August 17, 2011
By: Craig Haugaard, Grain Origination Manager
After the close yesterday we had a USDA report which showed that we had 2.947 million acres of prevent plant corn, 1.421 million acres of prevent plant beans and 2.623 million acres of prevent plant wheat. There is a debate taking place in the trade over what this means exactly but at the very least it would appear to be friendly.
CORN: 1 higher
I don’t want to talk about any fundamentals at all today. We have discussed them ad nauseam and frankly they have not changed much so the heck with them. I suspect anybody that lives in farm country and still has a pulse already knows what they are anyway so let’s talk about something more exciting this morning. Looking at the action yesterday we did several very cool things. 1) We established a new life of contract high in the December futures. 2) On the bar chart we posted an outside day higher, i.e. we had a lower low than the previous day, a higher high than the previous day and we closed higher than the previous day’s high. 3) Since the new life of contract high yesterday gave us a solid close above the resistance at $7.22 ¾ the Fibonacci numbers would now suggest that the next level of resistance in the December futures comes in at $7.78. So, we don’t need to rehash the fears over reduced yield, lost acres, etc. all we need to know is that the technical indicators are all friendly so for the time being it makes sense to let this market run and see where we get to before the market tells us to make another incremental sale.
SOYBEANS: 5 higher
Beans were a little lower yesterday on ideas that moisture in the western Corn Belt as well as generally cooler temperatures will be beneficial to the bean crop. You know what? At the end of the day none of that garbage probably matters much. From a long term picture what may matter the most is the corn/bean ratio and right now that is telling us that anybody with, as my dad used to say, the brains God gave an idiot, knows that the market is telling them to plant corn next year and not beans. As you can see on the following chart, we are trading at a bean/corn ratio that is historically narrow. My slow cousin Jimmy probably said it best last night when I was visiting with him about it. I asked if he had thought about what he might plant next year. He gave me kind of a blank look and said, “Cwaig have ya seen the pwices? I was bown on Tuesday but it wasn’t today, of couwse I’m going to plant more cown.” OK, so I scratched my head a little on that one but I think he meant to say that he was born on a Tuesday but it wasn’t last Tuesday. Anyway the point is that with the December 2012 Corn/November 2012 Soybean ratio at 2.02 the acreage battle for now would seem to favor an increase in corn acres next year. With a projected carry-out of 155 this market should at least remain in the trading range that we have been talking about for the past few months. Then, if we lose a couple million acres to corn again next year this thing could get really exciting once again. We will have ebbs and flows along the way but long term you have to be a little bullish in this marketplace. Technically, two of my three indicators are bullish as the November futures continue to trade at about the midpoint of their recent trading range.
WHEAT: 3 higher
Disappointing yield reports coming from HRS harvest helped to fuel a nice bull move in the wheat market yesterday. Couple that with the prevent plant acres as report above and you have a nice friendly little fundamental story. Toss in fears that the drought in the south west may result in less HRW acres being planted and a guy could get downright friendly to this market. Yet, in the back of my mind the specter of the Russian bear pushing cheap wheat into the world market. For now we are taking a very parochial view of wheat but if we ever focus back on the world situation at large it could change the market dynamics. Right now the bull is doing the happy dance and all of my technical indicators are bullish.
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.