EHedger Afternoon Grain Commentary 11-4-11

Published on: 14:26PM Nov 04, 2011

It was a fairly quiet day at the Chicago Board of Trade as everyone waits to see what the outcome of the transfer of positions and accounts out of MF Global to other firms will be. December corn settled 2 ¼ cents higher closing at $6.55 ¾ while January soybeans were 6 ¼ lower finishing the week at $12.21 and December Chicago Wheat was ¾ higher closing at 6.36 ¾. There isn’t much to talk about today in the way of fresh grain news. The outside markets were supported early in the day on the heels of better than expected jobs data. By the end of the grain close the dollar was higher and the Dow Jones was 70 points lower. It appears to us that traders are waiting to see what will happen when all of the MF Global accounts are actually transferred and positions are liquidated by those that are unable to margin their current positions. On top of this situation we have a USDA Supply/Demand and Production report next Wednesday. I have included our Supply and Demand estimates in the chart below. The main demand differences we have from the October report are the ethanol usage as well as the wheat feeding number. We still think the USDA is underestimating the amount of wheat being fed in the US, and we also feel the conversion ratio they are using is too low for ethanol production resulting in an overestimation of corn used.  (see chart below)

Until the November 9th Supply and Demand report the market could continue to chop around as it has over the past few weeks. Given the discount world grains have to undercut our prices, as well as the net long positions the spec longs are still holding, we like making sure the downside risk is well covered. We like remaining with the current EHedger recommendations.  Have a great weekend! 

Chart 11.4.11


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