January 18, 2012
By: Craig Haugaard, Grain Origination Manager
CORN: 5 lower
After a two day sell-off on the heels of the January 12 report the market managed a small rally yesterday as the trade’s attention shifted back to the weather woes of South America. For the session funds were net buyers of 9,000 contracts as worries over the ongoing drought drove them back into the hooves of the bull. (I was going to write that it drove them back into the arms of the bull but that would make even less sense than the gibberish that I ended up writing.) Also helping the cause was a weaker dollar, stronger crude oil and decent weekly export inspections. Cumulative export inspections for the year now are running only 2% less than last year with the USDA projecting that we will be down 10% for the year.
Technically all three of my indicators remain negative although they do appear as if they are consolidating. For the sake of argument let’s assume that they are forming a short term bottom. If that is the case what kind of a rally could we expect? Turning to our old buddy Fibonacci he would tell us that we could run into our first level of resistance in the March futures at roughly $6.24.
SOYBEANS: 8 lower
South American drought remains the feature of the bean market as well. In Brazil Parana is expected to get over 3 inches of rain in the next few days while Rio Grande do Sul can’t seem to catch a break when it comes to moisture. Argentina remains dry as well with the next possible rain of any significance now being this coming Sunday. The world’s 4th largest exporter of soybeans, Paraguay, just declared a national emergency as a result of the ongoing drought. Oil World is out with their latest yield projections for Brazil and Argentina. They are projecting total production to be 71 MMT and 50 MMT respectively. The January 12 USDA report pegged the productions at 74 MMT and 50.5 MMT. While that is all positive to prices the potential yield shortfalls in South America have not spurred any additional demand in the USA as our exports continue to struggle. For the year cumulative export loadings are down 28% from last year. The USDA is projecting that we will end the year down 15%. I had a chance to look at the December crush numbers yesterday as well and couldn’t help but note that the crush is running 6% behind last year which seemed significant until I saw that we had a plant not reporting so now I think I may have wasted time looking at a government report that was incomplete in its reporting. Anyway the UDA is projecting the crush to be down 2% for the year and it appears that we may be on track to do that.
Technically we appear to be trying to put in a bottom and work higher. If we accept that this is the case then the March futures offer Fibonacci derived initial resistance at $11.86.
WHEAT: HRS 1 higher HRW 6 lower
Wheat was drug higher by corn yesterday as has become its lot as of late. Weekly export inspections were a paltry 13.4 million, well below the 24 million posted for this week a year ago. With decent moisture in most of the wheat growing world and an expectation that domestic as well as world stocks may still increase wheat should continue to struggle and to take its lead from the direction of corn.
Technically all three of my indicators are bearish for both old and new crop in both the Minneapolis and Kansas City Exchanges.
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.