EHedger Weekly Grain Wrap-Up 4/03/09

Published on: 16:23PM Apr 03, 2009
        Weekly Grain Wrap-UP

        SETTLEMENTS 4/03
May 09 Corn
+ 1/2
July 09 Corn
413 3/4
+ 1
May 09 Beans
995 1/2
+ 18 1/2
July 09 Beans
+ 18
May 09 Wheat
563 1/2
+ 13
July 09 Wheat
575 3/4
+ 13
May 09 Meal
+ 8.3
May 09 Oil
+ 0.21
All three gains closed higher on the week. We finally got the much awaited acreage report behind us this week. The report was a big surprise to most traders.   The report estimated corn acres will be 1 million less than a year ago; soybeans will be 300,000 more than a year ago and wheat will be down around 5 million. They pegged total U.S. acres down around 8 million on the year (the corn, soybean and wheat acres down a total of 6 million). After the report, strong buying came into the market. The open interest increased sharply during the second half of the week as traders continued to build their long positions. We do not believe that these will be the final numbers. At these price levels, loosing nearly 8 million acres is very difficult to believe. Many people have this same feeling about the acres but all of us will have to wait until June to get anther set of acreage numbers. Using the reports acres and trend-line yields; most analysts will be using a 250-350 million bushel carryout for soybeans, a 1.3-1.5 billion bushels carryout in corn, and a 600-700 million carryout in wheat. 
               Looking at the big picture and, the overall fundamentals are not bullish from these levels, especially if you believe (as we do) that the acres will be up significantly on the June report. However, there is not going to be any major new bearish fundamental news that will hit the market for the next few months. We may have to wait until the June report. This will leave the market vulnerable to rallies. If the funds want to buy commodities across the board, the technical guys get on a buying program, or people get excited about a wet spring, you may take some heat on your short positions. Without any major problems during the growing season we believe producers will look back this summer and realize that these current levels were great hedging opportunities. On the other hand, that does not mean that the next few months are going to be an easy ride for the bears. We recommend you stay with your hedges at these levels and if you want some upside protection for the next few months we recommend purchasing some fairly inexpensive call strategies.
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