November 18, 2011
By: Craig Haugaard, Grain Origination Manager
I have been a little on the bearish side the past week or two but even I was a little depressed by the ferocity with which the markets were treated yesterday. In fact I found myself singing:
Maize, you’re breaking my heart
You’re shaking my confidence daily.
Oh maize, I’m down on my knees,
I’m begging you please rally now.
Augering maize in the afternoon
I just know the market is going to rally soon.
I got up to move my truck ahead
When I came on back the bull was dead.
I will send a Wheat Growers cap to the fifth person to tell me the name of the song and the artist that I ripped off on this deal.
In terms of actual corn related news yesterday we got off to a bad start when the weekly export sales were announced and they came in at 209,000 which is well below the 533,000 posted for this week a year ago. Yesterday in this space I mentioned that Japan had purchased 800,000 corn from the Ukraine. That was still resonating through the trade yesterday as it was pointed out that in a normal year Ukraine would sell roughly 300,000 to Japan for an entire year. With Ukraine expected to export 12 MMT of corn this year versus the 6.5 MMT they exported last year it is expected that we could lose additional export business to them. If there is a bright side to all of this it would have to be that it has been assumed that on a break China would step in and buy corn in order to replenish their stocks. Even that conventional wisdom had its detractors yesterday as analysts pointed out that China appears to be harvesting a record crop so the extent of their potential purchases is somewhat of a question mark.
Technically, all three of my indicators are bearish. Looking at the March futures chart, our old buddy Fibonacci would suggest that we should pick up some support at $5.86 with additional support at $5.51 basis the March futures.
SOYBEANS: 6 higher
When it comes to soybean exports even Helen Keller can spot the trend. With weekly exports announced at 746,000, which was well below the 1 MMT posted for this week a year ago we now have cumulative sales down 35% for the year. The USDA is projecting that we will be down 12% for the year so we had better pick up the pace sometime soon. As anyone with a pulse knows, China is the key to big export numbers for us so it was encouraging to see China announced as the buyer of 420,000. The news out of South America continues to be negative with production estimates for Argentina now forecast in some quarters to be 53 MMT, up from the 52 MMT that the USDA is currently projecting. On the technical side of things all three of my indicators are currently bearish and if we look to the Fibonacci numbers I see that in the January futures we should pick up some support at $11.63 with more substantial support at $11.17 and of course if we drop to $11.09 ½ we would fill the gap left back on October 8, 2010.
WHEAT: HRS 1 lower HRW 2 higher
With corn getting roughed up more than your run of the mill Occupy Wall Street protestor it is no surprise that wheat was down fairly hard as well. Weekly export sales were a disappointing 317,000, well down from the 943,000 posted for this week a year ago. We continue to get beat up by cheap Black Sea wheat. In fact it is interesting to note that Ukraine has now exported 6 MMT of grain since the first of July and their fire sale shows no signs of ending any time soon. In China I see that they are getting rain in much of their wheat growing area which is negative. Longer term the projections are for wheat production in the EU to be up 6 MMT next year and that coupled with already ample supplies does not paint a bullish picture. If we really want to look down the road I suppose we could contemplate what the USA will look like if the legislation caps the CRP program at 25 million acres rather than the 32 million that we have today. I suspect that will dump a bunch of acres back into wheat production and probably drive prices lower. In the world of technical indicators all three of my indicators are bullish the Minneapolis futures and all three are bearish the Kansas City futures.
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.