January 25, 2012
By: Craig Haugaard, Grain Origination Manager

CORN: Old crop 3 higher  New Crop 2 lower

I have been sitting here this morning trying to think of a good analogy for the stupidity which we have seen on display lately but I am failing to find the proper words.  Here is the deal in a nut shell.  For months now we have seen cheap wheat being sold out of the Black Sea region.  In many cases the wheat has been as much as $30/MT cheaper than the next offer.  Much of this wheat has been feed wheat and thus we have seen wheat and corn kind of move together.  Many of us have tried to figure out why they are offering the grain so much cheaper than the rest of the wheat growing world was willing to.  I still don’t have an answer to that question but I am proud to announce that the committee of morons that was making their marketing decisions may have screwed up as word hit the market yesterday that Russia may look at imposing export taxes to keep enough grain in country.   In the mean time the price of wheat in Russia has taken a big jump upward and yesterday at least that benefited our corn market.  

The other piece of news that captured the attention of the trade yesterday was the ongoing weather crisis in South America.  Recent rains are seen as helping the bean crop but we are hearing that it is too late to help out the corn.  It is pretty clear that nobody really knows what the extent of the damage might be but yesterday we did have the Ag Minister of Argentina release a report that places corn production this year at 23 MMT, this is down 3 MMT from the last number the USDA gave us. 

From a technical perspective this recent move up has now turned two of my three indicators bullish for both old and new crop.  If memory serves me correctly yesterday I told you that I thought we would see resistance in this market at $6.37 basis the March futures.  We got within a penny of that level yesterday and I would continue to look for that as a resistance level.  Should we punch through that level the next resistance level comes into play at roughly $6.65. 

SOYBEANS: 2 lower

Good rains in Argentina and Brazil kept some pressure on the bean market yesterday although we did have a delightful rumor make the rounds that Argentina was going to withdraw from the export market.  That rallied us for a bit but in the end there was no substance to the rumor and we came off the highs.  The thought is that the recent rains may very well have come in time to help out the South American bean crop.  Yesterday we had Oil World release their latest guesses of the crop size and they chopped the projected size of the crop in Argentina down to 48.5 MMT.  They had been at 50 MMT in their last projection and in fact started the year projecting a crop size of 52 MMT.  As a reference point the USDA is currently projecting the Argentinean crop at 50.5 MMT.  While that was good news for the bulls, the Oil World projection took a little of the wind out of their sails as they actually increased the projected size of the crop in Brazil by 1 MMT to a projected total of 72 MMT.  At face value these numbers would seem to indicate that the price is now high enough given projected carry-out but traders don’t need a real long memory to remember that in 2008/09 we saw the size of the South American crop decline a total of 18 MMT after the January report. 

Technically two of my three indicators are bullish in both the old and new crop futures months.  Look for next resistance point in the November bean futures at $12.32.

WHEAT: 2 higher

As mentioned under the corn comments, there are rumors coming out of Russia that they will impose export taxes by spring in order to insure that they don’t run out of grain domestically.  With prices of Russian wheat surging higher it is interesting to see the USA now competitive in the export market.    In that same general part of the world we are also hearing rumblings that Ukraine may also have to impose export restrictions with the winter wheat crop in that nation expected to be down 30% this year.  We are hearing that they now have good snow cover so their drought problems may be coming to an end.  The belief is that the winter wheat areas that were wiped out by the drought will probably be planted to corn this spring. 

Here in the good old USA I see that the winter wheat crop in Texas is now pegged at 23% good to excellent.  That is not a real impressive number but compared to the 17% good to excellent that we had at this point last year it is certainly progress. 

Technically the up day certainly helped as two of my three indicators are now bullish 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.