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Grain Hedge: Volatile Weak for Macro Markets, Grain Hold Tight

Grain Hedge: Volatile Weak for Macro Markets, Grain Hold Tight

20 April 2013

US - The Dow Jones Industrial Average, gold, and oil all fell sharply for the week. These macro markets were mostly driven by worse than anticipated Chinese GDP and by weaker than expected domestic economic indicators.

Grain HedgeThe grains have held relatively firm this past week with soybeans actually putting together a solid rally. Weather and demand concerns persist, however.

Corn was not immune to the volatility of the outside markets. After experiencing several large price swings, the grain is only down about 16 cents on the week.

Wet and cool weather continues to hamper significant planting progress and the weekly crop progress report showed the planting pace about 5 per cent behind normal for this time of year. Better opportunities to plant should come near month’s end.

Demand is still a concern and Friday the China National Grain and Oilseed Information Center estimated a reduction in corn used for feed by about 2 million metric tons. Old crop export sales were reported as 400,300 MT, which was on the high end of expectations.

Soybeans have had several positive sessions in a row and are up about 18 cents overall on the week. Supporting this market is the continuation of logistical problems in South American. It is rumored that another dock workers’ strike will likely happen soon.

The grain producers have been reluctant to sell as a safe guard against inflation. Commodity following funds has been purchasing contracts this week and today another 7,000 contracts were bought on net. Export sales were reported as 339,400 MT for ‘12/’13 and 227,400 MT for ‘13/’14.

Wheat continues to find support from the psychological support level of $7. Several times this past week the grain has dipped below that level only to return higher soon after. A freeze concern for the Southern Plains has also lent support.

Although some damage has been done to the winter wheat crop, the USDA left the good-to-excellent ratings unchanged at 36%. The full extent of the demand is yet to be seen, however. Export sales were excellent again this past week with 552,100 MT for ‘12/’13 and 1,122,600 MT for ‘13/’14 being reported.

The macro markets have been rocked this past week, but little to no demand has been done to the agricultural commodities. Concerns remain about China’s economic growth and bird flu fall out; while domestically economic indicators are weaker than previously thought. Planting delays are not a major problem yet, but if the precipitation and cool temperatures persist, problems could arise.

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