Fed Monetary Policy Supports Grains
Jan 26, 2012
Good Morning! Paul Georgy with early morning comments for January 26, 2012 at 5:20 am. Grain futures are higher as risk-on money flow attitude continues. Cash markets continue to move higher as gulf basis has not been this strong since July. At what price will the farmers start selling? There has been talk that it will take a move above 6.50 in March futures for corn and above 12.50 in March beans to pry open the bin doors. Option expiration could impact grains going into the final trading day on Friday. There is a sizeable open interest in 640 and 650 strikes. Weekly ethanol production was 934,000 barrels per day last week. The new number was 1% over last year at the same time but less than last week. Bernanke’s announcement of the extension of the Zero Interest Rate Policy through 2014 has traders concerned about inflation. This provided buying in commodities across the board. The USDA will release the weekly export sales at 7:30. The estimates are for strong sales numbers: wheat 450 to 750 tmt, corn 600 to 1,000 tmt, soybeans 720 to 1,100 tmt. Funds have been adding to long positions in corn and soybeans. Watch for short covering in wheat as nearby futures test down trend chart resistance. Cash cattle markets are still in a standoff with packer bids at 120 to 121. Last week cattle traded at 126. Packers are finally trying to stand their ground as negative margins have exceeded the $100.00 mark. Product is creeping higher even with the slowdown in slaughter. This is giving us reason to believe product could be backing up. Choice beef was up .65 and select was up .64 on Wednesday. Pork cutout values were down .56. Lean hog futures are being supported by the historically wide spread of cattle over hog prices. Get more details on the Allendale Research Center
and watch the Morning Coffee Video at 8:00 am this morning at www.allendale-inc.com
Markets as of 5:20AM
Corn +7 to +8 Live Cattle +02 to +10 US Dollar Index -43
Beans +9 to +19 Lean Hogs +05 to +40 Crude Oil +83
Wheat +8 to +11 S&P Index +3.50 Gold +18.90
Allendale Advanced Charts
Beans failed to take out the 100 moving average again on Wednesday. There is a solid short term uptrend in place, but is it enough to push past this moving average? If so, a test of the 38% retracement of 12.46 would be next target.
Nelson Notes from the desk of Rich Nelson
Private analysis firm, SovEcon, estimates Russian grain exports totaled 19.5 million tonnes by mid-month and will be over 20 mt by month end. This has traders believing the Russian government could impose tariffs on exports by April. The Russian government has previously indicated exports should not grow larger than 23 – 25 mt tonnes this marketing year. This could lessen the amount of cheap feed wheat hitting the market.
There is a significant risk of loss when trading futures and options contracts. This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities herein named, and each investor should consider the appropriateness of trading on this information, based on their objectives. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to accuracy. Past performance is not indicative of future results.