Grains Hold Up Despite Outside Pressure

Published on: 07:01AM Dec 13, 2011


·         Grains slightly higher overnight; Corn/soy/wheat able to shake off negative currency action yesterday to close higher; Soybeans making new lows before rallying to finish in positive territory
·         Outside markets generally supportive this morning with the US$ slightly lower
·         Some concerns over dry conditions in South American helping to support the soy market
·         CME to change CBOT/CME Ag settlement rules this coming spring; Closing prices have been set in the pit since side-by-side trading began in 2006, CME will be moving to use the electronic trade to set closing prices in a move that has floor traders very upset
·         Brazil corn 96.5% planted, soy 94% planted according to Celeres, who notes that dry weather is becoming an issue in some areas
·         China forecasting its Dec soybean imports at 5.39mmt up from its previous estimate of 4.2mmt
·         UK wheat exports were up in Oct, but continue to run below last season’s levels according to customs data
·         Brazilian farmers have forward sold 40% of the 11/12 soybean crop vs. 39% last week
·         Tech Numbers:                                 Support            Resistance
o   Corn (H)                               5.85                 6.05
o   Soybeans (F)                         11.00               11.30
o   Wheat (H)                            5.85                 6.05
Despite negative outside markets yesterday, and a mostly negative USDA report last week, the grain markets have been able to hold their ground. Technically, the markets are still in major downtrends that have yet to be negated. Charts are telling traders to sell rallies, however the way that the ag complex has held up under such huge fundamental pressure may be telling a different story. As one technician put it, we’re "bearish but cautious."
Hedgers: As long as basis levels are good, we will recommend selling cash grain and buying call options.
Specs: We want to be long soybeans, but are waiting for confirmation on our technical signals. Stay tuned. Hold long positions in H/Z and N/Z wheat spreads.
As always, call the office with questions or concerns.
Joe Vaclavik

(312) 462-4438