Fundamentals and Technicals Giving Grain and Soy Futures a Boost

November 28, 2012 12:25 AM
 

What Traders are Talking About:


* Technicals improving. Increased demand, firming basis and crop concerns have all given grain and soy futures a boost recently. But just as importantly, the technical picture has improved, increasing chart-based buying. December corn futures closed above the 50-day Moving Average Monday and followed that up with additional gains yesterday. December Chicago wheat futures pushed above its 50-day Moving Average yesterday, touching off a round of chart-based buy stops. Soybeans still have a lot of work to do before the technical picture perks up, but the corrective rebound after the recent, sharp price plunge is building.

The long and short of it: December corn futures are testing resistance at the top of the four-plus month sideways trading range, but must push above $7.76 at the top of the range to really make some technical "noise." December Chicago wheat futures bounced off key support and are headed for the top of the downtrending channel. An upside breakout from the channel is needed to signal bulls have control. January soybean futures are working on a 25% retracement of the price plunge from the all-time high to the November low. The contract must push above that level at $14.74 1/2 and the October low at $14.84 to confirm a low.

* More confusion on Ukraine wheat exports. Ukraine is apparently changing its "official" stance on wheat exports -- again. According to Ivan Bisyuk, first deputy agriculture minister, the country will allow wheat exports to continue even though the previously announced 5.5-MMT cap has been reached and the Dec. 1 ban for wheat exports is just days away. Bisyuk says, As of today, 5.5 MMT of wheat have been exported and we are continuing exports. Our updated data show that it is possible to continue exports. We will not use non-tariff regulations. If we need to (ban exports), we will announce that, but today there is no need to limit exports." Exporters are proceeding with caution, indicating they will export small tonnages of wheat until they are affirmatively told to stop.

The long and short of it: Ukraine's continued flip-flop on its "official" wheat export policy is leaving exporters and the market guessing. But it appears that wheat exports from the country will be limited moving forward.

* Fiscal cliff talks slow going. Lawmakers on both sides of the aisle indicate fiscal cliff talks are slow and little progress has been made. That's casting a shadow of doubt over markets as investors are uncertain what the final outcome will be. With a deal reached to keep Greece afloat, the U.S. fiscal cliff situation is the key macro-economic factor.

The long and short of it: While there's plenty of uncertainty with the fiscal cliff situation, markets would be under heavy pressure if investors were really worried. Recent price action, especially in the stock market, suggests investors are being cautious but they expect an 11th-hour agreement that keeps the U.S. from going over the cliff.

 

 

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Need a speaker for a seminar or special event? Contact me: bgrete@profarmer.com

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