squeaked to a ½ cent gain on the day. Even so, heavy selling pressure was largely absent, indicating that most traders are happy with their positions right now going into the report.
In general, it seems the market is bracing for a US corn acreage deduction tomorrow, as well as an upward revision in the national yield that reflects the broadly friendly weather conditions. The degree of shifts on either front remain up in the air, but for our part we think the hefty yield potential of this crop will continue to snuff out corn rallies until we get passed harvest.
Bottom Line: Producers should continue to look to sell into strong rallies as the potential for a drop below $3 is very strong if the weather remains non-threatening.

Chicago wheat resumed its recent downward march and settled 7 ½ cents down at its lowest level since May of 2007.
Bottom Line: Growing global stockpiles, diminishing feed demand and ample World production should all continue to point to lower wheat prices, and a drop into the mid to low $4s can’t be ruled out in the coming weeks.

Go to a free two-week trial that includes our hedging recommendations, trades of the day, market recaps or to simply open an account.
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of E Hedger, its affiliates, officers, directors, employees, or agents. Recipients assume the risk of reliance on and indemnify and hold E Hedger harmless for any and all losses, costs, or tax consequences incurred as a result of their use of market information.