March 2, 2012
By: Craig Haugaard, Grain Origination Manager
CORN: Old Crop 3 lower New Crop 1 higher
To paraphrase that great philosopher Tommy Boy, I can get a good look at a T-bone by sticking my head up a bull's behind, but I'd rather take a butcher's word for it. I suppose that, in a nut shell, sums up my morning comments. I stick my head into the dirty details so you don’t have to. Some of the dirty details that had traders selling yesterday were the disappointing export numbers. Based on the export pace thus far it would appear as if the USDA is overstating the potential final export figures. The conventional wisdom is becoming that the USDA will end up cutting at least 50 million bushels from the current export projection. The ethanol picture is also looking less than rosy with the weekly production numbers coming in at the lowest level in 21 weeks. Ethanol stocks continue to run higher than they have in past years and as a result profit margins at ethanol plants are slim to none and the spread between gasoline and ethanol continues to widen as evidenced on the following chart. On the following chart the spot gas futures are the black line while the spot ethanol futures are the red line. In other pertinent news, the price is now set for revenue crop insurance with the February average of the December corn futures coming in at $5.68. From where I am sitting this morning it appears as if the market will probably have a tendency to drift sideways to lower until we get to the March 30 projected planting report. That should be a market mover and then shortly after that we will start living and dying with planting progress reports and weather forecasts. Look for a volatile summer but if we get decent weather ultimately I would expect corn to trade much lower than current levels.
Technically, all three of my indicators are bullish both old and new crop. Looking at the December futures we have the next resistance level at $5.70. We have banged into that the past couple of sessions and if we could muster a solid close above it the next resistance level then becomes $5.82.
SOYBEANS: 5 lower
The funds kept their string alive as they have now for fourteen straight sessions been net buyers of soybean futures. They picked up an additional 4,000 contracts yesterday while at the same time being net sellers of corn and wheat contracts. I suppose the bad news yesterday was the weekly export sales were on the disappointing side although we did see China pick up some more beans. The Revenue Crop insurance is based on the average daily close of November futures during the month of February so we can now confidently predict that the base number will be $12.55. A little news out of South American where our attaché is estimating the size of their bean crop at 70 MMT, that is down from the last USDA number while still being higher than many of the projections being made by private analysts. I don’t see any way that we can avoid beans being a very volatile commodity in the coming months and if I had to bet right now I would bet that we have additional upside in the new crop beans before this thing is all over.
My technical’s are unchanged in that all three of my indicators are bullish the old crop and new crop futures. What was real cool yesterday is that on the bar chart we had an outside day higher. In other words the session yesterday traded both lower than the previous day’s low and higher than the previous day’s high and closed above the previous day’s high. With this chart formation we get a higher market the following day better than 80% of the time. The next resistance level in the November futures is a lofty $13.41.
WHEAT: HRW 2 lower HRS 4 higher
We have sanctions on Iran but yesterday we sold them HRW and the deal was allowed to go through based on a “humanitarian” allowance. Don’t get me wrong, I am glad we sold some wheat but what freakin good is a sanction if we keep make allowances for it. I thought the purpose was to make them miserable and bring them to their knees and make them behave in the world community. On a positive note I have decided that if the government can make allowances and still consider the sanctions in place and not violated so can I. I am proud to announce this morning that effective at midnight tonight I am going on a 40 day fast in which I will only drink water. Of course I will make “humanitarian allowances” and eat when I am hungry but under the governmental rules I will not be cheating on my 40 day water only fast. I will try and give you periodic updates on my water only fast as my strength allows. Exports are still running pretty much in line with the USDA projections.
Technically all three of my indicators are positive for old and new crop Kansas City futures as well as Minneapolis new crop futures. The old crop Minneapolis still has two of the three indicators in the bull camp at the present time.
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.