EHedger Closing Grain Commentary 2/8/11

Published on: 18:55PM Feb 08, 2011

China's quarter point rate hike had the grains lower in the overnight session.   Throughout the day grains came off their lows and finished higher in the new crop months.  December corn finished 2 ½ cents higher, November soybeans 11 ½ cents higher, and December wheat 15 ½ cents higher. 
Anti-inflationary measures by China were enough to scare the market early, but they were quickly forgotten by mid morning.  Also today was another round of heavy bear spreading as Goldman continues their roll.  This prompted the back months to trade higher by the settlement.  Outside markets were nothing special; equities continue to make new highs for the move and crude oil had another setback.
For grains, wheat led the way higher. Much of the strength was due to concerns over the Chinese wheat crop.  The UN's food and agriculture organization commented today on the dry Chinese weather and that it could affect up to 5.16 million hectors may be affected (out of 14 million hectors).  Wheat is making new contract highs on the headlines.
Tomorrow morning the USDA WASDE report will be released 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.
We like remaining with current hedges.  Please call your broker for a specific recommendation for your operation.


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