It is no secret that the news that has dominated since Friday evening is the downgrading of the United States from AAA to AA+.  With this downgrade we now have the same credit rating as that economic powerhouse, Belgium.  In overnight trade stock market indexes around the world as traders worry about the credit downgrade as well as the ongoing concerns over Chinese inflation and European debt problems.  As I write this crude oil is down $3/barrel and the dollar is weaker as well.  I look for this story to dominate today and the end result will probably be lower prices.

August 8, 2011
By: Craig Haugaard, Grain Origination Manager

CORN: 14 lower

If the credit downgrade continues to create pressure from the outside markets it is probably a no brainer to expect that this pressure will enter the corn pit as well.  With crude oil down sharply one would also expect this to exert pressure on the corn market.  In non credit related news we had generally scattered rains over the Corn Belt this week-end with something in the area of 60% coverage.  This coupled with what appears to be a return to more normal temperatures will probably be viewed as negative as well.  Having said that I must also report that this week-end I again received pictures of corn in IA and IL that had pollination problems with one private analyst now coming out with a 152 bu/acre national average yield.  Thursday we will get a fresh USDA number to play with although it is interesting to note that for the last seven straight years the USDA number in August has come out higher than the average trade guess.  My fear, however, remains the world economy.  If we see currency devaluations and wide spread recession I am not sure what the impact on commodities will be but it worries me and as I sit here this morning nobody is assuring us that recession and currency devaluations can’t occur.  Since I cannot tell you what the impact will be I will continue to do what I have done recently and rely on the technical indicators to tell me when it is time to take action in this market.  Right now two of my three technical indicators are bearish.

SOYBEANS: 20 lower

The pressure from the outside markets combined with ideas that we are now experiencing better weather forecasts should put some pressure on the bean market today.  We have the USDA report coming out on Thursday which should give us some fresh direction.  It is interesting to note that, unlike corn, in 8 of the past 9 years the USDA August number has been lower than the average trade guess.  Technically, all three of my indicators continue to be bearish.  Keep an eye on the November futures chart.  We need to find support in the $12.90 area or we will be breaking to the downside from what has been a several month sideways trading pattern.

WHEAT: 12 lower

There is concern that the ongoing drought in South West may negatively impact winter wheat planting if it doesn’t break.  I believe that September is when that crop gets planted so this will be a story worth keeping an eye on in the coming days.  Once you get outside of the USA there seems to be plenty of wheat and the expectation is that the USDA will increase world wheat production in the Thursday report.  We may have had a small taste of that on Friday when Ag Canada estimated their crop at 23 MMT, up from the 21.5 MMT that the USDA has been using.  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.