EHedger Closing Grain Commentary 9/21-10

Published on: 15:50PM Sep 21, 2010

Grains all finished lower today led down by wheat. 

Corn opened lower and after a two sided trade it found heavy selling into the close. Outside markets were a large influence today. Equities and crude oil were weaker going into the FOMC Minutes which came out just as the grain markets were closing. Basically the Fed kept the target rate at 0 - 0.25% and continued to say they would do whatever necessary to help the US economy if needed. The reaction to the Fed Minutes was very bearish for the US dollar which may give our markets a boost in the overnight session, however shortly after the decision Crude Oil dropped to the lows of the day.

The market remains at high open interest levels and supported by speculative investment. This has widened the basis so if you are able to lock in decent basis levels into the first part of next year it would be a good idea to reduce your risk of further basis changes. 

With only a billion bushel carryover for corn we can’t afford to lose much more in average yields. If yields remain unchanged from USDA’s September estimates the market is likely overbought. With only 18% of the corn crop harvested and %8 of the beans there are still a lot of unknowns in the market.

Yesterday’s December Corn high remains intact which is the 50% retracement level from the 2008 highs/2010 lows. With the market above $5 and at high open interest, the risks are higher in both directions, so expect volatility. We are approaching the end of the month/end of the quarter. Many technical support levels still remain well below current prices so we recommend staying adequately hedged. If you would like to get more protected please call your broker to discuss current strategies.

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