Thursday, August 20, 2009

An extremely quiet session today with light farmer selling and traders debating US crop prospects. Ongoing Pro Farmer tour finding generally favorable conditions in Iowa and Minnesota. The crop tour is estimating some areas of the Iowa to be up as much as 45 bu/acre from last year while USDA forecasts statewide corn yields up 14bushels from last year in Iowa. Traders continue to assess the impact of late developing crops but since it is still 45 days from a normal first frost date in most of the corn belt the discussion isn't at the forefront of conversation yet. The most recent USDA crop condition report shows this crop as the second least developed in 25 years so this will continue to be a topic of discussion obviously. The market will also continue to debate the impact of the change by CFTC to impose smaller limits on index fund holdings of Ag commodities as mentioned yesterday this could lead to liquidation long futures positions (up to 22,000 corn and 11,000 of wheat) in the next two months.

The bean complex spent the bulk of the day trading around unchanged on light volume. Export sales were supportive for beans at 274,900MTs of old crop and 583,100MTs of new crop with meal sales at 110,800MTs of old crop and 45,500MTs of new crop. Oil sales saw net cancellations of 12,300MTs (S.Korea cancelled 9k and Mexico rolled 3.5k into new crop) of old crop and positive sales of 5,300MTs in the new crop position. The USDA also announced the sale of 165,000MTs of new crop beans to China on the dailies. However with a benign weather forecast and tepid outside markets there just wasn’t any get up and go to the bean complex today and prices soon settled into a two sided trade.

The markets in general seem to be stuck between a rock and hard place with little room to move. There just is little in the way of selling being seen right now due to the fact that the farmer is holding on to grain and the commodity funds are unwilling to add to shorts until the technical’s tell them to. The upside is limited by the nearly perfect growing conditions we are currently seeing as the rains over the past 48 hours as the market has perceived that the moisture situation has been taken care of. There is not much concern about hot weather either as that is something most would look forward to at this point. Still the crop is running behind but we have been well aware of that since planting. The bulls continue to hold on to the hope that we may have an early frost but until we see that on the maps, the market does not seem to want to bite.

Phil Farrell