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CME Group wheat closes sharply higher, corn disappoints

08/01/2010 @ 11:00pm

CHICAGO, Illinois (Agriculture.com)--As the CME Group wheat market reaches 22-month highs, the corn market has a disappointing close Monday.

The Dec corn futures settled 2 1/4 cents lower at $4.04 1/4. The Nov. soybean contract settled 5 cents higher at $10.10. The Sep. wheat futures closed 31 3/4 cents lower at $6.93 1/4. The Dec. soymeal futures contract closed $0.70 per short ton lower at $289.30. The Dec. soyoil futures contract finished 62 points higher at $41.17.

In the outside markets, the NYMEX crude oil is $2.31 per barrel higher, the dollar is lower, and the Dow Jones Industrials are up 193 points.

The dollar has dropped 7% in the past few months and the traders say another leg down is possible. The crude oil market is surging higher. And today, at least, the Dow screamed higher. All of these factors are very bullish for commodities.

Separately, a Joe Bedore, FC Stone Inc. floor manager, says the corn market's close was very disappointing. 

"The market knows Russian losses could be around 40%. The question is how much more loss is possible? Someone in this industry should be able to figure out the extent of further losses. Are there going to be 50-60% losses? If so, this market is not done rallying. I feel bad for those that bought this corn market at $4.17, they are getting waxed. 

Bedore says the other thing to watch is the import activity of Russia. 

"Will Russia import wheat, corn, etc, because of this drought? The market needs more answers to determine a more definitive direction. Some are scratching their heads, wondering just how bad Russia's problems are because they exported wheat to Egypt over the weekend for a lower price than other countries. Now wait a minute, do they have a supply problem or not? If Russia keeps exporting, this rally is over," Bedore says

Tim Hannagan, PFGBest.com senior analyst, says the grain markets continue to go as high as it's dry over domestic and foreign grain producing ports. 

"This week has light rains over our eastern Corn Belt states of IL, IN, and OH where crop conditions are lowest nationaly. Total rain fall is .10 to .50 inches. The bigger news is high heat and lack of rain across the massive Russian grain prairies look to continue another week threatening wheat and small feed grain production. This lends more talk of eventual increases in U.S. exports to fill the hole in production," he says.

Meanwhile, one CME Group trader, requesting to remain anonymous agrees the markets are rallying on continued bad weather in Russia, the former Soviet Union (FSU), Germany/Poland, and too much rain in Ukraine. 

"The region of concern exports 50 million tons of feed grain/wheat and they have lost between 25 to 30mmt of production. The fear is they may also put export controls on. Last night, the Moscow forecasts had 95-105 degree temperatures for the next five days. So, the problem is not over. It's dry in western Australia, dry in Mato Grosso, Brazil, but it's winter there. All cases raise concerns, given the sharp reductions already incurred in the FSU." 

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