EHedger Closing Grain Commentary 2/3/11

Published on: 18:54PM Feb 03, 2011

Grain prices dropped today on profit taking and a sharply higher dollar.  March corn finished 6 ¾ cents lower, March beans 8 ½ cents lower, and March wheat 4 cents lower.
Coming into the day the markets were slightly weaker with wheat leading the way lower.  Weekly exports came in above expectations for soybeans and corn; and below expectations for wheat. 
Here are the following Exports (Actual vs Estimated in 1000 MT's):
                        Estimate                        Actual
Soybeans           3400-3600                     4107.9
Corn                 450-700                         1236
Wheat               800-1100                       565.4
Despite the impressive soybean exports, the stronger US dollar weighed heavily on prices today.  Comments made by the European Central bank President Jean-Claude Trichet were viewed as bearish the Euro currency which in turn is bullish the US Dollar.  Also today, Ben Bernanke commented that he doesn't believe his economic policies have contributed to the global rise in food prices.  He also mentioned that inflation is contained, and it may take a while for the unemployment rate to fall substantially.  These comments may be a sign that rates will not be rising in the short term which would be bullish dollar-denominated assets like commodities.
Weather is looking favorable in South America and is helping to put pressure on grains.  If the dollar starts to strengthen again, we could see this continue to negatively affect the price of corn, wheat, and beans, especially since we are coming off the highs in these markets.  Even though the traditional fundamentals look bullish, outside market forces could still be a significant risk.
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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