EHedger Closing Gain Commentary

Published on: 18:17PM Feb 07, 2011

Grains started the day stronger but came well off their highs by the close.  March corn finished 3 ¾ cents lower, March beans 9 cents lower, and March wheat 5 cents higher.
Export inspections were out this morning and showed a decline from last week in corn and beans, but an increase in wheat.  Today we saw heavy bear spreading in grains which is likely due to the fact Goldman is currently rolling positions.  Outside markets were mixed with equities making new highs and crude oil having a large break.  The energy market weakness poured over to corn and soybeans, helping push them lower on the day.
The USDA WASDE report will be out this Wednesday at 7:30 AM.  The average analyst estimates for corn, beans, and wheat carryout are as follows:
                        Estimate            Range
Corn                 736                   645-795
Soybeans           135                   105-150
Wheat               810                   751-889
There is a potential to see a decrease in US and world corn carryout expectations in this report.  For US carryout, stronger ethanol production may be the number one reason for this. For world carryover, the decrease would likely come from a lowered Argentine corn production.  The last USDA report projects Argentine production at 23.5 MMTs, we could easily see that reduced by 2 Million from the weather problems they have had.  Brazilian production is expected to remain strong.
Not much else has changed fundamentally and so the path of least resistance is still pointing higher.  The latest commitment of traders report shows the funds increased their net long positions in grains as follows:
+25,748 net long contracts of corn
+13,805 net long contracts of soybeans
+4,582 net long contracts of wheat
We recommend keeping your upside potential in the calls spreads, and make sales in the cash market. Please call your broker for a specific recommendation for your operation.


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