EHedger Weekly Grain Wrap-Up 7/31/09

Published on: 16:36PM Jul 31, 2009
Sep 09 Corn
338 ¾  
+ 6 ½
Dec 09 Corn
348 ¾
+ 6 ½
Aug 09 Beans
+ 5 ¾
Nov 09 Beans
980 ¼  
+ 9 ¼
Sep 09 Wheat
+ 12 ¾
Sep 09 KC Wheat
559 ¼ 
+ 9 3/4
Sep 09 Min Wheat
+ 9 ½
Dec 09 Meal
+ 2.6
Dec 09 Oil
+ 0.10

              Corn closed 7-cents higher on the day and 22-cents higher on the week. A large rally in the soybean market combined with the USDA’s announcement last week of an acreage revision has helped corn prices rally 35-cents off of their lows. The U.S. dollar is making new lows for the move and the stock market continues to rally. This is attracting money into commodities. We saw another round of “end of the month” buying late in the day. We should see additional money enter the markets early next week. Corn has had a significant break and was well overdo for a rally. We are now approaching levels that producers should start getting caught up on sales if need be. I have been waiting for Dec. corn to rally back to the $3.50-3.60 level. Overall, it sounds like the corn crop is getting bigger. This of course can still change depending on how the crop finishes out. If we get through August with cool weather and good rains and avoid an early frost, we should have a very large corn crop. Hopefully the outside markets will help corn stage another rally early next week and allow everyone to get caught up on sales. The market will also want to see what acreage changes the USDA makes on the August 12th report. If the changes are small, we could see corn turn back down and break as the farmer sells the remaining old crop bushels. When this happens, I think it will be time to start covering some sales.
August soybeans closed 6-cents higher on the day and $1.13 higher on the week! November soybeans closed 11-cents higher on the day and 67-cents higher on the week. Relentless Chinese buying helped old crop soybeans turn around and post a sharp rally this week. Old crop soybeans still look to be tight in the end and we are starting to see the extreme volatility that is likely to continue as we get closer the “end” of the marketing year. I said early in the week that it would not surprise me to see a sharp rally in August soybeans and that it could pull up November soybeans to the $9.50-9.80 level. Obviously, I had no idea that this would happen in 1 day! Soybeans look very good technically and this has caused massive short covering and new buying all within the past two days. This has put November soybeans back to the highs of my estimate. If we see additional buying next week, it would not surprise me to see November soybeans rally all the way back to $10.25. As a producer you should have orders in from the current price level all the way up to $10.25 to get caught up on sales in the next week or so. Again, we still have to get through August and we still have to avoid and early frost. However, if we finish off the growing season strong in the U.S. and South America expands as aggressively as is forecasted, we could see much lower prices this winter and/or next spring. 
                 Wheat closed 12-cents higher on the day and 12-cents higher on the week. Week demand and large global supplies continue to weigh on the wheat market. U.S. prices remain overpriced compared to other key exporters and this is keeping export demand low. A growing HRW crop size and good spring wheat conditions in the U.S. combined with a possible record Australian crop as keeping global production outlooks strong. These factors all helped drive wheat prices to new contract lows by Wednesday. A rally in corn and soybeans however, helped prices stage a 3-day rally at the end of the week. Going forward, I don’t see anything bullish wheat besides the fact that the funds have record short positions. This could certainly cause a large short covering rally at any given time, but overall this will not cause a bull market. Fears of stricter regulations on Index Funds by the CFTC have also weighed on prices. This will certainly need to be monitored as the Index funds hold massive long positions in all of our commodities, and especially large positions in wheat and soybean oil. Look for any large rallies to make sales if you are behind. Have a good weekend and as always, please call if you have any questions.
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