November 21, 2011
By: Craig Haugaard, Grain Origination Manager

CORN: 7 lower

I am having a hard time concentrating this morning since I learned some very distressing news this week-end.  In the nearly five and a half decades that I have spent on earth I have always figured that when I was thirsty I should take a drink of water to avoid getting dehydrated.  Then, on Saturday there was a story in the UK Telegraph that turned my world upside down.  The headlines kind of say it all; EU bans claim that water can prevent dehydration.  The paragraph in the article that seems to sum it all up is as follows:

A meeting of 21 scientists in Parma, Italy, concluded that reduced water content in the body was a symptom of dehydration and not something that drinking water could subsequently control.

That is correct, the European Food Standards Authority (Is that like our USDA?) convened a group of scientist to see if water really hydrates you and after a three year study they decided that it didn’t.  Starting next month people who sell bottled water in the UK face a two year jail sentence if they claim that their water hydrates you. 
I feel like a fool for drinking water all these years whenever I was thirsty and thinking it was doing me any good.  I wonder what other lies I have fallen for.  Like a sap I have gone to sleep when I was tired thinking that would take care of it.  I bet I was wrong about that.  Eating when I was hungry, what a moron, I suspect this group of scientist could also disabuse me of the notion that food prevents hunger. Heck for all I know that whole deal about crops needing rain is a hoax brough to us by Big Water.   All I can say is thank goodness for the government or I would have kept wasting my time drinking water and thinking it was taking away my thirst.  Aren’t you glad we have the government looking out for us?

Speaking of government, it looks like our government economists might be about as sharp as their government hydration expert scientists.  It looks like the super committee is about to wave the white flag and I am hearing more and more talk that another downgrade of the USA credit may be only a matter of time.  That would seem to signal a continuation of the weak dollar which should be supportive to commodities.  On the flip side it appears that liquidity is draining from the EU banking system at a pretty fast clip and there is an increasing fear that this could lead to a short term crisis.  That would probably send folks fleeing to the perceived “safety” of the US dollar, sending the dollar higher and probably weighing on commodity prices.

In the more immediate time period we are seeing good demand coming from ethanol and are expecting pretty good feed numbers in the January 9 report as well.  Where we are not doing as well is in exports where cheap feed wheat and corn from the FSU as well as other locations is beating us up pretty good.  An example of this is Ukrainian corn that is being offered at $0.50/bu less than what the USA is offering.  

Another factor to be aware of at the present time is the fund repositioning that needs to take place.  As things stand right now it appears as if the funds will need to sell roughly 12% of their corn position to get back into the commodity mix that they are required to be in.

Technically, I have nothing good to tell you.  All three of my technical indicators remain 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.   In looking at the weekly charts I see that $6.05 offers support with additional support at $5.45 and $4.85.  Don’t bet against seeing $4.85 in the next 12 months if we have normal weather.

SOYBEANS:  9 lower

Of course, all of the outside market stuff that we covered under corn applies to beans as well and actually may well be more important than the specific commodity fundamentals at the present time.  Beans performed better than corn on Friday which makes sense if you think about the corn/bean spread charts that we ran in this space last week.  In order for beans to get the kind of acres we need the conventional wisdom is that we need to get that corn/bean ratio out to more acceptable levels.  This could end up being two different tales with adequate old crop supplies and in fact good supplies in the Western Hemisphere as we stand here today.  When you start looking a little further down the road, however, it gets interesting.  Let’s assume that in 2012 the farmers of this nation harvest 75 million acres.  If we have a national average yield of 41.5 bu/acre and leave total demand where it is currently projected to be we would have a carry-out of 98 million bushels and be looking at a bullish market. 

While that may end up being the fate of soybeans in the 2012/13 crop year right now the reality we are faced with is that the technical indicators are all bearish and if we apply the Fibonacci numbers to the January futures chart it appears as if we have some support at $11.63 with more substantial support at $11.17.   Ultimately a drop to $11.09 ½ would fill the gap left back on October 8, 2010. 

WHEAT: HRS 2 lower        HRw 7 lower

Cheap wheat from the Black Sea region and moisture in HRW country will probably keep pressure on the wheat market.  At the end of the day we have adequate supplies both domestically and worldwide and with cheap feed wheat being offered from multiple sources we are seeing wheat trade more as a feed grain than anything else these days.  With that line of reasoning I would look for wheat to take its major direction from corn in the short term.

In the world of technical indicators two of my three indicators are bearish the Minneapolis futures and all three are bearish the Kansas City futures.  What I do find interesting is that, in looking at the Kansas City continuation chart,I see that we are right up against solid support on the weekly chart.  This level needs to hold or this could get real ugly.

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.