July corn closed with a double digit loss while July soybeans had a double digit gain. The heavy bull spreading of soybeans is related to the strong export demand. Corn planting delays are still a market concern despite today’s selloff. At the same time that extra precipitation is helping the subsoil moisture problem. Our outlook remains the same. We want to stay hedged and look to buy some short-dated calls to help protect the upside should spring problems persist.
Export sales were better than expected for wheat, at the high end of expectations for corn, and middle range for new crop soybeans. We did see an additional sale announcement for new crop soybeans on the 8am announcements. The old crop bean sales were 339,400 MTs or 12.47 million bushels, well above what was needed to keep pace with the USDA estimate. In fact, we are less than four million bushels away from meeting their estimate of 1.350 billion. We still have 108.5 million undelivered bushels some of which may end up getting rolled to 2013 before it is all said and done. Still, we are in a very tight old crop situation and that is why futures and basis are holding strong. What is surprising is the fact that European countries are still purchasing US soybeans, South America will obviously have to pick up most of that business very soon or else we will have to see more price rationing. With a huge South American crop this year, we should see a "long tail" of exports that will compete with our new crop.
May corn had the largest selloff today without much "market talk" as to why. This could be from large funds selling their bull-spreads ahead of first notice or some other reason we aren’t aware of yet, either way it certainly led the rest of the contracts lower and we have to watch out for signs of long liquidation.
Planting delays are expected to keep us well behind pace on Monday’s crop progress report. However the planting delays ultimately affect yield, they certainly affect sentiment. If the planting delays continue into May the markets may get antsy and start putting additional premium into prices. For this reason we want to protect our hedges using the short-dated new crop July calls. For more details on our current hedging strategy, please sign up for our newsletter using the link at the top.
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