January 5, 2012
By: Craig Haugaard, Grain Origination Manager
CORN: 6 lower
I find myself wishing I was a radio DJ this morning because I have had an overwhelming urge to play Summer in the City by the Loving Spoonful and dedicate it to the fine folks in Argentina. It is so dry in portions of Argentina that rumor has it dogs have to mark their territory with chalk lines. With an almost certain reduction in the amount of corn being produced in South America this year the trade will be increasingly sensitive to the impact that this may have on export demand from the USA and ultimately the impact that increased export demand could have on our ending stocks. In a year in which the assumption was that we should see stocks increase that may turn out to not be the case. My technical indicators are all bullish. I would expect the next level of resistance in the March futures to come in around the $6.75 area while in December 2012 futures look for it at $6.00.
SOYBEANS: 13 lower
It appears as if we have better chances for rain in Argentina early next week and for Brazil later next week. For the sake of the argument today let’s assume they get “disappointing rains”. Here is what could happen. We have a drought similar to the 2008/09 drought. Not a far stretch since some portions of Argentina are supposedly having the biggest drought since 1906. If we reduce the crop this year by a similar percentage of the impact that 2008/09 had we knock 22 MMT off the books that we were planning on. In turn, all of a sudden the world needs USA beans and of course even my slow cousin Jimmy knows that right now the economics favor growing corn. This spooks the trade and we have a good old fashioned rally in February in an attempt to buy bean acres. Of course corn will not go down without a fight so we see that rally as well. Could it happen? Heck yeah, and if it does I will be quick to remind you of what a brilliant prognosticator I am and if it doesn’t I will hope you forget these comments were ever written. Technically, nothing has changed with all of my indicators still bullish.
WHEAT: 7 lower
With a scarcity of snow in the Dakotas and Canada some traders are already conjuring up a drought for next summer. While that may prove to ultimately be the case it is worth noting that the topsoil moisture in Kansas is now rated as 76% adequate and the crop rating has gone from 45% good to excellent to 53% good to excellent as we stand here today. Oklahoma is also now at 63% good to excellent while Texas continues to struggle. Fear of drought and index fund buying next week may be short term supportive to this market although in the longer run I think it continues to take its lead from corn. From a technical perspective two of the three indicators are bullish Minneapolis wheat and 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.