June 30, 2008
July corn: 724 3/4 down 30
Dec: 757 down 30
I said we'd probably see a limit move today, and that's what we got. Elevators are taking 5 to 7 cents protection this afternoon. Limits will expand to 45 cents tomorrow.
The report was bearish for both the supply and the demand sides of the balance sheet. The USDA estimated planted corn acres of 87.327 million, which was 1.666 million more than the average trade guess and at the high end of the range of trade guesses. Quarterly stocks of 4.028 billion bushels were 134 million bushels above the trade guess, and indicate demand destruction.
As expected, traders are second-guessing the report, but the market is going to trade the numbers even if everybody knows the numbers will be revised, because it is the most current information we have. After gathering most of its data in the first 2 weeks of June, the USDA surveyed another 1150 producers in 6 states to get a more accurate picture of how many acres are out there, but they realize that a more extensive survey needs to be done a little later. They intend to survey about 9000 producers in mid-July in order to provide a more accurate picture in the August crop report. And even when ewe get a better idea about planted acres, we'll still be guessing about abandonment and yields.
Funds were heavy sellers today, weak longs are scared, and the potential exists for this sell-off to snowball in the short-run. On the other hand, if few people panic then we could see the market stabilize in the morning. Last week's low of 738 basis Dec is going to be a target for the bears, because there will be stops under that point. My best guess is that we'll see the market take out those stops and then try to come back up again.
No change in strategy. We have 50% coverage with put options, and will look to add on weather scares in July and August.
From John Dee's morning forecast:
"A NW flow aloft will bring a few cold fronts through the Midwest in the next week to ten days, but the fronts only look to produce light to moderate rains. The NW flow will also provide for a stress free temperature setup across the Midwest in the next week to ten days."
The national average basis was a penny lower, at 50 under July.
Export inspections of 39.6 million bushels were above the high end of expectations. Cumulative inspections are running 16.2% ahead of year-ago levels, compared to 16.3% ahead last week. The USDA projects exports will be up 12.9% this marketing year.
Today's crop conditions ratings show improvement, with 61% rated good to excellent compared to 59% last week. This is in line with expectations. Three percent of the crop is silking, compared with the average of 9%.
That's it for now!
Jeff
The information contained in this letter, while not guaranteed as to accuracy or completeness, has been derived from sources believed to be reliable and arrived at by careful consideration. Losses as well as profits are possible, and market conditions can change rapidly. Any trade recommendations included in this letter are the opinion of the author, therefore the use of this information and advice is the sole responsibility of the user.
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