Soybeans Strong, Grains Still Rangebound
Nov 03, 2011
Straits Financial AM Grain Update
-Grain complex sharply higher overnight led by soybeans; Beans 20+ higher in most active contracts; Dec corn back above 6.50 after selling off on the open yesterday; Markets have been relatively thin due to MF Global accounts being frozen according to some proprietary traders
-Export Sales this morning at 7:30am CST; Trade expecting 400-600 for corn, 450-750 for beans and 350-450 for wheat
-Russia’s winter wheat acreages is expected to be lower than expected, however the crop is in good shape according to newswires
-Some looking US soybean demand to return as buyers are expected to take advantage of low harvest prices; Majority of big soy purchases have come out of S. America as of late
-Brazil has imported an estimated 148 mil/gal of ethanol, mostly of US origin, through Sept; That number is expected to double through April 2012 according to UNICA (Brazilian Sugarcane Industry Association)
-Technicians still eyeing the 6.60 area as major resistance for Dec corn and 6.37 as support; Technicals in Jan soybeans are more broad, with support near $12.00 and resistance near $12.50; Dec wheat support near 6.35 and resistance near 6.60
-Nov Crop Production report next week
Selling the higher open has been effective in the grain markets over the last weeks. Be cognizant of false breakouts above 6.60 in corn and above 12.50 in soybeans. Demand remains the big questions. Most would agree that the “supply scare” is over. Now, we’ll see how many importers want to buy $6.50 corn. Ethanol margins are excellent, currently.
Producers: Corn growers should take a serious look at their break-evens for the 2012 crop. We believe that hedges can be initiated using option strategies if the Dec’12 contract trades to 6.50. Producers can hold off on rolling Dec HTAs for the time being.
Specs: No new recommendations today. We still like long WH vs. short CH on a long term basis as we believe a short covering rally in wheat is likely.
Please call the office with questions or concerns.
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