December 1, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 3 higher
No sooner had I sent out yesterday’s comments than I heard that, metaphorically speaking, the USA was going to provide more ice cream to the EU. That had the stock market up sharply and had commodities surging as well with crude oil trading over $100/barrel. As near as I can determine, what the Fed did yesterday was lower the cost of converting the Euro to dollars. This tends to cheapen the dollar and as a result we had active spread trading yesterday with traders buying the Euro and selling the dollar. From a commodity perspective this is positive as it makes it cheaper for other countries to import from us and thus as expected corn prices managed a higher close yesterday. Once we get down to looking at the specific corn fundamentals I see that we had very good weekly ethanol production. We cranked out 930,000 barrels of ethanol for the week which is the highest weekly production we have seen since December 2010. At this pace we could end up using up to 150 million bushels more than the USDA is projecting. That is kind of an interesting number because we have some analysts in New York that are projecting that exports of corn will end up being 150 less than the USDA is projecting so this thing could end up being a wash. Technically, two of my three indicators are still bearish. Looking at the Fibonacci retracement numbers I see that we have resistance in the March futures at $6.22.
SOYBEANS: 9 higher
I really want to fall in love. I would love nothing more than to look at a chart and have it take my breath away. I remember fondly the charts of yesteryear and wonder when I will find one that will fill me with joy and excitement once again. I had hoped that the bean chart would be “the one” but instead it is just leaving me empty and disillusioned. While I had great hopes that this chart would surge strongly on the heels of its almost perfect Fibonacci setback I am left instead with a chart that looks increasingly blah. The January futures should have been able to at the very least stage a rally to the $11.73 level but instead hit the 23.6% retracement level yesterday and sold off. Pathetic. Two of my three technical indicators are bearish at the present time as well so perhaps true bullish love will not be found in this chart. The bean fundamentals are not very inspiring either. In South America we are hearing reports of very good weather conditions while out of China we continue to hear reports of negative soybean crush margins. Neither one of those stories are the type that ignite bull markets. If we don’t get something going soon the path of least resistance may be lower which could see the January futures dropping to at least $10.88.
WHEAT: HRW 7 higher HRS unchanged
The most positive thing that I can say about wheat is that it didn’t close low enough yesterday to create an outside day down on the bar chart. That seems like a hollow victory indeed as wheat closed down pretty hard for the day. The fundamentals have not really changed and as we have discussed in this space in the past they tend towards the negative right now. Yesterday, news that Russian production is expected to be up sharply next year coupled with the good US weather pressed wheat lower. It doesn’t help that we continue to see cheap wheat offered to the world from the Black Sea region. In fact at the pace Russia is currently on they will have exported 25 MMT by February, well ahead of the 19 MMT of last year. Technically, two of my three indicators are bearish both the Minneapolis (HRS) and Kansas City (HRW) futures. For those of you that looked at the charts that I ran on Tuesday you will remember that in the Minneapolis March futures the $8.49 area was an area of resistance so it was fun to see the Minneapolis March futures get right up to that level yesterday and then back down. Hopefully those if you that were looking to sell this rally took advantage of that resistance level and got some sales on the books. I continue to believe that in this market rallies need to be sold.
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