Corn: Fundamentally, things are looking up for the corn complex. After Friday’s surprise increase in stocks, the market has been unable to move lower. Concerns are growing that demand is not being rationed at the current price for both ethanol and exports. There are rumors that commercials have a lot of inventory bought for January, but they are already allowing producers to deliver on contracts in December. This could shorten up their book and require them to become more aggressive on cash procurement as we move into the end of December. Expectations are still very high that new crop corn will have to stay competitive in order to assure adequate planted acres. It should be noted that Dec2011 corn contract hit $5.40 today, which is still 22 cents below its contract high. We believe the odds are still better than 60/40 that the market will test and perhaps make new highs before April 1, 2011.
Soybeans: The soybean complex has experienced a very strong surge of price activity. Just like corn, it started weak in overnight trading and then found strength all day long. The March contract tested $13.10, which had been recent overhead resistance. The technical picture for soybeans is very similar to corn. It has been up for a significant number of days and most of the momentum indicators are getting top heavy. Even if you long-term want values to go higher, a correction over the next two weeks would be a necessary cleaning function. The big news is China did not raise interest rates over the weekend. Bank margin requirements did increase, but it does not have the same impact on borrowers as raising interest rates. With inflation at 28-month highs, the government is getting very nervous about inflation. It wants to control it without tanking the economy. I have to say the soybeans look a little more fragile than the corn complex. I would not be surprised to see them break first. Remember, the Nov 2011 objective is $13.25; the market is currently at $12.16, allowing producers time to sit back and wait.
Wheat: The wheat complex continues to get firm under concern about global supplies. Primary producers like Argentina are still having some concerns about yield. As long as this concern continues to be in the market, it appears wheat has the ability to stay firm. At this time we assume those following our recommendations sold all the new crop wheat [we’ve recommended] on the books at $8. We suggest that those who have sold more than 50% of expected production need to invest in some short-term upside call protection just in case the market gets the idea that supplies are going to get too tight due to reduced global yield and inflation influences.
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