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Grains close sharply higher

Updated: 08/12/2010 @ 1:48pm

CHICAGO, Illinois (Agriculture.com)--Off their session highs, the CME Group grain markets still close sharply higher Thursday. After turning lower, as traders attempted to sell today's USDA report, a rally ensued.

After reaching as high as $4.29 1/4, the Dec. corn futures settled 10 3/4 cents higher at $4.21 3/4 per bushel. The Nov. soybean futures contract closed 13 cents higher at $10.28 1/2 per bushel, reaching an intra-day high of $10.37 1/4. The Sep. wheat contract closed 18 1/4 cents higher at $7.13 per bushel, with a session high of $7.32. The Dec. soymeal futures closed $8.30 per short ton higher at $296.20, the Dec. soyoil finished 55 points lower at $41.83.

Joe Bedore, FC Stone's CME Group floor manager, says everybody tried to sell the USDA report, out of the box, thinking it was bearish beans for sure, a little bit negative for wheat, and for corn, people think it's a neutral number. 

"With the USDA putting the yield at 165 bu./acre, that might end up being the biggest number the USDA puts out. So, traders tried to press this USDA report and found it's not working. We have turned right around and everything has made new session highs."

Bedore adds, "This rally is not being led by funds, because they normally participate on the open and the close. They weren't there on the open. But, watch out for the close, the funds might be there."

Matt Pierce, Pitguru.com floor trader, says Thursday’s rally indicates people are scared about grain supplies.

“For the first time, even following the increase the USDA tacked onto average yields, people don’t believe the numbers,” Pierce says. “They don’t believe we have the old-crop numbers and they are starting to figure out we won’t have the U.S. new-crop corn acreage.”

With winter wheat plantings taking place right now in Nebraska, Kansas, Oklahoma and Texas, the U.S. is poised to lose massive amounts of corn acres for 2011. In addition, with cotton plantings increasing, corn acreage will be lost in the South.

“Investors are looking ahead of the game thinking the old-crop stocks might be fine, the new-crop stocks are a new ballgame with the U.S. having to make up for losses in Russia, France, Germany, Ukraine, and Kazikstan.”

So, there is a pull in the new-crop corn market, tipping off a huge speculative play going forward, he says.

To end the week, the market will be strong, Pierce says. “We are getting massive amounts of fund-money flowing into our markets. Purchases of five and ten thousand call contracts took place Thursday. These funds may be late. But, this could signal the next leg up on the rally across the floor.”

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