Dollar Weakness Provides Tailwind
Jan 27, 2012
Good Morning! Paul Georgy with early morning comments for January 27, 2012 at 5:40 am. Grain futures are mixed as traders adjust positions after a volatile week. The rally in commodities the last few days is being called the Bernanke Bounce. The Fed policy announcement to keep the zero interest rate policy in place until the end of 2014 had traders willing to move money to riskier investments. Cash markets are still very firm in some areas in central IL however we are hearing a few ethanol plants have already lowered basis by 5 to 10 cents. We are skeptical of this 6 day rally in nearby corn. Once the end user gets enough supply to cover needs cash markets will likely setback until we find some export interest. Weather forecasts for Argentina and Southern Brazil have increased rain amounts. The delay of export shipments out of Brazil and Argentina will pick once harvest get in full swing and port problems are resolved. The macro influences will continue to push grain futures around as money flow swings with sentiment. The talk of QE3 seems like a wild card for the Fed. Throwing money into the system now would accelerate commodity price and defeat the purpose. The price relationship between 2012 corn and soybeans is weighted heavily to planting corn. That has some producers wondering "Why plant any beans?" Watch the spread between Dec 12 corn and Nov 12 beans over the 6 to 8 weeks. There likely will be some action in that spread before March 31 Planting Intention Report. Maybe we don’t need any more beans with the way USDA is increasing the 2011/2012 beans ending stock on the monthly S+D reports. The cash cattle trade is at a real stand off this week with packer bids at 120 to 122 and feedlots asking 126 to 128. Who will cave first? Packer margins are estimated to in the red over $100. Daily slaughter has been reduced and product still struggles at the retail counter. Choice beef was down .23 and select up .46 on Thursday. I am sure feedlots would move cattle at steady money if they could get it. Pork cut was down .88. Could the rally in meat prices and consumers getting their credit card bills from the holiday spending spree taking its toll on retail demand? Get more details on the Allendale Research Center
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Markets as of 5:40AM
Corn +3 to +5 Live Cattle +20 to -20 US Dollar Index -24
Beans +1 to +2 Lean Hogs +20 to +40 Crude Oil +41
Wheat -1 to -2 S&P Index +2.25 Gold -4.30
Allendale Advanced Charts
Cattle backed off of early highs and settled near key support at 127.80. Critical support crosses at 126.10 to remain in an uptrend.
Nelson Notes from the desk of Rich Nelson
The weekly ethanol production report was considered positive. Production in that week totaled 934,000 barrels per day. Though it was lower than the previous week’s 941,000 bpd pace, it was better than expected. YTD production is 3.0% higher than last year. USDA looks for the year total to use 0.4% lower corn.
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.