EHedger Closing Grain Commentary 9/23/10

Published on: 14:29PM Sep 23, 2010

Corn and wheat were lower today while beans continued to find support finishing five cents higher. December corn ended up settling the day 5 ¾ cents lower at $4.99 ¼. November beans settled for the day five cents higher at $10.93 ½. December wheat was the weakest contract on the board settling the day 22 ½ cents lower at $6.97 ¼. 

This morning the USDA released its weekly export sales numbers and we also had a Census Crush report. The weekly sales for corn were at the low end of the estimates at 561,000mt. Wheat sales were also at the low end of the range of trade estimates due to the cancellation of 490,500mt of 2011-2012 wheat. This brought the weekly sales to 459,800mt. Beans seem to have found continued support due to solid weekly sales at 1.08 million mt and also a slightly better than expected crush number of 128.1 million bushels versus the trade estimate of 127 million bushels.

The USDA also announced the sales of 120,000mt of US soybeans to China and also another 120,000mt of soybeans to an unknown buyer both for 2010-2011 delivery.  We need to be sure to keep in mind that Chinese demand has been pegged by the USDA at 55 Million MT’s this year.  This means on average they have to import 1.06 Million MT’s from either the U.S. or S. America every week to keep up with expected demand.

Open interest continues to climb.  Soybean’s open interest is about 550,000 contracts which is only 67,000 contracts away from its all-time high in February 2008.  Corn’s open interest is about 1.42 million contracts which compares to the all-time high of 1.546 million contracts in February 2007.  With such high open interest and a market largely supported by speculative investment we are likely to see volatility kept high.  The trend remains bullish for corn/soybeans.

Other commodities have been rallying right along with grains such as the metals and softs.  Gold posted a new all-time high yesterday at 1298 per ounce (December).

Tomorrow is the October option expiration for grains.  Much of the corn option open interest is at the $5 level and often times the market leans towards this area of high open interest heading into expiration.  Next week we will be at 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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