The intra-commodity spreading pushed the soybean/corn ratio to new highs for the week. November soybeans closed 20 ½ cents higher at $16.45 ¾. December wheat closed 12 ¾ cents higher while December corn closed ¼ cent lower.
Today’s Cattle on Feed report showed slightly lower placements than what the market was calling for. The high price of feed is clearly affecting the feed demand as the latest WASDE report shows the "feed and residual" estimate dropping by 725 million bushels of corn.
The CFTC’s Commitment of Traders report showed another increase to the already massive long positions the funds are holding in corn, wheat, and soybeans. Using futures and options combined, the "managed money" alone is long 1.516 billion bushels of corn, 1.1577 billion bushels of soybeans, and 385.520 million bushels of Chicago wheat. Obviously these huge positions have helped push us to these lofty levels. How much more will they add to these positions and how long will they stay with them are the questions to ask.
The Weekly Export Sales Report showed strong soybean sales but corn and wheat both fell below the estimated range. Corn above $8 has obviously taken a toll on the export pace which has restricted its upside. At the same time the price can’t afford to fall very far and create a bunch of demand until we know more about the crop size. For this reason we think we are stuck in a holding pattern between $7.50 and $8.50 until we get further into harvest.
While corn is in a supply market we believe soybeans are in a demand market. Crush continues to outpace estimates. Exports have been strong. At the same time the recent rains have the market wondering if bean yields have improved. In our opinion once we get past the supply question soybeans will have a bigger story than corn.
Please contact EHedger at 866-433-4371 if you would like to try our proprietary farm management software called AMMO. To learn more please visit www.ammoag.com. Thanks and have a great weekend!!!
Chart: November Soybeans 2012/December Corn 2012 Ratio
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