Corn versus Soy Spreads Rally

Published on: 07:05AM May 18, 2012


·         Grains mixed overnight; Old crop corn trading nearly 6.30 in the July contract this morning after posting lows in the 570s on Monday morning; Most of the spec longs have flushed out of the market, leaving room for significant upside based on extremely tight old crop supplies
·         Soybeans showing strength in old crop while November contract relatively soft; Old vs. new spreads trading to new highs yesterday
·         Wheat futures strong; Dryness in western wheat areas combined with some concerns in Russia inducing short covering
·         Corn exports came in at low end of analyst estimates yesterday
·         National Corn Growers Association asking regulators for 30 day waiting period prior to CME grain trading hours expansion
·         Some dryness emerging in areas of Corn Belt; Warm temps slated this weekend
·         Outside markets mixed this morning; Crude near unch with metals and equities higher; Currencies mostly flat
Fundamentally, nothing has changed in the corn market. Weather patterns are still mostly favorable while cash supplies remain tight. Technically, we believe that a good portion of long spec money was forced out late last week and early this week. The fact that many of these longs no longer populate the market opens the door for the rally that could have happened several weeks if not months ago. 
Old crop soybeans seem to have found some footing, however we believe that more downside is certainly possible in the November contract. Soybean acreage could increase as much as 2.5mil from March to final according to some sources. We can’t argue with this idea given the movement that occurred in the soybean vs. corn spreads from late November through last week.  
As always, call the office with questions or concerns.
Joe Vaclavik
(312) 462-4438