EHedger Afternoon Grain Commentary 1-31-2012

Published on: 15:26PM Jan 31, 2012

Grains rallied into the end of the trading session close finishing near the highs of the day.  For the month of January, front month contracts finished as follows: corn down 7 cents, soybeans up ½ cent, and up 13 ¼ cents for wheat.

The weather forecast for South America is still calling for favorable conditions for the following couple of weeks besides dryness for the next couple of days in Southern Brazil.

 Wheat has once again gained on corn and is now trading at a 27 cent premium to corn in the March contracts.  This is significant since it has been trading in and out of a discount to corn since June which has surely affected the amount of corn being fed in the world.  If wheat is no longer cheap enough to be a feed substitute the corn market may have to rally to ration demand.  Much of this depends on the South American crop as the market has already priced in a high risk premium for crop damage.  Obviously there has been some damage from the heat stress; the question still remains how much.

Tomorrow is the first day of the month and we could continue to see wide fluctuation like we saw today for end-of-month position squaring. We will continue to monitor export sales as well as weather in South America. Longer term we still think these rallies need to be sold for the New Crop months.  The market has relied on world weather concerns to keep us supported over the past few years. If we get the acres back from preventive plant as well as a few acres out of CRC we could easily see the increased acreage needed to replenish stocks.

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