The Financial Times of London yesterday ran a story yesterday saying that Germany and the eurozone’s five other triple A members face having their top-notch ratings downgraded after Standard & Poor’s put 15 countries in the single currency bloc on negative credit watch.  This has widespread implications and is a story that could impact commodity markets as well before all is said and done.

December 6, 2011
By: Craig Haugaard, Grain Origination Manager

CORN: 9 lower

The Ukraine is beating the USA in the corn export market by $30/MT and Australian feed wheat is being offered into Asia $20/MT less than Ukrainian corn.  Even my slow cousin Jimmy can look at that and figure out that perhaps we are not overly competitive on the world stage.  The combination of a lot of feed grain and feed wheat for sale in the world market coupled with fears that Friday’s report will show the Chinese production up sharply acted as a damper on the market yesterday.  Into this mix you can add the Informa estimate of the Brazilian 2011 corn crop of 63 MMT, up 2 MMT from the last USDA estimate and 5.5 MMTY above the 2010 crop.  One potential Black Swan event would be Iran behaving in an irrational manner, although some would argue that with Iraq the bigger surprise would be if they acted in a rational manner.  In response to the storming of the British embassy in Iran last week there have been calls for tough economic actions against Iran.  A Reuters story on Sunday quoted the Iranian Foreign Ministry spokesman responded to talk of efforts to block Iranian oil exports by saying, “As soon as such an issue is raised seriously the oil price would soar to above $250 a barrel.”  So, the fundamentals that we are currently trading are probably a little on the bearish side while a blow up in the Middle East that sent crude oil to the stratosphere would probably be bullish.  Until that happens we are probably better off trading the fundamentals that we know as well as the technical indicators.   Technically, all three of my indicators are bearish and as pointed out in this space yesterday we were up against a key support level that needs to hold.  In the overnight session we broke through it to the downside and we need a close back above that line today to avoid another leg down.  Should we fail to get that the next support levels in the March futures are at $5.52 and then $5.31.

SOYBEANS: 4 lower

The September 1 stocks in South America were 7 MMT more than they had been the previous September and surprise, surprise, they are exporting a record amount of beans for this time of year.  It doesn’t take a rocket scientist to figure out that this is probably impacting our exports and so yesterday’s weekly export loadings number of 31.6 MT was down from the 48.3 MT posted for this week a year ago but in line with what we are seeing thus far this year.  Cumulative export loadings for the year are down 33% from last year with the USDA projecting that we will end up the year exporting 12% fewer beans than we did last year.  The weather is also kind of working against us right now with good rains in the forecast for dry areas of Brazil and Argentina.  It should also be noted that much of the Corn Belt got good moisture this past week-end.  The other bit of news is a private analyst who is projecting new crop Brazilian bean production to come in at 75.6 MMT, slightly higher than the 75 MMT that the USDA is currently using.  Technically, two of my three indicators are bearish.  In the January futures we should have some support at $11.00 and resistance at $11.46 and $11.73.

WHEAT: 4 lower


Strike 1 – Weekly export inspections came in at 14.4 MT, down from the 21.5 MT posted a year ago this week.

Strike 2 – HRW country is getting or has gotten beneficial rains.

Strike 3 – The crops in Russia are reportedly off to a great start with more acres planted than they did last year.

That was yesterday in a nut shell.  You could rightly point out that the Ukraine is experiencing very poor crop conditions but yesterday nobody cared.  With ample domestic and world stocks wheat may struggle.  We know that the funds are heavily short and in early January have to rebalance their funds which should result in them buying back part of their short position.  That is the most positive event I see on the immediate horizon for wheat.  

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.