September 7, 2011
By: Craig Haugaard, Grain Origination Manager

CORN: 6 higher

We had a very interesting session yesterday with corn finally staging a comeback when the price of crude oil turned and started to work higher.  To illustrate the connectivity that these two commodities enjoyed yesterday I am including a five minute chart (meaning that every point on the chart represents five minutes of trading data as opposed to the full day that you would see on a normal chart) with the price of December corn in red and crude oil in black.  You will note that crude oil trades longer hours than does corn but you can see corn futures start trading at 9:30 yesterday morning and immediately dropped lower.  Around 12:30 crude oil took off and as it rallied corn went with it.  Yesterday’s pressure was largely the result of outside markets and in particular, fears over what is unfolding in the EU.  I don’t think we can count on those outside markets changing any time soon.  We live in an age that seems to be marked by uncertainty and the attendant volatility that it brings.  Once you get past the corn/crude relationship that dominated yesterday’s market we still have a couple interesting things to talk about.  During the session yesterday Informa released their production estimates.  The pegged total corn production at 12.711 billion bushels with a national average yield of 151 bu/acre.  This is considerably higher than the other private estimates that we have seen lately and if they turn out to be correct you could see the price of corn drop a buck a bushels as the need to ration would start to disappear.  Another story that seemed to be getting legs yesterday is the alleged increase in corn planting around the globe.  It appears as if these high prices are encouraging the planting of corn at the expense of other commodities in South America and Europe.  I saw one report which has corn production in Argentina up 20% for the coming year.  The Informa report also acknowledged this by increasing world corn production by 6 MMT with gains noted in Brazil, Argentina, Ukraine and Russia.  After the close we had the weekly crop conditions report which, as expected, showed further decline in the crop condition with 52% of the crop rated as good to excellent.  This is down 2% for the week and is now the worst rated crop since 2005.  That year we were rated as 51% good to excellent for this week and ended up with a national average yield of 147.9 bu/acre.  In the coming days look for the market direction to be determined by the outside markets as well as debate over which private analyst actually has their figure on the pulse of this market.  September 12 will be the next USDA report and I suppose that it goes without saying that it could be a big one.  If nothing else, yesterday’s Informa report should serve as a wakeup call to those of you that have not sold much and are convinced that the market can’t do anything but go higher.  If the actual production numbers come in at that 151 and the market drops a buck you are going to wish you had sold a little something when we were at these levels.  Having said that, my technical indicators have all turned bearish as a result of yesterday’s close.  I don’t know where this market is going but after having made a full Fibonacci move last week and then seeing the indicators turn I have to believe that selling something at this level is not the worst plan in the world.       

SOYBEANS: 7 higher

Beans were down sharply mainly as a result of pressure from the outside markets.  Unlike corn which had crude oil to pull it up from the lows beans dropped and languished lower for the session.   The Informa report with a national average yield of 41.5 bu/acre was in line with most of the other analysts so we didn’t have a story there.  In the world of exports China indicated that the high prices are causing them to delay some purchases and the weekly export inspections came in at 9 million, down from the 14.9 million posted for hits week a year ago.  Turning our attention to South America I see that Brazil is projecting that they will produce 75.2 MMT of beans this year, up from the 73.5 that the USDA is projecting.  Reports out of Argentina indicate that planted acres of beans in that nation will be up 2.5% over last year.  After the close we had the weekly crop condition report for this country and, as expected, we saw conditions slip once again.  The crop is now rated as 56% good to excellent.  That is down 1% for the week and interestingly enough is the same rating that the 2007 crop had at this point.  That year we ended up with a national average yield of 41.7 bu/acre.  As I gaze into my technical “crystal ball” I see that two of my three indicators have now turned bearish. 

WHEAT: 9 higher

Crop insurance for HRW is in the process of being set right now with the last day being September 15.  Thus far we have an average price of $8.29.  With no moisture in the forecast for the next couple of weeks in HRW country it will be interesting to see if folks plant anyway given the crop insurance price.  Right now the trade seems to be betting that they will.  The Informa report took a stab at projecting world wheat supplies and interestingly enough projected that world wheat production will be up 10 MMT from the last number the USDA was using.  If the USDA confirms that next week we will be in a worldwide situation in which the price of wheat will probably struggle at these levels.  With a lot of wheat going in to the feed market look for wheat to continue to take its direction from corn.  Technically, two of my three indicators are bearish for both Minneapolis and Kansas City futures.

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.