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Wheat was the day's downside price leader as favorable yield reports are offered by the Crop Quality wheat Tour trekking across the Plains. Yields are reported to be far better than last year and talk of a 380-410 Kansas wheat crop is being noted. The chair reaction of wheat selling led to corn and beans feeding on itself throughout the session as the Robo-traders sold relentlessly through price levels.
In hind sight I have mentioned in the past that the last day of the month/first day of the month is notorious for making a high or a low for grains and it looks like we are seeing a high again. I mistakenly thought the US dollar was going to break down this week and that the Chinese corn buying would keep selling at bay for awhile, thus grains could move higher into next week. That is wrong and now it is up to soybeans to promote rebounds in the grain complex to sell if soybeans have not finished the rationing process, or rumors that the FED wants to fire up the printing press.
Investors are factoring in the potential for the USDA to hike its yield estimates for the 2012 crop when it release its first measures of supply and demand for the 2012-13 corn marketing year next week. "In years where plantings are swift, the USDA usually up their yield estimates above trend for crops in the May crop report," said one analyst. The combination of early seeding and good soil moisture may also allow for early harvests in late summer. Yet, despite outlooks for supplies to grow after the next US harvest in the fall, current inventories remain at precariously tight levels, with strong export demand from China and limited farmer selling of supplies limiting selling in old crop contracts. The new dynamic in the corn market is that China will likely be a value of buyer of US corn from here forward and it will be interesting to see if the USDA goes "all in" or stays cautious about Chinese intentions in their initial estimate.
ADM's Chief Risk Officer said yesterday that he was "very concerned" about whether farmers will plant enough soybeans. His latest estimate on US corn acreage is a whopping 96 million acres, although he conceded that that could bleed back into soy acreage. He said that another 1 million acres of soybeans could come from double cropped wheat. As for what US yields will do this year, today's CommStock report noted that climatologist Dr. Klaus Wolter gives a 60% chance of El Nino. We have never had below trend-line yield corn production in an El Nino year. El Niño's don't necessarily produce bin busting record yields but the crops use the cooler summers provided by El Niño's. Most would be shocked by the yields that we could produce in a good weather year. South American crop production benefits from El Nino too. If we get a full El Nino the tight global stocks situation will ease.
The CME Group announced late yesterday it will expand electronic trading hours in its CBOT grain and oilseed futures and options beginning Monday, May 14, 2012. This will expand market access to 22 hours per day. Beginning, May 13 for trade date May 14, customers will have expanded access to CBOT corn, soybeans, wheat, soybean meal and soybean oil futures and options on CME Globex as follows: Sunday to Monday, 5:00 p.m. to 4:00 p.m. CT and Monday to Friday, 6:00 p.m. to 4:00 p.m. CT. Open-outcry trading hours will continue to operate from 9:30 a.m. to 1:15 p.m. CT Monday to Friday.
There is also rumors that CME and other grain organizations may ask to USDA to alter the time of their USDA crop/stocks/seeding reports to 10-10:30 AM CDT to allow full staffing and an open CME floor to handle the expected increase in volume. The last time the change in USDA report times occurred was back in the mid 1990's and it required an act of Congress to have the USDA report release to go from 2:00 PM CST to 7:30 AM CST.
Note on the US dollar chart, I thought we were going to fall out the bottom of the channel and it held. That is negative commodity prices, as became apparent in the last two days.
US Dollar Daily Chart
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