EHedger Afternoon Grain Commentary 10/1/12
Oct 01, 2012
Soybeans closed sharply lower to start the week, month, and 4th quarter. The November contract settled 40 ¾ cents lower at $15.60 ¼. Wheat also had double digit loss with the December contract closing 18 ¼ cents lower at $8.84 ¼. December and March corn were the lone contracts to finish green closing a ½ cent higher at $7.56 ¾ and $7.60 (respectively).
Interior soybean basis levels fell sharply today which contributed to the selloff. Harvest is progressing and cash beans are making their way to market. The market consensus seems to be that we will raise the national average yield as well as harvested acres. Given the fact that we just had a stocks report show an additional 39 million bushels in old crop beans also isn’t helping the bulls. But let’s assume that the USDA does increase available bushels by 200 million. Over the past 5 months we have cut 616 million bushels off the original 2012/13 demand estimates. With the buying pace China has set we could easily replace 1/3rd of that lost demand with that extra 200 million bushels. Though I want to stay hedged, I don’t believe that the price of soybeans can continue falling at its current rate unless bean yields are substantially higher than the current expectations. Soybeans are now 41% harvested and the good-excellent rating was left unchanged from last week. This is a faster harvest pace than the market was estimating.
Corn has a really bullish supply story, but is the demand going to pick up? Last week the USDA shocked the market with an old crop corn carryout less than a billion bushels. In response we had a limit up settlement and strength coming into today’s session. Corn is now 54% harvested and the good-excellent crop rating went up 1% to 25%. Now that we are past the 50% harvested mark this may be a trigger point for market participants to start looking for a harvest low. We just need to start seeing export demand pick up for any sustainable rallies. Last week we had a dismal 400 MTs… total! Today we saw an option origin purchase of 100,000 MTs to Mexico. We need to watch the Thursday sales reports for direction as well as the next WASDE report which will be released on October 11th.
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