September 29, 2011
By: Craig Haugaard, Grain Origination Manager
There is a school of thought that a monkey throwing darts at the stock listing could do as well at picking stocks as an expert analysis. In 1988 Wall Street Journal put that to the test when they had a 100 stock portfolio selected by throwing darts at the financial pages and one selected by experts. In the end 61 of the stocks picked by the experts performed better than those selected by the darts so I suppose the experts are marginally better than random chance. The reason that I mention this is that we are seeing such a wide range of guesses coming into to morrows report that I think a monkey with a dart could probably be as accurate. In looking at the range of guesses on the 2011/12 stocks number I am seeing guesses range from 880 million to 1.12 billion. The trade is clearly nervous as reports of good yields continue to come in. This nervousness is also fed by uncertainty in Europe where the battle over Greece and the plan to bail them out seems to be heating up again. This is having the effect of strengthening our dollar which in turn makes us less competitive in the export markets. In the not too distant past we have seen a 900ish carryout give us futures prices of about $5/bu. so the idea that we can’t go lower from here is probably not well founded. My technical indicators are all bearish and I am thrilled for those of you that sold when the technical sell signals were given this year. In looking at the charts you can see that we have an area at $6.20 in the December futures that has provided some support in the past but in looking at the Fibonacci support levels you can make a case that this could to $5.75 and if that doesn’t hold the next number up is $4.98.
SOYBEANS: 6 lower
I dreamt last night that I wrote a movie script about the action packed life of a grain originator. As best as I can recall this morning the script went something like this. The scene opened with the actor playing me seated in his palatial office. It appeared as if I was being played by either Paul Blart or Brad Pitt, couldn’t quite make it out but either way it was some guy whose career is dead. The phone rings, I answer it, “Wheat Growers.” On the other end the guy says, “Is this Craig?” I answer, “Yes, how can I help you?” Other end, “Just wondering when the prices are going to go back up?” Me – “How are your yields running?” Other end – “A lot better than I expected, this is going to be a good crop.” Me – “How about your neighbors?” Other end – “Yeah, sounds like they are pretty good to.” Me – Suffocating an internal scream and then respond, “Yeah, that’s what I am hearing from the rest of the Corn Belt as well.” Other end – “So when do you think it will go back up?” Then some weird stuff with midget ninjas took place and the rest is kind of foggy. The fact is that most of my phone calls yesterday went pretty much as described above and the problem is that the whole Corn Belt keeps reporting better than expected bean yields. It has gotten to the point where some traders are now considering the possibility that the USA stocks could actually be building. Right now I believe the 2011/12 ending stocks are projected at 165. Is it possible that the crop could be large enough to move it to jump it all the way to a 260 type of number? That would take a national average yield of 43.5 bu/acre. How many of you are seeing yields in that area? I will bet most of you and at this point I would like to point out that traditionally other Corn Belt states have better yields than we do so perhaps a 43.5 is possible. If in fact we end up with a 260 type carry-out I would like to remind you that we have seen carry-out projections in that range as recent as 365 days ago. I should also remind you that when we were trading that number a year ago the November 2010 soybean futures on September 29, 2010 closed at $10.99. I am not saying that beans can’t go higher but when we are in the midst of harvest and everyone’s beans are yielding better than expected the odds for a bull move get pretty freakin slim. Technically, all three of my indicators are bearish and the Fibonacci numbers are showing at $12.12 and then $11.68.
WHEAT: HRS - 10 higher HRW unchanged
We went through a bunch of fundamental news in this space yesterday and without exception it could be viewed as bullish. None of that mattered yesterday as corn drug wheat lower and a general flight from commodities had funds being aggressive sellers. I think that in the days ahead we will see the domestic stocks shrink and the potential for the HRW country drought to impact next year’s yields cannot be denied. For now none of that matters much as this market seems to be taking its lead from corn as well as other outside influences. All of my technical indicators are bearish Kansas City wheat with two of the three being bearish Minneapolis as well.
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.