September 22, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 20 lower
The outside markets will set the tone for the market today and perhaps for days to come. The whole world seems on the edge of an economic precipice. In overnight trading The MSCI All-Country World Index was down 2.5 percent. The Fed is saying that they see “significant downside” to world economies. This has the dollar at 7 month highs this morning while crude oil is down sharply and gold is also falling out of bed. Finally, the Financial Times of London had an article this morning which included the following quote coming out of the IMF, “The high interconnectedness in the European Union financial system has led to a rapidly rising risk of significant contagion. This threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond.” So, the world is a scary place right now and that is going to bring a lot of pressure to the commodity markets today.
In terms of the corn market itself it occurs to me that what we may have going on is a classic case of “All dressed up and no place to go.” We spent most of the summer hearing about the feared impact of the hot summer nights and the impact that it would have on reducing yields. I think that the trade built up the expectation that yields would be reduced and now we are starting to get some actual yield reports they are indicating better than expected yields. As long as the reports keep coming in better than expected we will probably see continued pressure on this market. Longer term we still have pretty good demand around the world. In China livestock production is continuing to increase with a recent report from the Chinese government that animal feed demand will increase by 23% over the current level by the year 2015 so Chinese demand should be a story into the future. On Friday Informa will be releasing their inaugural planted acres estimate for 2012. Looking at the corn/bean spread the expectation is that they will be projecting an increase in corn acres for 2012. Technically, all three of my technical indicators once again firmly in the bear camp. With the collapse in the overnight trade the next level of potential support in the December futures is at $6.53.
SOYBEANS: 27 lower
Right now we have slow export demand and South America is sitting on a bunch more beans than they were a year ago. Toss in the negative outside markets and this market has the potential to get hit pretty hard today. The technical indicators are all bearish. We have broken through what should have been major support in the November bean market and right now I don’t see any support in this market now until we hit the $12.84 area.
WHEAT: 18 lower
Right now the folks that are talking about potential drought problems are nothing but background noise as the attention is being focused on large world supplies. With the cheap Black Sea wheat in the export market and the outside markets in free fall wheat should trade lower all day. Technically, all of my signals are bearish and I don’t see any support in the December Kansas City futures until $7.20 with the next level in December Minneapolis futures at $7.76.
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.