Grains had a large trading range today finishing the session with minor gains. December corn closed 4 cents higher at $5.54, November soybeans closed 4 ¼ cents higher at $13.75 ½, and July wheat closed 11 ½ cents higher at $6.73 ¼.
Grain prices spiked higher early in the trading session as the morning forecast was left mostly unchanged still calling for drier than normal conditions for key segments of the Midwest. Going into the weekend during a weather market the trade likely lightened up some of the long positions to take the "forecast changing" risk off the table. New crop corn may have also run into some hedge pressure as we got above the spring crop insurance price of $5.68 for the first time since March 20th.
The latest Commitment of Traders report shows the "managed money" adding 17,843 corn longs and decreasing corn shorts by 9,847. This puts there net total position using futures and options at net long 70,715 contracts of corn which is comparatively small when looking at the soybean position. The "managed money" hardly touched there massive long soybean position adding 1,590 longs and reducing shorts by 3,008. They are currently holding a net long position of 217,554 contracts of soybeans using futures and options.
Medium Term Outlook:
For corn, the main point we want to drive home is that the USDA has a 1.881 billion bushel carryout projected WITH an increase in demand of 1 billion bushels from last year. Basically without the estimated demand increase we were really looking at a carryout well above 2 billion. Sure we could see a yield reduction from weather but we have plenty of leeway in corn before seeing heavy demand rationing. It is soybeans that we see having the potential to rally even without a weather market as they have a much smaller window to replenish supply.
Ethanol production was pegged lower on this week’s report while supply increased. This could have been the reason July corn fell 36 ½ cents to December this week. Blending margins have really dropped for the new crop timeframe and with rumors of plants slowing down/temporarily closing we have to ask if that 5 billion bushel demand estimate by the USDA isn’t still too high?
Weather is still going to lead the fundamentals in price direction but there are plenty of reasons for the market to hold back. If you would like to receive a free trial of our research including hedge recommendations, please sign up using the link below. To discuss opening an EHedger account with one of our experienced agricultural brokers, please call 866-433-4371. Thanks and have a great weekend!
Chart: December Corn
Chart: November Soybeans
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