August 19, 2011
By: Craig Haugaard, Grain Origination Manager

I have not run a good old drought chart for awhile so I am probably overdue.

CORN: 3 higher

Sometimes what happens in “the market” has very little to do with what we have traditionally thought of as the market.  The grain market was a great example of this yesterday.  If you thought that the grain market was trading grain fundamentals yesterday you would have been sadly mistaken.  We were reacting to the outside markets and frankly they are not very encouraging.  We had a story in the Wall Street Journal that the NY Fed was worried about US bank exposure to the US debt situation.  Morgan Stanley was out there suggesting that the USA and EU were dangerously close to a recession.  Across the pond we saw Germany reject a proposal to go along with a Euro-bond that would bring all of the financing of the financially weak EU countries access to cheaper borrowing costs.  At the same time Finland was demanding collateral before they would toss in any more bailout funds for the weaker EU nations.  Looks to me like Germany and Finland are just trying to be responsible in a world that seems to be going mad.  Anyway, all of this led to the dollar being sharply higher, stocks markets around the world doing a swan dive and crude oil plummeting.  This all combined to create an atmosphere in which grains were on the defensive for the day.  In fact, all things considered, grain actually hung in there pretty well.  As you can see on the following corn/crude oil chart, corn (red line) actually separated itself from crude (black line) pretty well.  Had we bothered to trade the actual corn news we would have been paying attention to the Informa crop tour in Illinois which found some pollination problems as well as some tip back problems.  The big fear of the trade has been that we will see the USDA lower the projected yield again and we may end up with 150 bu/acre national average yield or less.  At the same time we are also seeing an ethanol situation in which it appears that we would need to run cash corn to $8.00 or better around the USA to ration off demand.  With those kinds of cards on the table I would look for this market to continue to be very volatile with the possibility for more upside potential still very real.  Technically, two of my three indicators are still bullish.

SOYBEANS: 3 higher

Here is a hot piece of breaking news for you.  It appears as if a truckers strike is about to kick off in Argentina.  Is there any place on earth that has more strikes than Argentina?  Between dockworkers strikes and trucker’s strikes I am amazed that anything ever moves in that place.  On the flip side our weekly soybean export sales came in at 224,000 which was well ahead of the 181,000 that we posted for this week a year ago.  Of course, the outside markets raised havoc with the bean market yesterday as well but it really didn’t close all that badly and should open higher this morning.  The reason for that is probably the certain knowledge that August weather makes or breaks this crop and right now it has been less than ideal.  Technically, all three of my indicators are bullish as the November futures continue to trade at about the midpoint of their recent trading range.

WHEAT: 6 higher

I see that Egypt bought some more wheat and to the surprise of absolutely no one they bought most of it from Russia.  Heck, Helen Keller could have seen that coming.  The only positive thing that I can see in the story is that the price was about $10 MT higher than the last stuff that they puked out of the Black Sea so maybe they don’t feel like they have to be far and away the cheapest game in town anymore.  As you can see on the drought map that I ran up above the HRW country is still is very tough shape and that alone should give us a higher open today.

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.