April 12, 2012
By: Craig Haugaard, Grain Origination Manager
CORN: 2 higher
I am in Chicago for a Risk Management Conference put on by the CME and spent yesterday morning at the Board of Trade. While there I had a broker tell me that he could tell me where the December corn futures were going to close on September 30th. When I pressed him a bit he said, “If we have good weather the price will be at $4.62 ½.” I posed the same question to another broker and was told, $4.65. That probably sums it up pretty well. If we have good weather this summer the new crop futures have pretty significant downside from the current level. I should add that they both remarked that if we see production problems we could see December futures at $7.00. In the afternoon I heard the President of World Weather speak and if he is to be believed we will see some production problems this summer. For the western Corn Belt he is looking for April to have below normal moisture with May and June to also be warmer and drier than usual. When I asked him specifically about South Dakota his remark was that we were going to be dry this summer. The caveat to all of this is that according to him the intensity of our drought will be determined by the amount of rain that we get in the next four or five weeks. One interesting thing that we have noted in our trade area but that seems to be nationwide is the slow pace of new crop sales this year. The national average appears to be less than 10% of the expected 2012 new crop harvested has been sold which is well behind the pace normally expected for this point in the year. We are also seeing old crop corn in strong hands. The Director of Grain Research for Newedge, USA noted that he expects to see the inverse between old crop and new crop to start to become less and that if corn is to move basis will have to do the work. If he is correct then a hedge to arrive contract at these levels and setting the basis latter may make sense. The big question is, “Is he correct?” In other corn related news I see that we had pretty good weekly ethanol production numbers again. At the current rate of usage it looks as if we are on track to use 75 million more bushels than what the USDA is currently projecting.
Technically all three of my old crop indicators are bearish while all three of my new crop are bullish at the present time. In looking at our old buddy Fibonacci we have resistance in the May futures at $6.76 and $7.04 with support around $6.32. In the December futures we have very solid support at $5.23 with resistance at $5.55 and $5.75.
SOYBEANS: 6 higher
The same broker that gave me the $4.62 ½ December corn price also projected that, given benign weather, November beans will close at $12.92 on September 30th. I then spent the rest of the afternoon listening to a parade of speakers that were all fairly bullish beans. In light of that it is interesting to note that two of my three indicators are bullish old crop but at the present time all three of my indicators have turned bearish new crop beans. With the tight supply situation and good demand I suspect that the downside is severely limited and continue to believe we have more upside than downside at the present time. Fibonacci is showing me initial support in the November futures at $13.42. Frankly I would be surprised if we drop that low at the present time but if we do we should find solid support there.
WHEAT: 2 higher
Wheat is trading as a feed grain and with the superb crop ratings that we are seeing coming out of winter wheat country look for wheat to continue to lose ground to corn. Chicago May wheat futures are already trading at a discount to May corn futures and I would not be surprised to see the July futures head that way at some point as well. I heard the Vice President of ADM Investor Services speak yesterday and his take was that new crop Chicago futures will be at $5 at harvest time. If he is correct that will probably put new crop Kansas City futures around $5.20.
Technically in the Minneapolis futures two of three indicators are bullish for both old and new crop. In the Kansas City market all three of my indicators are bearish both old and new crop 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.