September 20, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 11 higher
The market started out getting stomped on yesterday as the negative pressures of the outside markets sapped any bullish enthusiasm that traders may have still been clinging to. Then the darndest thing happened, the December futures dropped to a low of $6.76 ½ and suddenly there were buyers? Why? In short because I told you that we should have support in this market at $6.77, so I missed by half a cent which ain’t too bad. Now, did I say that we should have support at $6.77 because I am some sort of incredibly handsome and talented marketing guru? Nah, I couldn’t even sell that story to my wife. The reason I said that we would see the market supported there is because that is what the Fibonacci numbers told me would happen and as those of you that have been following along closely this year know, the technical indicators have been extremely accurate as of late. So, we hit the support level and then bounced. Of course, the official reason that we bounced is that we are now low enough that USA corn works pretty well into China. Corn in the Dalian futures market is trading for roughly $10/bu. and it appears as if the Chinese may only have about 15 MMT in reserves and allegedly would prefer to have closer to 45 MMT on hand. The thought is that we may very well see China step in and become a significant buyer in the near future and that ladies and gentlemen is why prices were working higher into the close. Now this does not mean that we are out of the woods yet. The fact remains that the harvest reports continue to come in better than expected. This could obviously change, according to the crop progress report last night we are only 10% done with corn harvest so these tales of good yields could still shift to something less than glorious. The financial fiasco in Europe may strengthen the dollar which would be a drag on commodities and the world is still awash in feed wheat. Finally, I would be amiss if I didn’t mention that two of my three technical indicators are still bearish. Having said that, I liked the way we bounced off of the support level yesterday and follow through to the upside in the overnight session. Now we need to see if we can turn that into upside momentum.
SOYBEANS: 13 higher
Good early yield reports and fears of the European economic situation kept pressure on beans throughout the session yesterday. After the close the weekly crop conditions report showed the crop declining from 56% good to excellent last week to 53% good to excellent this week. Virtually that entire decline came in the frost stricken upper Midwest where the good to excellent category in Minnesota and South Dakota declined by 10% while in North Dakota it declined by 9%. Although exports have been a little slow as of late we will want to keep an eye on China where they are experiencing record high hog prices. In fact, it appears as if Chinese feed production in August was up 17% over feed production last August. If they keep cranking away on feed production it may turn out that their imports of soybeans will be larger than the 56.5 MMT that the USDA currently has factored in for them. From a technical perspective two of my three indicators are bearish.
WHEAT: 10 higher
I have a couple possible rays of sunshine for you. First, it looks as if we are getting some support in this market fairly close to where I told you it should come in and thus if this Fibonacci retracement level holds it could set the stage for a rally. Secondly, in talking to traders I started to hear more of them talk about production problems around the world rather than the constant drumbeat of “cheap world prices” that we have been seemingly focused on lately. Traders mentioned not only the ongoing drought situation in HRW country but also pointed to dryness in Argentina as well as a drought that seems to be developing in the Ukraine. Now, not all is sunshine and roses yet. It appears as if India is exporting wheat to Bangladesh. Bangladesh has been buying that cheap Black Sea wheat from Ukraine so India probably had a major fire sale when they let this go. My technical indicators continue to be bearish for both Minneapolis and Kansas City futures. Keep an eye on the $8.43 level in the Minneapolis December futures. If it can hold perhaps we can get a bounce up from there. If that level doesn’t hold then I think you could project the futures prices to sink as low as $7.75.
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.