E Hedger Weekly Grain Wrap-Up 12/11/09

Published on: 17:42PM Dec 11, 2009
Settlements 12/11

Market Settlement Change Low High
March corn 404 1/2 11 1/2 390.25 406.25
March wheat 537 1/2  1/2 530.25 544.75
Jan soybeans 1035    8    1020 1041.25
Jan soymeal 306.50 0.90 301.4 308.4
Jan soyoil 39.57 0.12 39.25 39.92
December corn closed 12-cents higher on the day and 16-cents higher on the week.   Poor export demand, weak feeding margins, increased hedge pressure and weak outside markets all helped corn prices break back to the low end of the current trading range. We are now back to the middle of the trading range and could easily see the market rally towards the high end of the range ($4.05-4.20) or break back towards the lows ($3.60 area) by the end of the month. The liquidity is weakening every day as we quickly approach 2010. Market players from all sectors are stepping aside and will likely return early next year. This will make the market become increasingly “thin” with each passing day. It will take larger inter-day moves for funds to move in and out of large positions. This combined with very volatile outside markets, should create more and more choppy markets for the grains. Fundamentally, corn looks to have found a trading range. Above $4, corn looks to be overvalued as the livestock industry is unable to “pay up” for grain and the world exporter becomes uninterested. Conversely, as cash corn prices get towards the $3.25-3.50 levels we see aggressive purchases by ethanol plants, investors and importers. The market is anticipating a large influx of “new money” in the beginning of January. If this happens and pushes the corn market to new highs, I am looking to lock in another rounds of good sales for the 2010 crop. The calls that we bought this week will help us capture some upside on the 40% of the 2010 crop that we have already sold. If you have not yet followed this recommendation, give us a call and we will help you find a suitable alternative. 

January soybeans closed 8-cents higher on the day and 8-cents lower on the week. The soybean market is now trading back at the highs of this year’s $2-3 trading range (weird saying a $3 trading range!). As soybeans approach $11, we are seeing Chinese demand switch towards South America as they become discounted to U.S. in the February and forward time slots. We are also seeing soybean meal and soybean oil demand drop off as price reach the $350/ton and 40-cent/pound prices respectively. As with corn, the market is anticipating a large influx of money to enter the market in early January. This combined with aggressive Chinese buying on large breaks has helped soybean prices remain strong. Currently, the weather looks ideal for the South American growing season. If this trend continues, we could see a meaningful break in soybean prices during the first quarter of 2010. There are more available acres for both corn and soybeans here in the U.S. next spring. If South America has a good growing season, we will see our export demand drop SIGNIFICANTLY after the first of the year. With the potential for more corn and soybean acres next spring, $10 soybeans will look high priced. Please make sure you are caught up on your sales. 

December wheat closed 1 ½ -cents higher on the day and 17-cents lower on the week. A large round of short covering and the fear of losing too many SRW acres helped wheat stage a $1.40/bushel rally. However, demand remains pathetic for wheat and global stocks continue to build. The latest USDA report increased the U.S. carryover estimate up to 900 million bushels. This is the highest carryout in 10 years! Although the wheat market will certainly have large rallies. It remains difficult to build a fundamental bull case for the next 12-18 months. As with corn and soybeans, we should see a new round of buying after the first of the year. This should be a great selling opportunity for the producer and should be taken advantage of. The calls that we bought several weeks ago will hopefully give you the confidence to make aggressive sales on any rallies through this winter. Good luck and as always give us a call if you have any questions.
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