EHedger Closing Grain Commentary 8/31/10

Published on: 15:57PM Aug 31, 2010

Corn/wheat/beans all finished lower with wheat/beans the downside leaders. Corn and soybean crop ratings remained unchanged in yesterday's report.  This was the main cause for weakness overnight. After a choppy, 2 sided trade throughout the day beans and wheat traded sharply lower into the close. 

The market tried to hold strength today but was unable.  Wheat was the first one that tried to rally and couldn't keep the strength. Then corn tried to take out the highs and couldn't do it.  Finally meal tried to take out the highs and couldn't do it.  Once the outside markets traded lower the market lost its support and sold off into the close.  When beans/wheat got to double digit losses it put corn lower.  The specs are already long everything so it was likely a day of liquidation, especially since it is the last day of the month.

There are a lot of emails circulating around the marketplace about early yields being poor for corn. Today the emails were a little bit more 2-sided. We would just like to mention as of today very little corn has been harvested.  So it is probably too early to write off the corn crop just yet.  In the next 10-15 days we should see a lot of combines starting to roll and we should start to get a much better idea of how corn yields are holding up.

The US corn crop is maturing very rapidly, and we should see a record amount of corn harvested in the next 30-45 days.  We believe this could put some strong downside pressure on the market during this timeframe.  Even though we are bullish corn, there are a few things we are concerned about. Firstly most participants in the marketplace are assuming we are going down in national corn yields from the last USDA estimate. So if national yields don't go down or in fact go up, it would be a huge bearish surprise to the marketplace. The next production report is on September 10th, even if national corn yield ends up being lower it may not be reflected in this report.  With the marketplace holding near-record long positions and with a rapid harvest pace likely, we could easily trigger a larger sell-off than expected.  We like our current hedge positions at this time.


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