December 5, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: I had to be on the road before the night session closed today but expect the day session to open in line with the overnight close.
I was looking at the charts this morning and all I could think was, “Wearing spandex is a privilege and not a right.” I don’t know why that was in my head but there it is. I suppose one could argue that making a decision about whether or not to wear spandex is like deciding when to sell your commodities. There is a time and place for both activities and we probably can all think of folks that have made the wrong decision in both the wearing of spandex and the selling of grain. Well, enough spandex talk. What you are really interested in is where the price of corn is going to go and when it is going to go there. On Friday the fear seemed to be that the large Chinese crop and slow exports that we talked about in Friday’s Pre-Opening Comments may result in domestic and world supply demand figures both showing increased carry-out in the December 9 report. That led to selling pressure and ultimately to the lower close that we experienced. From a technical perspective Friday’s close turned all three of my indicators bearish and pushed the price back down into a key support area. As you can see on the following March futures chart we are at an area ($5.86) that is in effect a triple bottom. We were in this general area at the low on July 1, 2011. We visited it again on October 3, 2011 and then on November 23 we got back to that level and have bounced around it ever since. I suppose the bad news is that as a general rule triple bottoms tend to fail and if this one gives way the next support levels are at $5.52 and then $5.31. On the upside we have resistance at $6.22 but I don’t think we will have to worry about seeing that number anytime soon unless we get a bullish report on Friday.
SOYBEANS: I had to be on the road before the night session closed today but expect the day session to open in line with the overnight close.
Fears over drought in South America and the realization that in years in which Argentina experiences a La Nina year (such as it is this year) the yields tend to be below average propelled the bean market to a higher close on Friday. It was interesting to note that soybean oil was higher while soy bean meal was a little lower for the session. This would make sense in that we seem to have strong and growing demand for vegetable oil worldwide. With the rate of increase of palm oil production slowing considerably this year it should be supportive for soybean oil and that in turn should help support soybeans. From a technical perspective the action on Friday was enough to keep two of my three indicators are bullish. A higher close today would probably be enough to have all three of them in the bullish camp once again. In the January futures we should have some support at $11.00 and resistance at $11.46 and $11.73.
WHEAT: I had to be on the road before the night session closed today but expect the day session to open in line with the overnight close.
We had a good old fashioned weather market in the wheat futures on Friday. A Reuters report came out Friday morning that cited data from the Ukrainian Farm Ministry which indicated that as a result of severe drought they may produce a measly 8.5 MMT in 2012, down from 22.2 MMT in 2011 and could in fact end up importing wheat in 2012. This is not unheard of with Ukraine last importing wheat in 2004. The flip side of this is that Russia is expected to raise 10 MMT more total grain next year than they did this year and will undoubtedly pick up some of the demand that the Ukraine will not be able to meet. Technically, two of my three indicators are bullish both the Minneapolis (HRS) and Kansas City (HRW) futures. A higher close today will turn all of my indicators bullish on 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.