EHedger Afternoon Grain Commentary 8-31-2011

Published on: 14:43PM Aug 31, 2011

First notice day for September grain futures brought a softer corn market and slightly higher soybean market while wheat was lower for September and slightly higher in December. December corn finished just off its low, down 7¾ at $7.67½. November soybeans were a half cent higher, finishing at $14.57½. September Chicago wheat finished 5 cents lower, at $7.45¼. 

Much of today’s trade was focused on the higher than expected deliveries for wheat and soy oil. Also released today was another private estimate ahead of September’s USDA report. A private group estimated that the corn yield is 149.1 and the soybean yield is 41. We will continue to hear estimates ahead of this report; however, at the forefront of the market is the current weather pattern as soybeans are reaching a critical point in their maturation process. Overnight rains were solid for the northern part of the Corn Belt and were disappointing for the central to southern sections that have had a tough time getting rains all season. Without the needed rains in these growing areas, soybeans should be supported at these levels.

We continue to hear discussions about the final yields, and today’s private estimate was no different. This week’s crop progress lowered the corn rating by 3% and the bean rating by 2%.  Until we get more definitive information from the upcoming harvest, the market could remain supported on production fears. If corn yields are lowered from current guesses, obviously we can still see this market take out the highs. By the same token, in a year with this much variability the market will be very anxious (volatile) if yields start coming back better than expected. We also need to be careful about observing the demand issues that high corn is presenting to the cattle industry. Weekly export sales will be released tomorrow morning (estimates are below) and the market will be watching to see if export business has been scaled back as a result of these high prices.   

What does this all mean to the producer? We recommend being cautious with marginal positions and look to move short positions over to cash sales if possible to make sure we have sustainability. We can also look at a wide range collar spread (selling a call and buying a put), which will allow for more upside potential if needed. For those reluctant to sell due to production uncertainty, we like December $7 corn puts, which are a relatively inexpensive way to get protection on for harvest.

Please call your broker for details.

Chart 8.31.11

Best Regards,



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