Bob Utterback has more than 26 years of experience and offers producers a disciplined approach to marketing.
Outside markets continue to dominate the grain markets
Dec 17, 2008
The U.S. dollar was down, which is fueling concern that export demand could improve next year. While in normal times I would not disagree with this observation, I believe the bulls are not given enough credit to the negative influence of the domestic and global economy. Right now I believe producers will be lucky the first half of 2009 if we can get export close to USDA expectations!
The other big news today was in the crude oil market. The expectation going into today’s trading was that we would get a 2 billion-barrels-a-day reduction by OPEX. The actual number was 2.2 million barrels. This brings daily production down 4.2 million barrels for the year. The market’s reaction was lower crude prices. This goes to show you that demand remains weaker than expectation.
The third driver in the outside markets was the equity market which was up sharply yesterday; today the market spent most of the time in the negative category. The tone of the market is positive but not explosive.
Of the three main outside market influences, the decline in the U.S. dollar has been the most cited as reason for the corn rally. Please note that, since the Dec. 5th low in March corn (at $3.05), it has now rallied more in 12 business days and that’s more than the yearly net change we saw from 2000 to 2007. Boy has the market changed!
My Bias: $4 March corn was an excellent price to sell inventory. We suggest that producers who have cash commitments for January move now rather than wait. As for beans, China continues to buy aggressively to rebuild stocks. While I expect this will hurt demand next fall, right now it’s positive. I suggest scale up selling of old crop inventory above $8.75 for any necessary January sales. The wheat market has been on fire the last couple of days because of concern about cold weather on wheat stands. While there has been some impact, it’s more than likely less than the trade talk suggests. The simple fact is wheat was oversold and due for a bounce. However I would be very cautious on getting too bullish for wheat. We have adjusted some of the low-priced hedge recommendations and are simply waiting to sell into the February to March time period. The hogs and cattle were slightly lower; but, overall, in a quiet holiday trading pattern. Our concern continues that, if any further cracks in demand are seen, we will have to see lower values.
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THE RECOMMENDATIONS AND OPINIONS CONTAINED HEREIN ARE BASED ON INFORMATION FROM SOURCES BELIEVED TO BE RELIABLE. HOWEVER, THAT INFORMATION MAY BE INCOMPLETE AND UNVERIFIED. THERE ARE NUMEROUS FACTORS THAT CAN AFFECT THE MARKETS THAT CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF THIS EMAIL, AND RECOMMENDATIONS OR OPINIONS CONTAINED THEREIN. THOSE FOLLOWING THESE RECOMMENDATIONS/OPINIONS DO SO AT THEIR OWN RISK. THE FIRM AND/OR CUSTOMERS OF THE FIRM MAY TAKE A POSITION THAT MAY BE INCONSISTENT WITH THE RECOMMENDATIONS AND OPTIONS CONTAINED HEREIN. ANY RECOMMENDATION/OPINION DOES NOT CONSTITUTE AN OFFER TO BUY OR SELL OR THE SOLICITATION OF ANY OFFER TO BUY OR SELL ANY COMMODITY INTEREST. COMMODITY TRADING INVOLVES RISKS, AND YOU SHOULD FULLY UNDERSTAND THOSE RISKS BEFORE TRADING.