October 17, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 3 lower
This week-end I read about the coolest thing that I just have to share with you. I read about autopoiesis. This is a concept that a biologist by the name of Francisco Varela cam e up with in 1972 and explains the process by which cells regenerate and replace themselves. According to his theory which appears to be widely accepted, cells in our bodies die and are replaced every ten years or so. What this would appear to mean is that all the cells that you had in your body in 2001 have now been replaced. Since the human body is a collection of cells this would mean that you are a totally different person than you were in 2001, your 2001 person was totally different than you were in 1991, etc. I figure that explains why I get better looking every day although I am a little annoyed that that these new cells appear to weigh a lot more than my old cells. So here is the cool part, that means that any dumb thing you did in 2001 or earlier you really did not do, that other guy did it. I tried out this concept this week-end. My wife and I were talking and she brought up something from the past. I looked straight at her and totally denied every doing such a thing. I think my exact words were, “Look, I do not know what you think you remember but I am 100% sure that I never did that.” I then took a little pause and said, “Look back in the early 90s you were hanging out with that jerk Craig version 3.0 and I will be darned if I am going to get blamed for any of the crazy stuff that idiot did.” If this theory is correct that means that I am now on my third wife although this one is eerily like my first and second ones and still not buying much of what I try and slip past her although I am sure not going to stop trying. Anyway thought you guys would like to know about this scientific fact that is really kind of a get out of jail free card and will allow you to totally deny doing anything that an earlier version of you did. I personally will also be using it in the market and from today onward will deny anything that was said ten or more years ago about the markets if I was wrong. Now, on to stuff that I may very well be denying I ever wrote when 2021 rolls around. Friday brought us weekly export sales numbers and the Informa projected planted acres for 2012/13. The weekly export numbers were a solid 1.28 MMT, well above the numbers posted for this week a year ago. Although we are really early in the export year the sales pace is currently lagging last year by 3%. The USDA is projecting that we will end the year down 10% so it will be interesting to see how this plays out. On the Informa end of things they are currently projecting that farmers across the fruited plains will plant 93.1 million acres of corn in 2012. Given this set of assumptions I would expect the December 2012 futures to hang around the $6 level and wait for the old “acre buying rally” or perceived production problems to take the market higher at some point. The way the old crop futures are acting they seem to have found a place to kind of consolidate but at some point I would not be surprised if the need to do a little price rationing gives us a rally. Historically, it would not be surprising to see the November crop size estimate lowered from the October number and that could provide a boost to this market as well. Technically all three of my indicators are bullish and I see significant support in the December futures at $5.75 with solid resistance at $6.52.
SOYBEANS: 14 lower
As far as the beans go, export sales are lagging last year by 25% with the USDA projecting that we will be down 5% for the year when all the smoke clears. This is the time of year that I would expect exports to really pick up so we will want to keep an eye on those. With the September 1 stocks in South America being 8 MMT more than a year ago it may put a squeeze on our exports. As far as next year goes, on Friday Informa projected that you guys will plant 77 million acres of beans next year. They are also projecting that acres of cotton will be down 2.8 million in 2012 so I imagine that many of these acres will be headed to soybeans. The other planting/production number to keep an eye on is in South America. On Friday I read a report by the Brazilian crushing association that projected bean production in Brazil this year will be up 5% over last year coming in at a projected 79 MMT. Since the USDA is projecting a crop of 73.5 MMT for them this would be a dramatic change as well and could potentially pressure soybeans. Technically, all three of my indicators are bullish but as you can see on the following November futures chart, we had a 38.2% Fibonacci rally that hit pretty much right on the numbers and then traded off of that level. I look for the $12.75 area to offer very solid resistance for now. I would sell against that level right now if I had any beans left to sell and expect the $11.52 area to provide major support to this market. I guess I am looking for kind of a choppy, consolidating market for the time being.
WHEAT: HRS 7 higher HRW unchanged
In wheat the exports are running 17% lower than the pace of a year ago with the USDA projecting that we will end up down 20% when the current year is completed. The Informa report is projecting planted acres of wheat to come in at 57 million acres which is 2.6 million acres more than was planted in 2011. The two main stories right now seem to be the ongoing drought in HRW country and the good world stocks and cheap prices being offered out of the Black Sea region. For now the second story line will probably keep a cap on prices. Technically, my indicators are kind of sliding sideways as this appears to be a classic consolidation type market. I look for a lot of sideways action in both the HRW and HRS futures markets.
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.