Heavy Bullspreading Leaves Markets Mixed

Published on: 16:31PM Jun 05, 2013

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Old crop corn and soybeans settled higher while the new crop contracts had double digit losses.  Ethanol production was strong today and the tightness of old crop soybeans continues to provide underlying support to the July and August contracts.  Informa lowered their wheat production estimate to 1.494 billion from 1.529.

We continue to get market reminders of the tightness and positions of old crop soybeans.  The sharp moves in the July – November spread could be from certain market players caught short.  When July – Nov hit the high on May 23rd it was on rumors of Chinese crushers caught on some un-priced basis contracts.  Today we didn’t hear much for rumors and it may be the market is running the shorts in without a large supply available for delivery.  Take a look at the July – November soybean spread in the chart below:

July – November Soybeans

July - November Soybeans

December corn is back to the 50 day moving average.  If this level is breached overnight, the next downside target is the gap fill of 5.36 ¾ (see chart below).

December 2013 Corn

December 2013 Corn

The next major report will be the WASDE on Wednesday June 12th at 11:00am.  We expect corn option volatility to remain above 30 between now and then.  Soybean volatility is near 24 percent which is well above the 50 day moving average of 20.21.  Generally I would say these levels are relatively high which means options are a little pricey.  If you need to buy price protection we can look to offset these premiums using collar strategies and other forms of short options *note these can be marginable.  For now we want to stay well hedged going into the summer timeframe.  For complete hedge recommendations please sign up using the link provided.

Crop Progress:

Corn is now at 91% planted compared to 95% on average at this time.  Soybeans are 57% planted compared to 74% on average.  Corn’s crop condition is 63% good-excellent and 74% emerged.

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