November 23, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 12 lower
Watching the market yesterday one was left with the feeling that the majority of the traders and called it a week and headed off in pursuit of turkey and dressing. As a result we had outside markets that were quiet and that gave us a day of price consolidation in the corn market as well.
Technically, it is like the movie Groundhogs Day. All three of my technical indicators continue to remain bearish. Looking at the December futures chart the next logical level of support will be the $5.24 area.
SOYBEANS: 14 lower
I could write a bunch of junk about what is going on in South America, what is happening with Chinese demand, etc. but the fact is we have already covered that pretty well the past few weeks and nothing has really changed. Having said that I am only going to share one piece of news with you today. That is simply this: In July the funds were long 190,000 contracts of soybeans. As we wait for the opening bell to ring this morning they are long a whopping 11,060 contracts. The logical question that you must then ask yourself is, “Did they sell off their position because they are bullish?” I think I can answer that with a firm NO. That would seem to mean that they have sold off their position because they are bearish. That also means that if you are sitting on old crop soybeans you have to assume that you are either (a) Wrong or (b) Smarter than the fund managers. I shall now end this diatribe but quoting that great philosopher Dirty Harry when he said, “…you've got to ask yourself one question: 'Do I feel lucky?' Well, do ya,…”
All of my technical indicators are currently bearish and if we apply the Fibonacci numbers to the January futures chart it appears as if we have some support at $11.17. Ultimately a drop to $11.09 ½ would fill the gap left back on October 8, 2010.
WHEAT: 12 lower
Spring wheat got beat like a rented mule yesterday. We saw some fund liquidation but the bigger story is probably the unwinding of the spread trades. As we have chronicled in this space, the Minneapolis wheat has been the fair haired child of the complex with traders buying Minneapolis and selling Chicago and/or Kansas City futures in a spread. Yesterday we saw folks unwinding their spreads and as a result we had a blood bath in the Minneapolis wheat when compared to Chicago and Kansas City. The following chart is a chart showing the spread between Minneapolis and Chicago futures. As you can see, we had gotten this spread out to levels not seen since the 2008 excitement and it now appears that we may be moving back towards a more traditional spread relationship. If you are sitting on spring wheat I would like you to spend a few moments in quiet contemplation about what that could mean to prices and then be courageous enough to act on whatever revelation you might have.
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.