EHedger Afternoon Grain Commentary 8-18-2011
Aug 18, 2011
Today grains traded lower along with the sharply lower outside markets. December corn finished 12 ½ cents lower at $7.13, December wheat down 18 ¾ cents at $7.39 ¼, and November soybeans down 5 ¾ at $13.61.
Right now the story is still Demand destruction versus supply concerns. Weekly sales today were poor for corn and we continue to see this week after week. Ethanol has obviously plateaued, if it weren’t for exports to Brazil we would probably see further reductions.
The weekly export sales were out this morning and are as follows (in 1000 MTs)
Estimated Range Actual
Corn: 600-1250 523.8 (poor)
Soybeans: 400-900 421.5 (fair)
Wheat 400-700 548 (as expected)
Supply concerns have obviously been high enough lately to keep the price well supported since we are just one day off the contract highs. Rains are expected to be favorable in the short term. It all depends on where the national average yield goes from here. Currently for corn it is set at 153 by the USDA which is well below the trend. If you look at the last 7 of the 8 times the USDA has dropped the August yield estimate significantly, the final yield ended up being MORE than the August projection. The point is many analysts are still expecting further final yield reductions which may end up being the case, but we have to remember that the USDA has a history of overestimating these reductions when it comes to the August reports.
With the Dow Jones having another 500 point swing today it looks clear that the market isn’t ready to drop the volatility just yet. We want to stay in sustainable positions and stay well hedged at these levels.
Please call your broker if you have any questions.
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