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July 1st, 2011. 7:33 am cst PDF Print E-mail
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Friday, 01 July 2011 07:18
As of last trade, about 70 cents per bushel has been cut out of 2011 Corn futures since yesterday morning.  September and December (constrained to limits yesterday) have broken through second quarter lows with this morning's gap open.  If we get stuck at todays daily limit of 45 cents, the next stop will be March 16th lows, which were defended remarkably well by the July contract yesterday. Considering most every trading house was expecting 1 to 2 million acres less than what was reported yesterday, this washout might take some time to clear through the system.  In fact at one point over 25 million tons of Corn was offered in September at limit down yesterday.  Ask yourself, who would be doing that type of selling? A producer that can simply wait this time period out? Or by traders that are forced to liquidate at all costs.  Don't get me wrong, the blood was in the shark tank and the pile on effect was in full force yesterday by everyone, but this appears more of a paper surplus than a product surplus at the moment.  Today marks the beginning of a new quarter, and for large scale institutional investors, we will see both redemption's and deposits.  With a weak dollar my vote is more of the latter.  Those looking at redemption, recent gains have been muted.  With respect to the Corn market, the 2nd quarter looks like it never happened.  For the Crude Oil market, Jan 1st and this morning's price are just pennies apart.  Steady doesn't necessarily mean bear, but it also doesn't mean that the bull is dead.  Sick pen yes, dead no.

Milk futures were down as much as 40 cents following the release of yesterday Acreage report.  With producer profit margins gaining some traction, traders liquidated longs and initiated shorts across deferred contracts, despite the near $3 discount to spot pricing.  August through December futures would close 20 to 32 cents lower.  Second half average now stands at $18.30 per cwt, down 59 cents from its high on June 1st and up $1.02 from the first day of last quarter.  The same type of speculative pressure that grains saw yesterday is not to be expected in the milk markets.  Funds have repeatedly disregarded the option to include dairy into speculative portfolios due to futures illiquidity and the wild west cash markets.  Corn is priced off of the front month futures.  Everyone participates.  Milk is priced off of essentially Cheddar cheese.  Im not saying funds cant come in and buy warehouse receipts and control the milk markets, but that day hasn't arrived yet.  With that said, dairy is also not expected to be on an island during this madness.   It for sure has its own set of problems to deal with going into the long weekend.  Contacts are telling me that cheese, other than the type found at the CME cash market, is being offered at steep discounts to the board.  Mozzarella in some locations is being offered more than a dime under CME spot price when it more normally trades 5 to 10 cents per lb over.  Inventory dumping is a phenomena that tends to be contagious in the Dairy markets.

August Class 3 up 5 to $19.12
Sep Corn down 45 to $6.03 per bushel
August Crude down $1.02 to $94.40

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Ronald K. O'Brien II
RKO2 Futures & Options LLC
Office:(305)960-7890

*This report includes information from sources believed to be reliable and accurate as of the date of the publication, but no independent verification has been made and we do not guarantee its accuracy or completeness.  Opinions expressed are subject to change without notice.  This report should not be construed as a request to engage in any transaction involving the purchase or sale of futures contract and or commodity option thereon.  The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition.