Grains Retrace Tuesday’s Gains on Strong Dollar
Nov 16, 2011
Good Morning! Paul Georgy with early morning comments for November 16, 2011 at 5:10 am. Futures markets are lower with grains taking away half of Tuesday’s gains. Macro market "hopium" had Italy’s new cabinet in place and solving problems which was enough to trigger risk-on buying in the commodity complex Tuesday. Grains found support from rumors of China buying soybeans and soyoil demand in recent days. These headlines came at a time when corn was setting on recent lows and soybean prices near one month lows. Fundamentals are still a bit negative this morning with weather in South America near ideal for getting a crop started. We have been watching soyoil supplies tighten which is driven by bio-diesel producers trying to get as much inventory before blend credit goes away at year end. Export sales numbers will be important this week as demand has fallen behind levels to meet USDA targets. There also is talk about the strong seasonal for price rallies the day before and the day after Thanksgiving. The bottom line is the lows made early this week are critical support and if broken it would open the door for a sharp move lower. Beef cutout values were higher on Tuesday while futures closed the gap between it and cash trade. Pork cutout values were down 1.40. We are expecting more choppy trade as macro news impacts trader’s confidence.
Markets as of 5:10AM
Corn—5 to 6 lower Beans—9 to 11 lower
Wheat—3 to 5 lower
Live Cattle—10 to 15 lower Lean Hogs—10 to 15 lower
Dollar— .34 higher Crude— .57 lower
Gold— 8.70 lower
Allendale Advanced Charts
Beans found strength at mid session Tuesday once resistance at 11.90 was breached. The close above 12.00 was positive, but the downtrend remains in place.
Nelson Notes from the desk of Rich Nelson
Analysis firm, Oil World, is surprised by the soybean to corn acreage shifts in South America this year. They project Argentina will increase plantings 7% from last year’s 4.56 to now 4.87 million hectares. The group suggests a slight contraction in soybean ground from 18.89 million hectares to 18.76
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