February 22, 2012
By: Craig Haugaard, Grain Origination Manager
CORN: 3 lower
REMARKS:
With the Ag Forum quickly approaching the cold reality of what that event will probably show us hit the market like a deluge of ice cold water yesterday. If there were any bullish embers burning yesterday they quickly gave way to the overwhelming fear that on Friday we will have the government predict a carry-out somewhere north of 1.5 billion bushels. Should that turn out to be the case in reality by harvest time we will in all likelihood be experiencing prices at least a dollar lower than today’s levels. It is disconcerting that the market fell as hard as it did on a day in which fear and uncertainty around the world drove crude oil prices up over $2.50/barrel. As you will see on the following chart crude oil (black line) and corn (red line) have generally moved in tandem
As noted yesterday, all three of my technical indicators are bearish both old and new crop corn and obviously yesterday’s action did nothing to change that.
SOYBEANS: 5 lower
REMARKS:
The funds dumped about 12,000 corn contracts yesterday but they were the buyers of 2,000 soybean contracts. I read an interesting article by Oil World yesterday in which they said that the final production number in Brazil may very well be below the recent 69.5 MMT that they forecast on February 14. The sentence that was the standout in the article for me read, “This is likely (the South American drought) to reduce world soybean production by 18 – 19 million tonnes from last year, thus creating a significant global production deficit.” We certainly do live in interesting times. We are seeing he corn/bean ratio start to act like it should. As you will see on the following chart the spot futures have soybeans trading at 2.02 times the price of spot corn futures while the November bean futures are trading at 2.24 times the price of December corn (red line).
My technical’s are unchanged in that all three of my indicators are bullish the old crop and two of the three are bullish new crop. The resistance level in the November futures continues to be $12.74.
WHEAT: 1 lower
REMARKS:
Here is an interesting tidbit of information. Russia has 165.9 million hectares of “ag” land and darn near 25% of that is currently not be used. Guess what they plant a lot of in Russia? Hint – there is a reason I am sharing this tidbit in the wheat section. I also see that our neighbor to the north is planning on planting 10% more wheat this year. Here in the USA wheat acres are up as well. I will grant you that the crop in the FSU has been damaged, especially Ukraine and Kazakhstan. The general belief, however, is that the crop that was lost there will more than be made up for from other nations. Of course if we ever see real attractive wheat prices come back we have all that unused land in old Mother Russia that could come back into production if the price is right. That is a nutshell was the talk in the trade yesterday and that is why we closed lower for the day.
Technically, not much has changed. In spite of yesterday’s action in the Minneapolis spring wheat all three of my indicators are bullish while in the Kansas City winter wheat all three are bearish.
The information contained above was taken from sources which Wheat Growers believe to be reliable, but is not guaranteed by Wheat Growers as to accuracy or completeness and is made available for information purposes only. There is a risk of loss when trading commodity futures and options.
