February 3, 2012
By: Craig Haugaard, Grain Origination Manager
CORN:Old crop 1 higher New Crop 1 lower
I have been spending way too much time reading export projections because last night I dreamed that Tom Vilsack was dressed up like a minute man riding a Shetland pony and yelling, “The Chinese are coming, the Chinese are coming.” The fact is that exports have been a better than expected story so far this year. As we stand right now exports are running 6% behind last year while the USDA is projecting that we will be down 10% for the year. With the Chinese having a larger presence in the export market than had been expected this year the trade is starting to come to the realization that we could see the carry-out tighten up more than the 846 currently projected by the USDA. If the export and ethanol demand continue to jam along better than expected we could very well end up with a stocks to use ratio of under 6%. This would seem to indicate that the old crop corn should remain very volatile with a tendency for traders to see setbacks as buying opportunities rather than viewing rallies as selling opportunities. On the flip side as we look at new crop corn, I think long term, assuming normal weather, that we have the potential for a dramatic setback in prices by harvest time.
Technically, we have a very interesting picture shaping up. We closed right up against the resistance level in the December futures and if we can get a solid close above it that would then project that new crop corn could move up and test that $6.00 level while in the March futures we have resistance coming in at $6.65.
SOYBEANS: 6 higher
The trade spent most of the session yesterday trying to figure out what impact the forecast rains will have on the bean crop in South America. The expectations are that we will continue to see rain fall in Argentina and it is expected to flow into parched portions of southern Brazil in the next few days. While the trade is focused on the South American weather we shouldn’t lose sight of the export picture which has been less than stellar. Right now cumulative exports are running 31% less than last year with the USDA projecting that we will be down 15% for the year when the final bell rings.
We will be getting fresh Informa numbers today and I have to believe that those numbers will have an impact on what happens in the market today.
Technically, my indicators are all bullish with the next resistance level in the November futures coming in at $12.32 while in the March futures $12.45 should offer a struggle to get through.
WHEAT: 4 higher
While corn and beans managed to close slightly higher during the day session yesterday, wheat sagged to a lower close. The trade had rallied on the expectation that cold weather was going to sweep across Europe and the FSU and damage the crop. The cold weather is now here and the analyst that I spoke with yesterday is assuming that 6% of the Russian wheat crop. Having said that it seems as if yesterday was a classic case of buy the rumor, sell the fact. At the end of the day the expectation is that we will see both the domestic and world stocks increase this year and with that assumption I think we are probably kidding ourselves if we don’t also assume that with that stocks increase will come lower prices.
From the world perspective it I was interested to see a story out yesterday that India is estimating that they will have a record wheat crop in 2012.
Technically all three of my indicators are bullish both old and new crop in the Minneapolis spring wheat and old crop Kansas City. In the new crop Kansas City futures the stochastics hooked into a sell signal yesterday although the other two indicators are still bullish.
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.