Walsh Commercial Hedging 5/22/12
May 22, 2012
Good afternoon. The complex witnessed a volatile “Turnaround Tuesday” trade on a technically overbought wheat market, good crop progress/ratings, and a favorable mid-day change in the 6-10 day forecast. July wheat finished down 18 ½ at 685 ½. July Kansas City Wheat was 13 ¾ lower and settled at 701 ¼. The weekly Winter Wheat Conditions report showed that 43% of the crop was rated good/excellent compared to 52% last week and 32% last year. The Kansas crop drop was seen as the largest one-week drop in 4 ½ years. However, traders believed that the current rally in wheat was already priced into the market. July Kansas City wheat was already up more than a $1.20 from its lows on May 14th before today’s sell off. Also, the Spring Wheat planting report showed 99% of the crop is planted compared to 94% last week and 50% last year. There is some rain in the forecast for Southern Russia and southern Volga Valley region but hot and dry weather is also in the forecast. Many in the trade believe that the rains might help stabilize the crop temporarily but many believe that irreversible damage has already occurred with the dry spring. July corn finished down 31 ¾ at 601 ¼ and new crop December corn down 15 ¾ at 524 ¾. Rumors of a weaker basis at the gulf and reports that fund traders were sellers of nearly 25,000 contracts helped encourage the sell-off in old crop corn. Also, traders were unwinding their old crop/new crop corn spreads. New crop was pressured on news that the freshly planted US corn crop is 77% good/excellent condition. Also, in the 6 to 10 day forecast, “the GFS showed extensive coverage of the Midwest, eastern Plaines, northern Delta, and Southeast, as the central and southwestern Midwest turned wetter and the northern and western Plains and Canadian Prairies were drier on this update. The 11-15 day period continued to show a notable wetter trend in the central and eastern Midwest from the remnants of the 6 to 10 day system.” July beans finished down 31 ½ at 1381 and new crop November closed down 25 at 1281 ¼. The sharp drop in wheat and corn plus news of a record fast soybean planting pace coupled with the better mid-day forecast sparked long liquidation by the funds which still hold a big long position in the market. As of May 20th, a record 76% of the soybean crop was planted. All in all, as we saw today in the trade, the trade is keeping all eyes on the weather as forecasts can change daily.
Give us a call to see how we’re protecting our producers in these volatile markets at 800.993.5449 or email us at email@example.com
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