EHedger Weekly Grain Wrap-Up 9/11/09

Published on: 16:26PM Sep 11, 2009
Sep 09 Corn
314 ¾     
+ 5 ¼
Dec 09 Corn
319 ¾  
+ 4 ½
Sep 09 Beans
+ 10 ½
Nov 09 Beans
- 27 ½
Dec 09 Wheat
465 ½ 
+ 6 ¾
Dec 09 KC Wheat
+ 3 ½
Dec 09 Min Wheat
492 ½  
+ 8
Dec 09 Meal
- 11
Dec 09 Oil
- 0.35

Corn closed 4 ½ cents higher on the day and 13 ½ cents higher on the week. Reports of record yields over the past couple of weeks were confirmed today by the USDA’s national yield estimate of 161.9 bushels per acre. This was expected however, and was actually lower than many private estimates this week. An increase in the USDA’s demand estimate mostly offset the increase in production and ending stocks for the ’09-10 crop increased only slightly. Corn remained lower throughout most of the day, but short covering late helped rally prices to the highs of the day. Overall, I still think that corn has the best fundamentals going forward. However, corn will still have a difficult time rallying from here. Big crops usually get bigger, and all signs point to the same this year. We should continue to see the crop size grow until we get the final estimates in Feb. More important than the large crop that is about to be harvested is the fact that most of those bushels and some from the ’08-09 crop still need to be priced and moved. Many producers chose to wait and see how the crop finished out. As the risk of a frost is quickly eroding, producers will soon be forced to sell whatever bushels cannot be stored... regardless of price. With a big wheat crop already harvested and big corn and soybean crops on the way, there will certainly be storage issues this fall. This will cause corn to have another sharp break as we head into December (in my opinion). Demand is picking up and there are some real positive signs ahead for the corn market. Those things will matter eventually, but for the next 60 days corn prices could come under a lot of pressure. Corn is nearly 20-cents off of its lows and I would make some sales here and again at the beginning of the week.  
Soybeans closed 24-cents lower on the day and 19-cents lower on the week. This is the lowest weekly close since March 27th. Many analysts have been forecasting bad soybean yields due to aphids, white mold, SDS and cool temps. The attitude has been that cool temps are good for corn yields but not good for soybean yields. We have openly disagreed with this all along and point out that cool and wet years that ended in record corn yields (’92, ’94, ’04) also ended in record soybean yields. The USDA’s national soybean yield estimate of 42.3-bushels/ acre will likely increase as we head through harvest. Early yield reports are running much higher than year ago levels, especially in traditionally low yielding areas. It is still very early and we will have to continue to monitor yield reports. However, when we get big August rains, we get big bean yields. I know that EVERYONE didn’t get big rains, but almost everyone did. Pod counts were high on the USDA report and with plenty of precipitation we should see big beans and big yields. Unlike corn, very few people were even considering a record yield for soybeans a week ago. At the Farm Progress Show, most analysts were talking about good corn yields and bad bean yields. The market is still very “long” soybeans and soybean meal. There are not any frost threats until the end of September for the Midwest, and if this forecast remains intact next week, we should see soybeans continue to sell-off. 
Wheat closed 8 ½ cents higher on the day and 4 cents lower on the week. Wheat had a “key reversal” today, meaning it made new contract lows and then closed above the previous trading day’s highs. Wheat is on a nearly $3/bushel break since harvest began in June. The funds are large shorts and the market is way overdue for a rally. Today’s rally looked more like liquidation of short corn and wheat positions against long soybean positions. Fundamentally, there aren’t a lot of bullish arguments for wheat. Global stocks increased once again after global crops look to swell even further. IF prices want to “converge” with cash prices, we could see futures break another 50-cents or so especially if corn prices continue to break. Going forward, wheat looks to lose acres to soybeans across the globe and this could eventually support wheat prices. We are currently setting crop insurance prices for winter wheat. With wheat at multi-year lows, we will likely lose acres here in the U.S. The wheat market typically bottoms around Labor Day, so I would look for a rally back to $4.85-$5.20 in the December futures to get caught up on sales.    

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