Grains Rally On Light Volume
Dec 22, 2011
The grain markets have soared this week aided by drier South American weather,
a weaker dollar index, and positive economic news. The Dow Jones index has rallied
308.63 points to end the session Thursday at 12,169.65. Oil has raised $5.43 a barrel by
the end of trade today to settle at $99.83. Gold has found support after a sharp sell off
last week closing today at $1,605.60, which is up $9.60 an ounce. A modestly weaker
dollar index has added strength to a commodity rally this week.
Corn settled at one-month highs today after rallying for the fifth consecutive day.
The March contract has tacked on 34 ½ cents to finish at $6.17 ½ today. A drier, hotter
forecast for Argentina and Brazil came out mid-week and pushed the market higher
hitting pre-placed buy stops along the way. Assisting in the rally was a weaker dollar
index and better than expected export sales. Export sales were reported as 715,000 MT,
which is up 42% from last week.
Soybeans have enjoyed a six-day rally while managing to gain 32 ¼ cents this
week to close at $11.62 ¼ on the January contract Thursday. The drier weather in South
America is helping the rally as is a weaker dollar index. The market is currently butting
up against a couple of key technical resistance levels in the $11.60-11.70 range. Export
sales again beat expectations at 653,400 MT, which is up 39% from last week.
Wheat had the biggest rally of the week and is up 39 cents on the March CBOT
contract after the session Thursday. The grain benefited mostly from a weaker dollar
index and an improved global economic outlook. Fundamentally, there is still a large
world supply, especially feed quality wheat, which will cap further advancements.
Export sales continue to be mostly routine business and were reported as 362,300 MT,
which is up 14% from last week.
Santa Claus appears to have visited a little early from a producer’s standpoint
with double-digit rallies in the grains complex this week. South American weather is
adding a premium into the market, the dollar index is weaker, and a better global
economic situation is shaping up. All in all, the last few days of the year has offered up
some pretty good prices before attention turns to the January USDA reports.
Brock Schimbeno - Grain Hedge
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