EHedger Afternoon Grain Commentary 3-21-2012
Mar 21, 2012
Grains closed the day mixed with large intra-commodity spread swings. May corn finished 5 ½ cents lower at $6.42, May soybeans up 10 cents at $13.55, and May wheat down 6 ¼ cents at $6.36 ¼.
The market is back to selling corn and buying soybeans. The new crop corn-soybean spread reached a level we haven’t seen for over a year today at 2.37 to 1. I have included a chart below to show how far soybeans have come back against the price of corn. Soybeans are trying to do all they can to hold or even gain acres this year. Ultimately weather has been extremely mild and will likely encourage early or on-time planting for corn especially. Last year we had 10.551 million acres in prevent plant and we also have roughly 1.5 million acres coming out of CRP. We think corn could easily get 95 million acres and soybeans over 75 million. If we have a somewhat normal growing season this will certainly help us replenish stocks for next year, will the prices be able to hold?
The recent bullish mentality seems more related to old crop stocks as well as the potential for more demand out of China. Currently, we don’t see near term export pace raising enough for the US carryout to drop significantly on the next WASDE report. We did see a minor uptick in crush on the last crush report. If anything the market has done all it can to ensure that soybeans will gain/hold enough acres in the US to help cover any shortfalls that the South American crop had after this year’s weather related problems. Until then, World stocks-usage rates have not gone down significantly as we don’t even have a definite South American production number just yet. With soybean volatility still running at a relatively low level, hedging using the old crop options may not be a bad idea.
Tomorrow’s export sales expectations are as follows:
Corn: 700,000 – 1,000,000 MTs
Soybeans: 900,000 – 1,300,000 MTs
Wheat: 350,000 – 650,000 MTs
We expect March to continue to be a volatile month as traders gear up for the Planting Intentions report and Quarterly stocks data. If you have any questions or would like to open an EHedger account, please contact a broker today by calling 866-433-4371. Thanks and have a great week!!!
Chart: November Soybeans/December Corn Ratio