Grains end in choppy trade 8/26/09

Published on: 16:31PM Aug 26, 2009
Sep 09 Corn
320 ½   
- 1
Dec 09 Corn
- ¾
Nov 09 Beans
- 2
Sep 09 Wheat
478 ¾
+ 7 ¾
Sep 09 KC Wheat
+ 6 ¼
Sep 09 Min Wheat
543 ¼   
+ 7
Dec 09 Meal
- 0.8
Dec 09 Oil
- 0.11

            Corn and soybeans closed lower and wheat closed higher. The grains were choppy today and looking for direction. Good August weather and good outlooks are weighing on prices and the fear of an early frost and strong Chinese buying are keeping prices supported. Tomorrow’s weekly sales should be large for soybeans once again.   New crop sales to China could be as high as 1.5 million MT. Again, this is obviously bullish as the buying is taking place, but if the crop is large, I think it is ultimately very bearish. The Chinese have already bought a lot of their needs upfront. The fear of tight global supplies has convinced the Chinese buyer to “lock up” their needs early. With the farmer holding on to the majority of the new crop, there could be little buying left under the market this fall/winter. Chinese purchases are already close to 11 million MT for new crop. The USDA is currently estimating that they will take a total of 16 million MT during the 2009-10 crop year. If this is accurate, the Chinese importer has already purchased nearly 70% of their total needs before we have even harvested a bushel! Again, we will still have to end up with a good crop. If the crop gets hurt badly in the next couple of weeks, the Chinese will look very smart locking up their supplies early. However, if we have a large crop this year, prices could fall sharply by next spring. South America looks to increase soybean acres sharply. If this is does indeed happen, our exports should be close to zero from March 2010 to September 2010 as South America picks up the slack. I’m just afraid that without a weather problem, the bull soybean market has already used up most of its “bullets”. The consequences of an early frost are so great however that having some upside protection for the next 30 days should be used to help make some good sales at these levels. Please call if you have any questions. 
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