August 12, 2011
By: Craig Haugaard, Grain Origination Manager

CORN: 1 lower

The manner in which the research for yesterday’s USDA report was conducted would seem to indicate that they took the threat of loss from the hot weather very seriously and that was reflected in yesterday’s report.  It is interesting to note that since 1988 the USDA has on seven other occasions, other than yesterday, reduced the projected production number from what was used in the July report and in each of those seven occasions the actual final yield has ended up being larger than what was projected in the August report.  Looking at the carry-out numbers it appears as if we need to ration off about 1 1/2% of the feed demand which should be supportive to prices this winter.  Could the March or May 2012 futures challenge $8/bu. as we ration this crop? Technically, all of my indicators have turned bullish.  In the December futures keep an eye on the $7.22 ¾ level.  To get another leg higher we will need to take that out and thus far have failed to do leaving one to wonder if we are at the top of the trading range or on the verge of something bigger?

SOYBEANS: 2 higher

After looking at yesterday’s USDA numbers one is left to conclude that South America better have one big freakin crop or this market could really take off.  As it is the USDA had to reduce usage by 100 million bushels in order to come up with a 2011/12 carry-out of 155 and at 155 we certainly don’t have much breathing room.  It was interesting to see a climatologist come ought yesterday and predict that South America will have their crop threaten by La Nina in their upcoming growing season.  Even if they have a normal crop I don’t see any way that this doesn’t continue to tighten like a noose around a condemned man’s neck. (I watched a western last night) With that tightness we will continue to see a very volatile market.  Now, having said all that bullish stuff here is the deal.  So far we haven’t done jack squat in this market in terms of dramatically altering the trade parameters.  As I look at my beloved charts I see that we went down and hit the bottom of the multi month trading range on August 9 and are still a long way from the top of the trading range (roughly $14.11 in the November futures.)  After chopping around in this broad range since late last year I am more than ready to see this market break out.  The problem is that so far I don’t think what we received yesterday will be enough to break us out of the top end of the range.  Thus, unless conditions change I am personally going to lay in another sell order at the top end of the range and see if I can get a little more hedged up there.

WHEAT: 5 lower

I think the only folks that got excited about the wheat report yesterday were spread traders.  If you look at what the USDA did with the ending stocks number we see the following:

It seems pretty clear to me to me that we will see traders buying HRS and HRW and selling SRW on a spread trade.  From a world perspective the USDA increased worldwide production by 10 MMT and the world carry-out by 6 MMT.  I suspect we will see the FSU continue to have a fire sale on Black Sea wheat although the way in which they are pricing their wheat seems irrational to me. On the other hand, in 2000 I spent a month in Russia and most of what they did seemed irrational to me so this should not come as a big surprise.  It might have something to do with the vodka bottle on the breakfast table.  The last couple of sessions have turned all of my technical indicators higher and I continue to look for wheat to follow the price direction of corn.

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.