It is with more than a little embarrassment that I reveal publicly for the first time that the first vote I ever cast for president was in 1976 and I cast that vote for Jimmy Carter. Although I wax nostalgic for those days from time to time one thing that I don’t miss are the financial conditions of those days. With that background I think it is worth noting that yesterday we did something that we have not done since Jimmy Carter’s presidency. Yesterday, for the first time since February 22, 1978 the DOW closed lower for the ninth day in a row. The reason that I mention this is the growing fear that we may be on the cusp of major worldwide financial problems and I wonder what impact that may have on commodity prices. Perhaps the best guide is to look at the CRB index and note that in 1978 and 1979 we saw the index work higher. Corn also worked higher during that time frame with the spot futures going from a low of $1.80 ¾ on August 1977 to a high of $3.98 in December of 1980. As you can see on the following monthly CRB chart we now have a sell signal, the question yet to be answered is what impact this will have on grains.
August 5, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 8 lower
A soaring US dollar, collapsing crude oil prices and a bearish Informa report all worked together to push prices lower yesterday. Fear from the outside market appears as if they will be adding pressure to the market today as well. Perhaps the biggest surprise was the Informa report which came on the heels of other analysts who were projecting yields in the 152 – 153 range. As you can see in the following table, a national average yield of 158 would result in very little draw down in the stocks and as a result very little need to ration demand.
From a technical perspective yesterday’s session coupled with the just concluded night session really didn’t change anything as two of my three technical indicators are bullish.
SOYBEANS: 8 lower
The Informa numbers for beans should have been a little supportive so it was kind of interesting to see the reaction to them. One thing that they also did was tweak the export numbers to reflect slower demand. With their reduction in bean acres and yield and an adjusted export picture the supply and demand charts look as follows:
Technically, this market has been in a sell mode as noted in my pre-opening comments of July 29 so those of you that are following that should have gotten some sales of at a better level than we are seeing this morning. Having said that I don’t see anything yet to make me think we are breaking out of the choppy trading range we have been in for months.
WHEAT: 8 lower
The world financial markets helped to contribute to a very disappointing day in the wheat market as well. The Informa numbers came out pretty close to what the USDA has been projecting with all wheat pegged at 2117 versus the 2106 that the USDA released last month. I spent yesterday talking to farmers and riding in combines which re-enforced what we were already seeing, that the harvest can best be termed as disappointing this year. With that in mind we still need to make sure we are keeping the entire wheat world in mind and not trading our backyard. As I look around the world right now I see us continue to lose export business to Russia and yesterday even Romania sold wheat to Egypt for $40 MT less than what the USA was offering. I don’t know how long that region of the world will undercut us but for now that is the reality and couple that with the potential for a general commodity sell-off driven by poor world financial markets and it is hard to be short term positive. Having said all of that the key to this market right now is probably the direction of corn and outside markets. Technically, two of my three of my indicators are now bearish
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.