EHedger Closing Grains Commentary 8/13/09

Published on: 17:56PM Aug 13, 2009
Sep 09 Corn
324 ¾  
- 6
Dec 09 Corn
332 ¼
- 4
Aug 09 Beans
1189 ¾  
- 26 ¼  
Nov 09 Beans
1020 ½  
-23 ½
Sep 09 Wheat
- 8 ¼
Sep 09 KC Wheat
508 ½ 
- 10 ½ 
Sep 09 Min Wheat
- 12
Dec 09 Meal
- 5.7
Dec 09 Oil
- 0.87

Grains Close: Soybeans Tumble Late After Jittery Trade
  • Soybeans Tumble Late After Early Gains Run Out
  • Corn Under Pressure All Day After Firm Night Session
  • Weather Outlooks Still Friendly
  • More Pressure Expected As Weekend Nears
The soybean market got off to a firm start Thursday, and briefly scaled 11-month highs of $12.41 ½ in the August contract and 2-month highs in Nov futures on strong early buying spurred by supportive outside markets and decent weekly export sales. However, once that initial buying spree dried up, heavy profit taking emerged that dunked old and new crop prices quite aggressively as the session wore on.
More pressure is expected on both fronts Friday as traders pare back heavily long soybean positions ahead of the weekend. The recent gains in the beans have been fueled primarily by speculation of an imminent depletion in US inventories, and concern about the state of the currently emerging crop here. However, the USDA’s update Wednesday stated that US old crop stocks are still more than 100 million bushels, and that new crop supplies should handily top 3 billion bushels off a record planted acres figure.
All told, the combination of this more ‘roomy’ outlook by the USDA coupled with a lack of follow-through buying this morning set the stage for the profit taking seen late Thursday, and leads us to suspect that more is to follow in the days ahead.
Of course, more whippy two-sided trade must also be allowed for as traders here remain jittery, but overall producers should be prepared to use any remaining near term rallies as selling opportunities before a potentially steep retreat materializes.
Corn exports were on the soft side Thursday, which limited this market’s upside momentum from the start and kept new crop prices largely on the defensive throughout.
Given the still friendly weather outlooks, and that fact that Wednesday’s hefty yield increase is still fresh in traders’ minds, corn’s softer tone is no surprise, and indeed we are anticipating additional selling pressure in the sessions ahead.
The production side of this market clearly has the potential to be very large, so focus over the coming weeks will be on how well can the consumer side of the equation holds up. With the hog industry in historic disarray and cattle producers also struggling, corn’s prospects appear a little grim at the moment. But, if prices get low enough (into the $2s) then real demand will be re-invigorated, which may be what’s required to start the next bull market.
Looking forward, we believe corn prices have the potential to whip around for the near term on position adjusting, before heading quite steeply lower towards the end of the month and into the fall. Consequently, we once again urge producers who have not sold much of their 2009 crop to top up sales on near term rallies, and take protection from the upcoming slump.
We also have recommendations for your 2010 crop, so please call us for a full consultation about your positions and opportunities over the coming weeks.
Chicago Dec wheat resumed its recent downtrend and settled at its lowest level in more than 2 years. A breach of the support in place around $5 looks likely very soon, and there’s a chance that a swift slide towards $4.50 takes place once that key psychological perch is lost.
Producers need to move fast to top up sales before a potentially painful stumble going into September.
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