November 7, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 1 lower
I did some thinking this week-end and found the experience to be both painful and disturbing. They say that the brain is a muscle, if so mine more closely resembles the 350 pound coach potato than it does an Olympic athlete so you can appreciate the great strain that even the most rudimentary thought process inflicted on my brain. Be that as it may here is what I was thinking about. 1) How do you get Teflon to stick to pans when nothing will stick to Teflon? 2) Even Ray Charles can look at the corn chart and see that we are trading at some pretty elevated numbers from an historical perspective. (On a side note, is there a more current famous blind person that I can use for these analogies? If you have any suggestions please send them to me.) So, here we sit at pretty good prices with the chart basically sliding sideways. At points like this you have to ask yourself what direction the market will break when it goes one way or the other. So, which way is corn the most likely to break? In looking at the average trade guesses for the November 9 report we have 22 analysts participating and they have an average national average yield of 147.9 bu/acre and production at 12.402. These numbers are all pretty close to the October report numbers. So, what does no surprise do for us? I think without a bullish surprise we tend to go lower from here. Why? Well, for starters I am hearing reports that dealers in Brazil are sold out of corn seed as it appears the fast soybean planting pace will lead to record double cropped corn acres this winter. We could see a few MMT more corn enter the export market from Brazil than what the USDA currently has factored in. Speaking of exports, the word on the street is that Japan is talking to the Ukraine about buying corn in 2012 which again would cut into our PNW demand. Finally, we are seeing some buyers in Mexico buy SRW instead of corn. All in all it appears as if the higher prices may have brought in additional production around the world and with that may come price pressure. Finally, we are at that magic time of year when the funds need to reallocate their holdings and the best estimate that I can get from the folks in Chicago right now is that funds may need to sell 9% of their current corn position to get back into position for 2012. Of course, we still believe that if we see the nearby futures drop to around $6.00 we will see Chinese buying. That would be bullish as could a successful conclusion to the ongoing theatrics in Europe. Finally, this week the International Atomic Energy Agency is expected to release a report that Iran is in the final, critical stage for developing nuclear weapons. Iran with nuclear weapons is probably great for the sale of Depends but beyond that it is unclear what the impact will be. I am willing to wager a steak supper that eventually it will lead to war and I suspect with the relationship between corn and energy that would be bullish. From a technical perspective all three of my indicators are currently bullish with support at $6.00 and solid resistance in the December futures at $6.65 with a gap at $6.85.
SOYBEANS: 4 lower
I read a report yesterday from the meteorology center at the Universiade de Campinas in San Paulo Brazil. The basic upshot of it was that La Nina is currently weak and expected to have virtually no impact on Brazilian production this year. The report also noted that with increased planted acres and increased use of fertilizer production could set another record. Now, into that mix toss in the thought fact that USA exports are already badly lagging what is being projected and you start to understand why the market has not behaved very well lately. The average trade guesses for this week’s USDA report are very uninspiring, coming in at a national average yield of 41.5 bu/acre and total production at 3.059. Technically, two of my three 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 2 lower HRW 2 higher
There is really nothing new here as the Ukraine continues to offer cheap wheat. The key to this market is probably the moisture situation in the southern plains and the direction of 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.