December 8, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 3 lower
I have heard from several of you lately that my comments have all been a little negative. I didn’t think much about it until Tuesday when I was riding down the road with a friend and received a phone call asking what I thought about the markets. I went through the litany that I have been sharing in the pre-opening comments the past few weeks and when I got done and hung up the guy I was riding with said, “Holy crap, the world is coming to an end. We may as well just swerve into oncoming traffic right now because there is just no hope.” It occurs to me that even when I am right, and I have been, that folks get tired of hearing the truth when it means lower prices. This morning, in my effort to deliver an early Christmas present and to avoid been labeled as “negative” I am going to be all sunshine and roses. I will only write the positive stuff about the market and if I don’t have anything nice to write I will write nothing at all.
Here we go - Ethanol demand continues to rocket along at a record pace. Last week’s production came in at 954 which blew the previous record weekly production number of 939 out of the water. At the pace with which ethanol plants are producing it is possible that the usage may be as much as 150 million bushels more than the USDA is currently projecting. Looking south of the border fears of La Nina still resound in Argentina and Brazil and a drought would be devastating to crops in those nations. Speaking of drought, Ukraine is experiencing a strong drought while in the USA the fears are that the drought that has plagued Texas and Oklahoma could spread into the heart of the Corn Belt next summer. Looking at the charts some folks are pointing out the similarities between this year and 2004. In 2004 January report we saw the crop production numbers drop by 160 million while the demand numbers surged by 155 million (ethanol alone could make that move this year) and just like that over 300 million bushels disappeared from the carry-out. This sent prices soaring higher into early summer.
SOYBEANS: 2 lower
The aforementioned possible La Nina in South America has the potential to be very supportive to the bean market. We may already be seeing an impact of the drought with CONAB placing the estimated size of the Brazilian bean crop at 71.2 MMT this morning; down from the 75 MMT the USDA is estimating. Also adding to the incredible strength of this market is a palm oil situation in Malaysia that experienced virtually no growth in production this year while world demand for vegetable oil continues to increase at a substantial pace.
WHEAT: HRS – 5 lower HRW – 3 lower
The rain in Australia has turned much of that wheat from milling quality to feed quality. We have a drought in the Ukraine. The winter wheat crop in Texas continues to enjoy poor crop condition ratings as well.
So there you have it, nothing but sunshine and roses. If we want to we can always find positive news in the market and I believe that it is human nature to look for things that agree with what we desire to have happen. That of course is what makes marketing so darn hard. We find the bullish news in this case and cling desperately to it even if the ship is sinking. I hope you enjoyed the positive news this morning but I also hope that you have developed a risk management strategy to deal with that unspoken negative news that I have a hunch is still out there somewhere.
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.