Morning Note - From Country Hedging's Joel Fitch 7-12-2012

Good morning,

Markets are rebounding after yesterday’s report.  Again for the corn it felt like the USDA was being pretty realistic for what we know.  On the beans I think that they are underestimating old crop exports and could be underplaying new crop demand.  Little more bullish wheat news out of Russia as the Stavropol region is worse than previously estimated. 

Weather today is dropping some moisture in the Delta and up into Tennessee.  There could be light chances in IL, IN, and Kentucky, but Friday is the more likely chance to get anything.  It feels like it only really matters for the beans in a lot of locations.  The 1-5 and the 6-10 are still for above average temperatures and for limited chances of rain in the ECB.  The delta should be improving with the weather pattern. 

Estimates for the corn crop are now ranging between the high 130s and the low 140s.  As we continue to tighten the corn market I think that there is more potential demand to ration.  We traded a good portion of last year with a carryout of near 800 mb and traded below the current corn price. 

Corn spreads have become quite minimal with the tightening of the supply.  This market should invert shouldn’t it.  Especially for the western corn belt, you are going to have to manage with inverses or at least very limited carries.  Depending upon profitability of the ethanol industry corn should want to move East more than usual with Chicago Beyond and the river being a good market.

Export sales were good for old crop soybeans again, we just haven’t stopped demand at these prices and that suggests that new crop demand could be stay robust at these prices as well.  Corn sales were okay 173 tmt old/ 492 tmt new.  Wheat was 312, kinda poor. 

Joel Fitch
Market Analyst
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651-355-3792
www.countryhedging.com