EHedger Closing Grains Commentary 8/19/09

Published on: 17:30PM Aug 19, 2009
Sep 09 Corn
+ 5 ½
Dec 09 Corn
327 ½
+ 5
Nov 09 Beans
- 1
Sep 09 Wheat
- 4 ½
Sep 09 KC Wheat
- 1 ½
Sep 09 Min Wheat
538 ½  
- 2 
Dec 09 Meal
- 0.9
Dec 09 Oil
+ 0.15

Corn traded on both sides today in decent trade before closing the session with a 5-cents gain in the Dec contract. At face value, the firmer tone of the crude oil market (up over $2 a barrel in Dec futures) and the weaker dollar were supportive factors that aided in corn’s climb. However, some short corn / long soybean position tweaking was clearly also a major factor as those markets diverged on the day despite both facing the same generally supportive macro conditions.
Corn looks set for a period of mainly sideways trade for the coming days as we get through the rest of August and round out the development of the crop. The ongoing Pro Farmer crop tour relayed patchy crop assessments as expected today, but the overall theme remains that both the corn and bean crops have very strong potential as long as the weather remains non-threatening. Of course, there will remain a few out there who will worry about the impact of an early frost, but they might worry in vain for the next 2-3 weeks as the market focuses more on the likelihood of a near record-sized crop emerging before too long.
That will lead to a shift in attention towards the demand side of the equation, which right now remains quite soft. Profit margins have improved in the ethanol industry, but feeders remain in disarray and in a period of contraction rather than expansion, which means corn’s usage prospects look set to deteriorate for a while longer. In addition, corn will have to content with extra DDG’s and an abundance of feed wheat, which will further cloud corn’s demand outlook.
Overall, we suspect that corn is not done with its downwards probes yet, and would not be surprised to see Dec futures descend into the $2’s as harvest nears and if weather forecasts do not call for any early cold snaps. Followers of EHedger’s marketing advice are protected from such an event, but for those growers who have not yet taken sufficient precautions, please get in touch with us to chat about how we can help.
Nov soybeans shuffled mainly sideways on the day before settling slightly lower. From a technical perspective this market appears to be finding support at $9.40 and the 200-day moving average, but in our opinion remains highly vulnerable to another downward leg before too long if the Midwest growing weather remains accommodating. Pro Farmer’s reports will be closely followed in the days ahead, but so far the main gist is that, given adequate time, this crop should finish up quite well.
This market remains highly responsive to demand, and of course we have another round of weekly export sales reported tomorrow. Estimates range from 250,000 to 750,000 tons, and have the potential to be quite high given China’s persistent interest lately. However, domestic crushers have put the brakes on lately, so if China’s appetite at the export table slows much at all, we anticipate the prospect of a very large fresh crop to apply quite serious pressure to the price. Whether that happens this month or next remains to be seen, but given what we know right now we expect to see Nov beans trade in the low to mid $8’s some time in the next several weeks.
CBOT Dec wheat continued to grind lower in lackluster trade and settled for the third consecutive day below $5. And as far as Dec prices have fallen since their early June high of $7.25 ¼, we anticipate even greater weakness in the weeks ahead as wheat prices try to get cheap enough to entice greater offtake. Wheat supplies globally continue to rise, and until that trend changes wheat prices will favor the downside. 
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