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Grain Hedge

RSS By: Brock Schimbeno,

Grain Hedge is a self-directed discount brokerage that saves farmers money when trading in the futures and options market. For $7 commissions per side producers can execute their marketing strategy with authority, any time the markets trade.

Are the Bears Stealing Christmas?

Dec 15, 2011

Early in the month, the markets appeared poised for a "Santa Claus" rally, but now it appears that the bears are stealing Christmas.  The Dow has fallen 315.45 points to end trade Thursday at 11,868.81.  Oil received a supply shock, stemming from an OPEC meeting, which sent the commodity down $6.18 a barrel to end trade today at $93.46.  Gold has been blistered by losses of $137.40 an ounce to settle at $1,573.40 Thursday.  The dollar index has rallied sharply higher as the Euro currency has tanked.  Agricultural commodities have been mixed so far this week.

Corn has touched 9-month lows this week and has lost 15 ¼ cents on the March contract to settle at $5.79 today.  Technically, the grain is in very rough shape after testing support in the $5.80 area.  Fundamentally, there is little supportive news and traders are anticipating the January 12th Supply/Demand and Crop Production to give the market direction.  Speaking of fundamentals, export sales were reported as 504,700 MT, which is down 27% from last week.

Soybeans have been the lone bright light in a string of dead bulbs.  The oil seed is up 4 ¼ cents this week to finish trade at $11.11 ¼ on the January contract.  Technical support has held for this market in the $11.00 area.  The sharply stronger dollar index has put a cap on any rallies however.  Demand outlooks are uncertain and ending stocks are ample.  A supportive factor comes from weather concerns in South America.  Export sales were reported as 468,600 MT, which is down 39% from last week.

Wheat has lost 16 ¾ cents on the CBOT March contract to settle at $5.79 ¾.  Fundamentally, this market is very weak.  The world stocks are near all-time highs and export competition has been stiff.  Adding to the downward pressure is the sharply stronger dollar index.  There is still a very nice premium for high-protein wheat based on the Minneapolis and Kansas City grain exchange contracts.  Export sales remain routine and were reported as 318,400 MT, which is down 25% from last week.

As we head towards the New Year it seems less likely that a "Santa Claus" rally will happen and more likely that the bears will steal Christmas.  Supportive news has been few and far between for the markets of late.  Technically, we are sitting near some key support levels which will be important to keep an eye on.  Light volume and choppy trade should be expected heading into the New Year.

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