November 17, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 6 lower
Mahmoud Ahmadinejad and his merry band of mischief makers had crude oil sharply higher yesterday on the threat to shut down the Strait of Hormuz should anyone try attack their nuclear facilities. Rumor has it that he also muttered some stuff about destroying the Great Satan (USA) and the little Satan (Israel) and then got so worked up he punched a camel in a fit of rage but I can’t confirm that rumor. Anyway, all of this excitement had crude oil over $3 higher at one point which one would have expected to pull corn higher as well but that was not the case. Corn was hamstrung yesterday by news that Japan had bought 800,000 of corn from Ukraine as well as ideas that Japanese demand will be down overall as a result of the damage done to animal feeding in the recent tsunami. We continue to run into competition around the world from both other corn exporters as well as a seeming glut of feed wheat. One potential positive in the export market may be China where one Chinese firm is indicating that they expect China to import 5 MMT of corn this year. That would be up from the 3 MMT that the USDA is currently projecting for them. One positive demand story is ethanol production which continues to hum along at very good levels and is providing one nice positive demand story these days. Technically, all three of my indicators are bearish.
SOYBEANS: 3 lower
Tuesday the rumor was that China had bought soybeans. Yesterday the story sweeping the pit was that China was canceling soybean purchases. The only thing that we learned from all of that is that China is still the dog that wags the tail. Of course this time of the year we need to really be tuned in to South America so I thought that it was interesting to read a story yesterday from a private analyst who believes that soybean acreage in South America will only be up 1% over last year. The USDA is projecting acres to be up 3.5% but this seems to be in line with the Oil World story that I talked about yesterday. More acres are going to corn. Another reason to perhaps be more bullish beans in the longer term than corn. The other thing that I think we really need to watch is the corn/soybean spread. As you know, I ran a couple of those charts yesterday and until we get that ratio back to a more normal situation the assumption will be that you folks are going to increase corn acres next year. The question you had better be asking yourself is this; “If South America plants more corn acres and the USA plants more corn acres what will the corn prices do?” Once you answer that question I suspect that you are smart enough to know what to do with that information. Technically, two of my three indicators are bearish.
WHEAT: 3 lower
The only really good news that I can find is that it is dry in the Ukraine and that would mean a lot more to me if I didn’t see them having a fire sale on grain. Other than that if you look at either the USA stocks or the world stocks you will have to conclude that we have adequate levels and ladies and gentlemen, adequate don’t get you a rally. From a technical perspective all three of my indicators are bullish the Minneapolis futures and all three are bearish the Kansas City futures.
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