New life of contract highs for corn
Historical Price Trends: best odds for the week of June 9, according to our HPT page is for CBOT July wheat and soybeans. Over the most recent ten years, odds of 70% for lower wheat and soybean futures than where they closed on Friday of the previous week. On average July wheat 70% of the time has closed 9 cents lower and soybeans 7 cents lower. Please see the HPT page for the complete list for grains and livestock.
For The Week: for the week, July corn futures value increased 8.5%, July soybean futures value increased 6.8% and July CBOT SRWW value increased by 6.5%, July crude oil value increased 8.7%.
Conclusion: of key interest is CBOT and KCBT wheat futures were able to close above key pivot points. Viewed as positive but will reserve a degree of bullish enthusiasm until we have at least two more consecutive closes above the respected pivot point levels before suggesting a potential harvest bottom.
Corn Fundamentals: the combination of present heavy rains, week long forecast of more on the way, rally in crude oil, technical breakout and stout weekly export corn sales all are contributing to new life of contract highs for corn. A major east coast news publication released a story late in the week suggesting how investment money has not only funneled into the futures, options and indexes, but more notably outright purchasing farmland throughout the world, grain elevators storage facilities as well as vessels, rail cars and barges, and other hard assets. Food has come to the for front and investment funds smell the potential for opportunity. News wires report the Sec of Ag is watching wether very closely and well aware of current corn maturation. Could this statement by the Sec of Ag be the first stepping stone towards another policy change? Last Tuesday CRP was open for haying and grazing, it appears it may not be a big enough accounting arena to help support 2008/09 end stocks. Could the ethanol arena accommodate a much bigger accounting arena to shuffle some usage around to keep end stocks from becoming too tight? As we discussed last night...Bearish to corn is rebuilding talk of capping the renewable fuels standard on ethanol production of 9 billion gallons. Presently USDA has penciled in 4 billion bushels of corn to be used for 2008/09 production. If using a 2.65 gallons of ethanol production for a bushel of corn, USDA is estimating ethanol production of 10.6 billion gallons. IF the Energy and Agriculture departments were to pull in ethanol production by 1.6 billion gallons to a level of 9 billion, then USDA could reduce corn use for ethanol by 660 million bushels. At this juncture Allendale does not anticipate USDA/Energy Departments to take such drastic measures. China announced it has increased its 2008 corn production estimate from a level of 149 million metric tonnes to a new estimate of 154 million tonnes (6.06 billion bushels) for an increase of 190 million bushels.
New Crop Marketing: The total amount hedged as a percent of anticipated 2008 production is 25%. 6110 vs the Dec 2008 is key support, psychological resistance is 7000. We will monitor and alert when to resume hedges.