Risk-on Money Flow Buying Supports Grains
Jan 25, 2012
Good Morning! Paul Georgy with early morning comments for January 25, 2012 at 5:25 am.
Grain futures are holding yesterday’s rally in spite of a higher dollar and lower crude prices. The rumor of Argentina shutting off corn exports because of the drought has been denied by the Argentina Ag Ministry. The rumor of Russia putting a tariff on exports seems unlikely unless food inflation spikes higher there. However exports out of Russia should slowdown due to tight supplies and an increase in domestic demand. Cash markets are strong and end users are finding it difficult to pull grain away from the farmer even with the seasonal record high basis. The delay in Brazilian soy harvest is putting support under the nearby futures. The port problems in Argentina and the harvest delay in Brazil have a considerable line of boats waiting to be loaded. The increased demand for grain at the Gulf suggests some fill-in demand has shifted to US. Argentina received rain of .25 to 2.00 over 80% of crop growing area. The rain system is moving into southern Brazil. Another system with good rains is forecasted for next week. Crop insurer paid out a record $9.1 billion in indemnities on US crops in 2011 while totals could rise to $10 billion by the time all claims are settled. The previous record claims were $8.7 billion. Cash cattle trade is at a standstill while choice beef was up .68 and select was up 1.00. Live cattle futures are testing November highs. Pork futures were affected by spreading due to corn strength. Pork product values were down .54. Subscribe to the Allendale Research Center
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Markets as of 5:25 AM
Corn: 4 to 5 higher Beans: 2 to 3 higher Wheat:3 to 5 higher
Live Cattle: 30 to 40 higher Lean Hogs:70 to 1.00 higher
Dollar: .32 higher Crude: .69 lower Gold: 9.20 lower
Allendale Advanced Charts
The corn market didn’t waste much time trading lower on Tuesday after it found support at the 50 day moving average. The back off on the close could be a signal that the rally was a little too much too fast.
Nelson Notes from the desk of Rich Nelson
One thing getting a lot of discussion in the industry is corn basis. Our models show current basis for Central Illinois is running 19 cents stronger than usual. Producers are cash rich from 2010 crop sales, we have a tight crop, and ethanol plants are still buying. We look for basis to remain strong into April or so. Once we get closer to planting this large new crop, don’t be surprised if basis does not follow the 2011 crop basis pattern.
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.