August 25, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 4 lower
I think that I have been spending way too much time reading about, thinking about and being immersed in corn ratings and crop production projections. Like many of you I have been reading all of the stuff coming out of the universities as well as looking at the projections coming out of the Informa and Pro Farmer crop survey tours. Apparently I have obsessed to where it has moved into my sub conscience and last night showed up in my dreams. I dreamt that a corn plant was doing the limbo while Chubby Checker danced around singing, “Corn go unda limbo sticks, all around the limbo clock, hey let’s do the limbo rock.” After that it got really strange, but I digress. I suppose in a way limbo is not a bad metaphor for what this market has been doing with each piece of news seemingly sending the market ratings lower and lower. (See I actually can tie limbo and the corn market together.) I think what triggered last night’s nocturnal adventure was the reports that I read about the Pro Farmer tour projecting that the yield in Indiana will be down 17% while the USDA has them factored in for a yield that is only down 5% from last year. The tour found areas in Illinois where there projections are 33 bu/acre less than what they were a year ago for that same area. Over in Nebraska the tour is projecting yields to be down 3% from last year while the USDA is projecting an unchanged yield for that state. So, yeah, I am long term bullish but that doesn’t mean we won’t have setbacks along the way. In fact, in spite of all of the bullish news the fact that we closed a touch lower yesterday and were lower in the overnight session makes me wonder if we are getting set up for a technical sell off. If so the first line of Fibonacci derived support in the December futures comes in at $7.08 while the resistance still lurks up at $7.80.
SOYBEANS: 5 lower
When the smoke cleared yesterday and the tour results started coming out it was interesting to note that overall pod counts are not down as much as corn yields appear to be. The Stats Canada report also projected canola production at 13.2 MMT, up from the 11.8 MMT of last year and this seemed to exert a little pressure on the market. Longer term this is going to be an exciting market. This is especially true if the Oil World report that I referenced yesterday is accurate and South American acres get shifted to corn. Technically, all three of my indicators remain bullish although, as noted yesterday, we are at the top of the trading range and my indicators are looking a little oversold. If you are going to have beans that need to come to town at harvest time I would look pretty hard at the current opportunity.
WHEAT: HRS 10 lower HRW 5 lower
Minneapolis wheat got the stuffing beat out of it yesterday, in large part by spread traders who looked at the premium Minneapolis wheat has been commanding to the Kansas City and Chicago wheat and said enough is enough. As you can see on the following chart, the only time in the history of the futures markets that Minneapolis ahs traded at a larger spread was in the epic market of 2008. The other factor at play, and one we mentioned in this space yesterday was the change in focus from domestic to international. As long as we stay provincial in our outlook and only talk about drought in HRW country and poor yields in HRS country we can keep feeding the bull. When, however, we look outside of our borders, it becomes more difficult to keep the bull running. Yesterday was a good example of this with the news focusing on the Stats Canada report which pegged their wheat crop at 24 MMT, well above the 21.6 MMT that the USDA has been using. The same report showed planted acres in Canada up 9% over last year. The large Russian export program also caught more attention yesterday with reports now suggesting that the Russian carry-in was 20 MMT rather than the 16.7 MMT number the USDA is using. Finally, reports seem to indicate that Russia will export 22 to 23 MMT, well above the 17 MMT that USDA has them factored in at and light years beyond the 4 MMT of last year. The recent action has turned two of my three indicators bearish Minneapolis HRS wheat while one of the three has turned down on Kansas City HRW wheat.
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.