EHedger Closing Grain Comments 11-11-11

Published on: 16:33PM Nov 11, 2011

Grains closed mixed with December corn down 7 cents, January beans up 8 cents, and December wheat down 3 ¼.  For the week December corn finished 17 ¼ cents lower, January beans were 45 ½ cents lower, and December wheat was 20 cents lower.

Poor export sales and the USDA report were the main reasons for the decline in grain prices this week.  Despite the strength in the outside markets including crude oil and the bearish dollar grains couldn’t hold much support.  The large world wheat stocks are still weighing on US feed grains.  A favorable start to the South American growing season has also been weighing on soybeans.

Going forward we think exports will suffer with such a large world wheat crop supply.  Even today the US Grains Council reported that Taiwan and Japan have switched over to buy Ukrainian feed wheat in place of US corn.  This morning it was announced that Openfield, which is a large UK coop, has signed a contract with a US company to deliver feed wheat with the first load being shipped next week.  As wheat continues to undercut corn in many parts of the world (including the US) eventually it will start showing up in the futures price.  Ethanol production is the one source of demand that seems to be really helping basis lately but after the blender’s credit expires this year will the bids still be as strong?

On a side note the CME announced a pledge of a $300 million guarantee to SIPC Trustee to help facilitate the release of customer funds from the MF Global bankruptcy.  This is great for those who have money still tied up at MF Global.  Again, I like to stress the importance of having a solid reputable clearing firm that doesn’t engage in proprietary trading, investment banking, and other forms of conglomerate finance involving outside market risk.

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