December 7, 2011
By: Craig Haugaard, Grain Origination Manager
On this, the 70th anniversary of the attack on Pearl Harbor here is hoping that the market doesn’t stage its own re-creation of that event. Yesterday got off to a rocky start as news of an impending downgrading of the credit of European nations coupled with revised crop estimates from Australia and Canada put pressure on the market. The Canadians are now estimating the size of their corn crop at 10.6 MMT which is 600,000 MT more than the USDA currently has factored in for them. This pressured corn futures down to price levels last seen on March 17, 2011. At that point we had a couple of things happen. We had folks that have been short the past few weeks decide to take some profit ahead of Friday’s USDA report and we had some traders try and pick the bottom. The net result of this buying activity was enough to propel corn to a higher close and keep us from closing below that all important triple bottom number of $5.86 basis the March futures. Speaking of Friday’s USDA report, Bloomberg conducted a survey of analysts to get their ideas on what the report will tell us and the average guess for an ending stocks number is 845 with a range of 743 to 900. The average guess for the world ending stocks is a figure of 122.13 MMT. Technically, two of my three indicators are bearish. If we were are to ever get a close below this triple bottom area the next support levels in the March futures are at $5.52 and then $5.31. I want to close this by giving you a little something different to look at. The following chart is the monthly continuation chart with a red line drawn in where you could sell 2012 new crop futures at as I write these comments. I obviously have an opinion about what I think the market is going to do but sometimes I think it is good to look at the present opportunity in the light of history.
SOYBEANS: 4 higher
We opened lower yesterday and were under pressure early on as outside market fears and the Canadian canola projections lent fuel to the bearish fire. The Canadian’s are estimating the size of their canola crop at 14.1, well above the 12.9 the USDA has been using. As we got further into the session, however, the market turned its focus and fears to weather in South America and talk of La Nina seemed to dominate the conversation. We do have some rains in the forecast for dry areas of South America but we will want to keep a very close eye on this as it has the potential to have major impact on price direction. The more immediate story is probably the USDA report on Friday. Right now the smart money seems to be betting that the USDA will reduce exports and increase the ending stocks. According to the Bloomberg story the average trade guess for ending stocks is 211 million bushels with a range of estimates from 185 to 255. The last report gave us a 195 number so it would be a very big surprise if that number didn’t increase with this report. The average guess for the world ending bean stocks is 64.15 MMT. Technically, all three of my indicators have now turned bullish with support in the January futures at $11.00 and resistance at $11.46 and $11.73. As I did with corn, I am including the following monthly continuation chart with a red line drawn in at the point where the November 2012 soybean futures are currently trading.
WHEAT: 6 HRS lower HRW 4 lower
The news in the wheat market was grim yesterday. The size of the Australian crop is now estimated at 28.3, up 2.3 from the last USDA estimate. They have also increased their export projections to 21.6 MMT, 1.6 MMT higher than the number the USDA is using. The Canadians increased the projected size of their crop yesterday as well to 25.2 MMT, 1 MMT more than the USDA has been projecting. As we come to the USDA report on Friday these types of reports have led the trade to the conclusion that we will see the size of the world stocks increase once again. The average trade estimate of the world ending stocks number now stands at 202.89 MMT. On the domestic front the traders are not looking for much change from the last report with the average trade guess coming in at 830 million bushels and a range of 790 to 867. As a reference point the last number the USDA tossed out was 828. With growing world stocks it probably doesn’t come as a surprise that competition for export business remains intense with the latest example being a purchase by Egypt in which they bought from Argentina and Russia with the Argentine wheat coming in $30/ton less than the offer from the USA. The following chart in the monthly continuation chart for Kansas City HRW futures with a red line drawn in where the Kansas City September 2012 futures are currently trading. Again, I think it can be instructive from time to time to view pricing opportunities through the lens of historical price levels. From a technical perspective on the old crop futures, all three of my technical indicators for Kansas City March 2012 futures are bullish while two of the three are bearish for March 2012 Minneapolis 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.