November 4, 2011
By: Craig Haugaard, Grain Origination Manager

CORN: 1 lower

We had the usual cast of characters at play in the market once again yesterday.  As I mentioned in this space yesterday, there is a private analyst projecting a large increase in Chinese corn production.  That, coupled with news that they are in talks with Argentina, put some pressure on the market.  Over-riding all of that, however, seems to be the conviction that at a point China will be making some large purchases to replenish their stocks.  If and when that happens the conventional wisdom is that the good old USA will get a big chunk of the business.  While we are waiting and hoping for the Chinese to show up we do have a bullish demand story that is almost sneaking by unnoticed.  Ethanol is enjoying good margins and the pace of production is such that we could end up exceeding the USDA’s projection by as much as two hundred million bushels.  Toss in good weekly exports yesterday and a weaker dollar and we had all the ingredients for a stronger market.  Longer term we have the Chinese that I believe will step in and buy this market should it ever drop to the $6.00 level so for now I believe that will be the floor on the nearby futures.  On the top side we have solid resistance in the December futures at $6.65 with a gap at $6.85.  I look for that to be the top end for awhile.  The things that have me the most spooked right now have nothing to do with corn but could impact it greatly.  They are:

1)  The situation in Europe which still seems to me to be teetering on the edge of a cliff.  If they fall apart the dollar strengthens and hurts commodity prices.
2) The Middle East has to have your attention.  For some time now we have had the president Ahmadinejad of Iran saying he was going to wipe Israel off the face of the earth while at the same time trying to develop nuclear capability for “peaceful purposes.”  Now we see that Israel has examined a preemptive strike against Iran and a story in the UK Guardian yesterday spoke about plans for the UK and the USA to perhaps be a part of a strike as well.  As Mark Twain wrote in Pudd’nhead Wilson, “Well, he needed killing.”  If that were ever true I suspect that Pres. Ahmadinejad qualifies but the prospect of a full blown war with Iran is something that could really play havoc with our markets.

SOYBEANS: 1 lower

Weekly export sales stank yesterday and are now running 37% behind last year’s pace.  The USDA is projecting that we will end up down 8% for the year so at some point we need to get in gear.  We were helped yesterday by the outside markets pushing the dollar weaker and may have been assisted as well by news that, shock of shocks, the soybean crush workers in Argentina are going on strike.  While we had a good day yesterday, ultimately I have to believe that large Western Hemisphere stocks and poor exports are going to put some pressure on this market.  Technically, all three of my indicators are now bullish and in eyeballing the chart I would say that in the January futures we have solid support at $11.63 and tough resistance at $12.84. 

WHEAT: HRS 7 higher HRW 2 higher

Ukraine picked up the latest export business as they came in $9 MMT cheaper than the Russian offer with the USA not even in the same area code.  For the year cumulative exports are running 19% less than a year ago which believe it or not is probably a big victory since the USDA is projecting that we will be down 24% for the year.  Looks like we have some rain in the forecast for the southern plains next week which would be very welcome.  Other than that there is not much fresh news around.  Look for wheat to follow corn.  In terms of the technical stuff all three of my technical indicators are bullish the Minneapolis wheat while two of the three are bearish Kansas City wheat.  In looking at the March Minneapolis wheat futures chart I see that we are back up at the top end of the trading range and I suspect we will shop around to drift lower from this level.

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.