Corn: December corn settled down 12 cents at $4.67, which, if you are keeping score is a 33 month low settlement. CZ posted a 33 month low at 4.60. From the contract high of 6.65 posted 9/7/12, today’s low punctuates a $2.01 loss in value, or 30% of its value. Traders turned their noses up at what were good export numbers. Old crop sales were 134,000MT and new crop came in at 1,072,200 MT for a combined 1,226,200 MT net which came in above the range of expectations. Despite this friendly fundamental news, corn continued its swoon. Funds, which are short for the first time since 2005, added to their winning position and sold more contracts as we began the month of August. Bulls noted that western Iowa received less than 50% of their normal July rains. Bears noted pictures on the wire of 13-foot corn plants in Michigan. CZ has support at $4.60 followed by $4.44 and then $4.18. The old psychological support at $5.00 is now resistance above. FC Stone estimated corn national average yield of 157 bushel/ acre and a production of 13.993 billion bushels. Hedgers: We rolled down puts again today, taking money off the table as it fits our risk/reward parameters. We remain 50% sold of 2013 insured bushels at a board price of $5.99 ½.
Wheat: December Chicago wheat settled down 6 ½ cents at $6.70 1/2. KC December settled up 1 cent at $7.18. The WZ-CZ Chicago wheat corn spread traded above $2.00 today at $2.03 ½, which is the widest that spread has been in 3 months. Weekly export sales were combined 576,700 MT which were near the upper end of estimates which had been for between 500K to 700K MT. Brazil has bought 400,000 MT of US HRW wheat and is looking to buy more. China also has been a buyer and should continue to be buying dips. Hedgers: If you are selling wheat here, make sure you re-own at least 50% of those bushels with December calls. This market has been oversold for quite some time and a December option gives you 112 days of upside participation.
Soybeans: November beans settled down 13 ¾ cents at $11.92 ½ which is a new low close for the year as well as the lowest settlement in 14 months, going back to June of 2012. Exports today were well above expectations. Old crop sales were 78,500 MT and new crop came in at 1,030,900 MT, for a combined 1,109,400 MT. Despite this good fundamental info, the market sold off again. Rumors that China bought 3 to 4 cargos of US new crop bean remain unconfirmed. Today’s low at $11.89 came within a hair of the 11.86 ½ low posted April 24th. A settlement below that low opens up the door down to $11.00. FC Stone had a national average yield of 43 bushel/acre and production at 3.309 billion bushels. Hedgers: No change in recommendations. We remain with our cash sales of 60% of insured bushels with an average sale price against the board at $12.96 ¼.
The first day of August was painful for grain bulls. Funds added to their winning short positions and putting pressure on the corn market. While they remain net long about 90K contracts of new crop beans, if they decide to flip and get short, I can’t imagine who is going to step in and take the other side of that tidal wave. Since 2005 the funds have been the producer’s friend, basically playing the long side.
For the last 6 months we have had reports of more hedge funds and large banks leaving commodities. Instead, they have been moving back into equities, and we see evidence of that with the Dow and S&P 500 trading to fresh all-time highs here today. Fund interest in being long commodities since 2005 helped give producer’s great marketing opportunities. If the trend of funds being less interested in trading commodities holds up in the future, producers may one day be pining away for their return to the long side.