Are We Getting Closer to a "Risk On" Move in the Markets?

Published on: 15:32PM Oct 17, 2011

The grains fought hard amid continued European debt fears, with December corn and wheat finishing just barely positive and November soybeans down a substantial 17 cents to 1253. Many are asking if we are getting close to a "risk on" type of environment. With the G20 meeting happening this week, I am hearing that officials from all over the world are putting pressure on Europe to immediately find a solution and plan for its problems. If it can come up with a comprehensive plan, maybe we can get this ordeal behind us and move on...but that is still a big MAYBE. We have many other unanswered questions that must be taken care of as well: China’s slowing growth, the stability of the Japanese economy, U.S. debt and employment concerns, etc. These things are all indications as to whether or not we can again put some "risk on" and move prices higher in the grain and livestock markets.  

As far as the corn market is concerned, producers have to be somewhat enthused by the fact we have rallied by almost 70 cents from last Monday's low of around $5.72. There were also more rumors being thrown around on Friday that China was back in the U.S. corn market. I have heard no confirmation or specific numbers, but it certainly helps build our "demand" story. We also had Informa releasing preliminary estimates for 2012 U.S. corn plantings; if you aren’t getting our report, we go more in-depth on this and what it will mean to prices next year.  
Similar to the corn market, it was nice to see soybean prices bounce back last week (up over $1.10 from last week's lows); I just hope we can maintain the momentum. There seem to be a lot of analysts who have their sights fixated on that $13.00 mark; I am just not sure demand or production news will be enough to hold us there for very long. Not only am I concerned about more acres, but I continue to be concerned about overall soy sales. Just a month into the marketing year, we are already 25% behind last year's pace. Not to mention meal sales are down close to 15% and soybean oil sales are down close to 90%. Yes, there are some thoughts that the soybean oil ending stocks numbers estimated by USDA are too low when compared to the recent NOPA crush data, but as of this morning, the market obviously doesn't seem to care. I am of the belief that if we are going to see soy mount any type of real rally, it is going to need serious help from the "outside" markets; right now, I just don't think it can climb the hill on its own merit.
Another big question is the U.S. economic numbers released this week (PPI, CPI, Housing Starts, etc.). For more information on these numbers and their effect on grain and livestock prices, make sure you are getting your free copy of the daily report. Thanks again and best of luck. You can sign up online by clicking HERE or you can call the office if you have any questions or need to get signed up: 816-322-5300.