Choppy Trading Continues

Grains dipped lower overnight as the slog thru choppy trading continues. S&P futures and crude oil were modestly higher after Tuesday’s sharp sell-off.

Yesterday saw some fresh highs in soybeans with front-month March trading as high as $8.89, its highest price since mid-December, before backing off into the close at $8.85. Weather models overnight increased the chance of rain for Argentina next week. The current week’s weather is expected to be dry, so next week’s rain forecast will be important in preventing crop stress going into mid-month.

For corn, trade continues to be extremely limited between $3.73 and $3.64 with most of the volume in the past two weeks around the $3.70 mark. Today’s ethanol report is expected to show a modest recovery in weekly production as well as higher ethanol stocks after last week’s sharp drop in both measures. Ethanol margins have improved in the past few weeks, but are likely hovering below break-even when all costs are considered. Yesterday, ADM posted weaker than expected earnings, blaming ethanol as one of the limiting factors in company profits.

In crude oil, yesterday the API reported a +3.8 mil build in crude inventories, +6.6 mil in gasoline, and +0.4 mil in distillate. This morning, U.S. private employers added 205,000 jobs in January, above economists' expectations, a report by a payrolls processor showed giving stock futures a modest lift going into the opening bell.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a dba of Foremost Trading LLC (NFA ID: 0307930)

—Kevin McNew