I once had a guy tell me, “If you take a quart of ice cream and a quart of dog feces and mix them together, the result will generally taste more like the latter than the former.” I was reminded of that yesterday as I read the news reports coming out of Europe. Unless you have been in a coma the past few months you are well aware of the financial difficulties in which Europe finds itself. The headlines and stories that are coming out are not as optimistic as they were a couple days ago with this Reuters headline being pretty representative: Europe struggles with rescue fund, may turn to IMF. The reason that I mention this is that as you all know, the outside markets can have very large impacts on the commodity markets. If, at the end of the day the European approach to their problem is the proverbial mixing ice cream with dog feces and hoping it tastes OK instead of cleaning up the feces and the underlying problem that is creating them they may be doing nothing more than rearranging the deck chairs on the Titanic. It may look good for a moment or two but it is still sinking. We will want to keep a real sharp eye on this because it may very well impact our pocket books.
November 30, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 3 higher
The question to answer here is if this is a dead cat bounce or a rally that will sustain itself. Bullish traders will point to the similarity to last year when we launched a rally about this time of year. The fact that I am writing these comments from Aberdeen, SD rather than beach somewhere should tell you that I don’t have a freakin clue what the market is going to do but I am including a chart that shows the March 2011 futures (black bar chart) and the March 2012 futures (red bar chart). The question then becomes, will we follow the example of last year and rally into early March? All I can tell you is that two of my three indicators are still bearish and we don’t have much fresh news in the market. The fresh news that I am looking at is kind of mixed. In Ohio I see that 24% of the crop is still waiting to be harvested. I should have known that but for some reason it had escaped my attention. In Argentina we know that corn production is expected to be up and today we have a fresh estimate with their Ag Ministry now pegging production at 30 MMT. The USDA has them factored in for 29 MMT and a year ago they produced 22.5 MMT. Other than that there still seems to be good supplies of feed grains around the world and we are still seeing fire sales out of the Black Sea. As far as the Fibonacci retracement numbers go it looks like we should have resistance in the March futures at $6.22 with more substantial resistance at $6.43.
SOYBEANS: 6 higher
I have no new story here today. We continue to see some dryness in portions of Brazil and that is supportive to prices. The outside markets have been supportive the past couple of days as well but as you could probably tell in my opening comments I am not a firm believer that the crisis is solved and thus feel the outside markets could turn on us. Technically, two of my three indicators are bearish with Fibonacci resistance in the March futures at $11.53, $11.80 and $12.23. Having said that I hated the closing action yesterday. I mean we were up $0.17 in the March futures at one point and closed up a lousy $0.04 which does not leave me with a great deal of bullish enthusiasm.
WHEAT: 6 higher
The best thing that wheat may have going for it are the huge short positions held by the funds. As we get ready for the market opening today the funds are short roughly 55,000 contracts of Chicago wheat futures. As they unwind that we could see wheat rally. Once you get past that the news becomes a little less exciting if you are a bull. The weekly crop conditions report show the winter wheat crop continuing to improve with 52% of the crop now rated as good to excellent., It is worth noting that this is 5$ better than we were last year on this week. South of our border I see that Argentina has approved another 2.7 MMT of exports. Across the sea the Chinese wheat growing areas are getting good moisture while in the Black Sea region we continue to battle cheap wheat. In Australia we get a glimmer of hope w as a result of the rains that are hampering harvest progress. Technically, two of my three indicators are bearish and I continue to believe that in this market rallies are made to be sold.
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.