Grains finished lower with the largest drop in May wheat. May corn finished 7 cents lower at $6.30 ¾, May soybeans 9 ¾ cents, and May wheat down 19 ¾ cents.
Yesterday wheat gained heavily on corn, today they reversed those gains. December corn also finished lower and is now at the lowest settlement level since January 18th. Heavy "bear-spreading" occurred for corn, wheat, and soybeans suggesting a day of liquidation ahead of the report. We could also be seeing a lot of hedge pressure leading into Friday as the consensus remains that we will see a high corn acreage number.
Personally I think the market is setting itself up for disappointment on these reports. They are under the impression that either soybeans or corn will get the extra acres that are expected this year. We’re of the opinion that we could see 172 million acres between corn and soybeans combined. This compares to the market which we are seeing a lot of 168-169 million acre guesses. Ultimately this could be a very bearish scenario for the market.
The other potentially "bearish" surprise could come from quarterly stocks. The last report in January ended up in a "limit down" move in corn as the stocks came in well above estimates. How many quarterly stocks reports in a row have we seen negative reactions for corn? Dates and correlated price movements for front month corn in the three most recent Quarterly Stocks Reports:
January 12th, 2012 - Down 40 cents (limit down)
September 30th, 2011 - Down 40 cents (limit down)
June 30th, 2011 - Down 69 cents (July contract in delivery at the time)
Lastly we have to keep in mind that these planting intentions are from March 1st. We have had a lot of price movement since which could still end up affecting acres in the end. But between the available acres we believe corn and beans will be the most likely crops to gain ground where possible. Ultimately we want to make sure as producers you have enough downside coverage in both of these markets. Please sign-up by clicking the link below to try EHedger’s grain marketing software AMMO. Have a great week!
Chart – December Corn (Red – 50 day, Blue – 100 day, Grey – 200 day moving average)
Chart – November 2012 Soybeans Divided by December 2012 Corn
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.
Walsh Commercial Hedging 3/27/12
What's the Trade Watching? "Fundmanetals" or "Macros"