New crop corn and soybeans closed with double digit gains on Friday as many traders covered shorts ahead of the weekend. Bear-spreading was very prevalent in both corn and soybeans before and during the Goldman Roll today.
Many longs are rolling up to the new crop contracts for timing reasons as well as concerns of lower 2013 corn and soybean production. Our thoughts remain the same, we believe there will be some acres lost to prevent plant and some switched to soybeans but even if we lose a few million acres of corn there is still a chance for a large decline in price when it is all said and done. In short our reasoning is based on demand and yield. We have had three poor growing years in a row and demand has suffered. In our opinion, the USDA’s feed demand estimate was well overstated on the last monthly Supply and Demand report in May. By overstated we are about 700 million bushels apart. Probably the only reason the USDA used that demand number is because they were looking at such a large supply they had to offset in a reasonable manner. Their next report will be released next Wednesday, June 12th. We have not yet seen the average analyst estimates polled by Reuters or Dow Jones but it will be interesting to see how much yield and acreage each firm decides to use. These price surges have left the shorts rather skittish from taking on the risk without knowing more about the crop development. If crop conditions come in fair on Monday it could be a very different story. We will have to see what they say on Monday afternoon at 3pm CST. Have a great weekend!
July Corn: Touched the 100 day moving average and filled most of the gap but couldn’t get back to $6.76.
November Soybeans: Closed at fresh highs for the move. Not much in the way of technical resistance between here and $13.50.