EHedger Closing Grain Commentary 11-16-10

Published on: 17:20PM Nov 16, 2010

Tuesday grains fell sharply along with outside markets.  Almost every commodity and equity index was in the red by the end of the day.  December corn and November beans were down the limit for part of the day before settling down 29 cents for corn and 66 ¾ cents for soybeans.  December wheat finished 46 ½ cents lower.


Once again the market has flipped from being incredibly bullish to a liquidating market, and these sharp swings very well may continue.  In an aftermarket report, it was estimated that the funds sold 40,000 contracts of corn, 12,000 contracts of soybeans, and 14,000 contracts of wheat.  The US dollar has rallied back to its September levels and the Dow Jones fell over 178.  For corn, December managed to fill the gap set after the October WASDE report at $5.28 ¼.


This volatility is largely based on China's decision to try curbing food inflation.  They are expected to bring more aggressive measures of anti-speculation and anti-hoarding. Obviously the market is taking this as a very negative signal.  On top of this, Ireland's debt problems are being blamed for weakening the Euro Currency and in turn have helped the US dollar.


In our opinion, it may be hard for new crop prices to fall and stay low for any extended period of time unless there is an unforeseen demand shift. This translates to potential firmer back month pricing between now and the March Planting Intentions report.  There really isn't much room for error in the South American production, so the market will be edgy on any major weather concerns.


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For now we recommend staying with our current hedge recommendations.  Please call your broker if you have any questions.