EHedger Closing Grain Commentary 9/24/10

Published on: 15:58PM Sep 24, 2010

Grains rallied sharply today after Rueters reported that Calstrs (California State Teachers Retirement System) might be investing $2.5 billion in commodities over the next 3 years.  December corn finished 22 ½ cents higher at $5.21 ¾.  November beans finished up 32 ½ cents and December wheat finished up 22 ¾.

This strength was also attributed to strong outside markets after a strong manufacturing report which came out this morning before the open. Crude oil was up over a dollar higher and the US dollar hit new lows for the move.  The trend still remains bullish for corn/soybeans and with new money flow coming in like this it is going to be hard for the market to find resistance. 

I have included a crush chart below.  The price falling illustrates that demand for the products isn’t keeping pace with the soybean futures. This is probably a reflection of the huge inflows of investment money flowing into our markets.  The 2011 corn strategy we had put in place a couple of days ago will help catch upside potential for these types of rallies.   

Quantitative easing, selling of the dollar, and buying of treasuries and commodities have really been the main driving factor behind this rally.  It is just money chasing money at this point.  It makes grains more volatile and at the same time less likely to be sustainable at these prices.

Open interest continues to climb, we still haven’t hit record levels yet but we are close.  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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