Walsh Commercial Hedging 10/31/12
Oct 31, 2012
At around 10:00 this morning, the grain complex awoke from its 4 day forced holiday and shot up across the board. End of month speculative fund buying, technical buying, and firm cash markets all supported the complex today. Also, a report from Argentina saying recent heavy rains and water logged soils could cut projected corn production 20% and soybean production 10% added support. Currently, the USDA is projecting Argentina corn production at 28 million tonnes so a 20% reduction would reduce the crop down to 22.4 million tonnes. Of course the situation in Argentina needs to be watched closely but conditions are expected to dry down into the weekend and Argentina corn planting is usually completed by November so there’s still time. December corn finished the day up 14 cents at $7.55 ¾. Yes, it was great for the bulls today, but in my opinion I wouldn’t get overly enthusiastic until it can get past that $7.76 mark made on October 11th. Negative ethanol margins and continued weakness of exports might keep a lid on that happening. The weekly Crop Progress report showed 91% of the US corn crop harvested but of greater importance was Ohio and Pennsylvania each showing they were only 64% harvested before Hurricane Sandy slammed into them with torrential rains and winds. Indiana managed to get 81% of their corn harvested before the rains and wind hit. For soybeans, Ohio farmers managed to get 79% harvested before the storm. From what I’m hearing from producers in Ohio, the storm did a lot of damage to their un-harvested corn crop and my thoughts and prayers are with them. December wheat finished up 8 ¼ at 865 but 10 cents off their highs as traders took profits and after it was announced that US wheat wasn’t included in Egypt’s 300,000 MT tender which was pretty much expected given the cheap offers out of the Black Sea continue to be bought by Middle East customers. However, winter wheat conditions came in at only 40% gd/ex which might add some support to the wheat market. The trade was expecting gd/ex ratings to come in between 45%-50%-similar to last year. Kansas really needs rain bad. Only 37% of their HRW wheat is rated gd/ex. January beans finished up 12 ¼ at 1548 ¾ after a weaker trade in the morning session after ABN Amro put out 500 soybean receipts overnight. The report from Argentina and heavy rainfall in South Brazil has some in trade thinking there could be a substantial cut in South American soybean production which added the support. However, in my view it’s still too early in the planting season to suggest any substantial cuts will be made in production but of course one should keep a close eye on the ongoing weather in South America.
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