September 21, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 2 higher
We were better right out of the chute on Tuesday as the impact of another decline in the crop ratings coupled with persistent rumors of Chinese corn purchases stirred bullish sentiments. As the session dragged on and no business with China was confirmed the enthusiasm waned and the market drifted lower. Also weighing on corn is the current wheat/corn spread, shown on the following chart, which would seem to argue for record feeding of wheat this year. For example, feed wheat from Australia is being offered into Asian markets at a price that is $45/MT less than what corn from the USA is being offered into those same markets at. I think in the coming days the potential market movers in this market will be the EU economic situation, the yield reports coming out as harvest progresses and potentially unrest in the Middle East. We have no way of knowing how those stories are going to break but for now I am heartened by the way that the market bounced off of the support level and the fact that one of my three technical indicators has turned bullish.
SOYBEANS: 1 higher
We opened stronger yesterday but then as the debate over how much damage was actually caused by frost in the upper Midwest took place we saw the market retreat. There is a school of thought amongst traders that says the frost only burned the tops of the plants without doing any significant damage to yields. Time will tell if that is the case or not but yesterday that argument seemed to be carrying the day. Since our high in the November beans at $14.65 on August 31 we have seen the price drop well over a dollar and yet the funds are still long 162,000 contracts as we kick of the start of trading today. I am trying to figure out if that really means anything but I find it somewhat interesting that they are still that long after the set back this market has experienced. Technically, two of my three indicators are bearish. We have huge support in the November beans at $12.84 with resistance currently at $13.60 and $13.80.
WHEAT: 2 lower
They are starting to plant HRW down south and the trade is watching that progress or lack thereof. At the start of the week the HRW crop was reported as 14% planted, lagging the five year average of 20% for this date. It was interesting to see that Texas is 8% planted thus far versus their average planting pace of 21% while Oklahoma is at 4% versus their five year average of 16%. It will be interesting to see if this lag in planting progress turns into lost acres due to the ongoing drought. The threat of drought in the Ukraine also seems as if it has captured the attention of some in the trade. The problem is that we have to balance this type of news against an increased world carry-out and cheaper wheat being offered in the export market. The best way that I know to stay in tune to what set of fundamentals are driving the market is to watch how the fundamentals are reflected in the technical indicators. My technical indicators continue to be bearish for both Minneapolis and Kansas City futures. Having said that I am encouraged at the way in which we have found support at the $8.43 level in the Minneapolis December futures. If that level of support holds it opens the door for a technical bounce from that area. As you can see on the following Minneapolis December futures chart, the technical indicators appear to be getting oversold and that coupled with the Fibonacci support level hold could portend a small rally from this level.
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