“If you can keep your head when all about you
Are losing theirs…” Rudyard Kipling
September 26, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 5 higher
For some reason I have been thinking about Rudyard Kipling and especially his poem If the past few days. I suppose it is because so many traders are “losing their heads” so to speak. Of course the line in the poem that goes “If you can make one heap of all your winnings. And risk it on one turn of pitch-and-toss,” probably applies to folks that have not had a good risk management plan for their crop this year. Anyway, enough of my trip to poetryville. We have a couple of stories unfolding in the corn market. The first one is in the 2011 crop where the attention as of late has been on stories of better than expected yields, pressure from the outside market and rumors of Chinese buying. Friday was the unofficial start of the new crop 2012 games with Informa releasing their initial estimate of planted acres for 2012. They put out a number of 94.3 million planted acres of corn for next spring. If we do a little math and make some assumptions this would seem to project a harvested acres number of 86.8 million next fall. Toss in a 160 bu/acre yield estimate with a 650 carry-in and use a total demand number of 13335 and you end up with a 2012/13 carry-out of roughly 1.2 billion. If that is the case you could see the 2012 December corn prices drop a buck from these levels when it is all said and done. Now, as for the 2011 new crop, we didn’t really have any fresh news over the week-end. As we saw the market trade lower last night we saw technical buying come in and support this market. As you know, last week I said the next level of support that I see in the December 2011 corn futures is at $6.20 and it appears to me as if we have some bottom pickers coming into this market trying to get it bought and ride it for a bounce. Look for that type of buying to appear again today and as long as that keeps us supported above $6.20 that is a good thing. Ultimately we will see this market go back to trading yield and demand, i.e. Chinese rumors as well as the outside market and at this juncture most of that stuff is still bearish.
SOYBEANS: 8 lower
In overnight trade we have the Chinese soybean market down $0.34 while in Malaysia palm oil is down as well. Here in the USA reports of better than expected soybean yields continue to keep pressure on the market. For heaven’s sake, even the announcement of a sale of beans to China on Friday couldn’t breathe life into this market. The general consensus seems to be that the large South American supplies are going to absorb the majority of the Chinese demand. The Informa report places the estimated 2012 soybean planted acres at 75.8 million, up 800,000 over the 2011 crop year. Again, if we use the assumptions that the trade has been running with as of late that would project a 2012/13 carry-out of just under 130 so any production hiccup could blow that market up. The technical indicators are all bearish. The Fibonacci numbers would tell me that the next target in the November beans is at $12.15
WHEAT: 4 higher
We will get the final 2011 wheat production numbers on Friday and right now the trade is expecting that the USDA will show a reduction from their last estimate. If we couple a reduced production number with the ongoing drought concerns in HRW country that may be enough to help us locate a bottom in this market and have an area from which rallies can be staged. As you can see on the following December Kansas City futures chart, we appear to be having a bottoming action.
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.