The grain markets got on with their rally again today with corn, soybeans and wheat all trading firm throughout the day. While the rally looks to some to be nothing more than a bear bounce, there is no question the buy-side hedgers appear to be taking advantage of the USDA’s price-moving gift.
Chinese corn buyers made news again Thursday when the USDA reported that China bought 540,000 tons since Wednesday morning, and the expectations of China importing 8 to 10 million tons of corn during the next U.S. crop year is looking more plausible. While we suggest that feed buyers hold on securing prices for the new crop, it is advisable to own more old-crop corn.
News made its way around the market that the Senate has agreed to end the ethanol blender tax credit, as well as the import tariff effective at the end of the month. Obviously, the market shook this news off rather quickly though this does appear to be a very real run at enacting this into law — not the window-dressing of a few weeks ago. It seems unlikely that despite the removal of the import tariff that Brazil would be able to import much ethanol, as they are experiencing a shortage of both ethanol and sugar for production.
Goldman Sachs continues to be bullish on most commodities, expecting further increases in commodity returns up into 2012 thanks to widespread demand growth. They particularly like November 2011 soybeans, reiterating their long position in the key new crop contract due to further tightening stocks.
We look for corn to open 4 to 7 cents higher and soybeans to open steady to 3 higher.
Daily CME spot market prices:
Block cheese: $2.11 (unchanged)
Barrel cheese: $2.1025 (up 0.25 cent)
Butter: $2.035 (down 0.5 cent)
Grade A NFDM: $1.625 (unchanged)
These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. Commodity trading is risky and FCStone Group, Inc., International Assets Holding Corporation, and their affiliates assume no liability for the use of any information contained herein. Although all information is believed to be reliable, we cannot guarantee its accuracy and completeness. Past financial results are not necessarily indicative of future performance. Any examples given are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. References to and discussions of exchange traded products are made solely on behalf of FCStone, LLC. References to and discussions of OTC products are made solely on behalf of INTL Hanley, LLC, and OTC products are only available to eligible counterparties.