Looking Ahead to Next Week in the Grains
Oct 28, 2011
After the smoke has cleared from this crazy week, we find beans down 18 cents in the November contract, so I wanted to address this issue for a second. I am making some adjustments to my long-term ratings for Soybeans, if you aren't getting my free daily report, sign-up to get all of my ratings for row crops and livestock. I know many of you are probably thinking I should be raising the ratings for soy, especially with the new rhetoric flying around that China will soon be upping their soybean imports closer to 60 million metric tons...which (just for the record) I am highly skeptical of. The reality is, I believe China has a real hunger for South American soy and is looking to enhance that relationship as much as possible. Point being, China will take as much of their business to Brazil as they can. With around 60% of total US demand going to exports, and crush margins lagging both domestically and abroad, I just have a hard time being really bullish soybean prices at this juncture. I feel the current USDA export number at 1.375 billion, and the USDA crush estimate of 1.635 billion could both be too high. Do you realize shipments for the marketing year are down over 30%, meal sales are down 10% and soybean oil sales are down by more than 70% compared to last year. Certainly if we were to see some type of weather related issues in South America my stance would have to change abruptly...
In terms of my wheat ratings, I am thinking about changing it as well. My thoughts are that even though the acres here in the US are getting planted, the drought could eventually dig even deeper into the heart of our US wheat producers. I will say I am slightly more bullish the "higher protein" wheat, but I am also wondering how the "money flow" situation building in the Chicago wheat contract will turn out. I know everybody and their brother are short the CBOT wheat market, so could there be a short-covering rally? I still feel as if wheat is going to try and stay competitive with corn as we move forward.
In terms of Corn, I explain in much greater detail the questions that need to be answered and where my new ratings are in my daily report...
With mighty "Money" up to bat and the US equities and metals both rising at the same time, some are thinking we will soon start to see the "Inflation" gods once again banging their drum. How this all plays out is anyone's guess at this stage of the game. If inflation takes off, the governments will be in no position to raise rates or make the payments on the debt because of the fragile set of economic circumstances in the world today. I am not one to buy into doom-and-gloom, or hyper-inflation especially as we are set to witness the greatest October in US Stock history, but we certainly need to be digesting all of the new cards that have been thrown onto the table. Anticipate extremes in both directions, but look for the grains and soy markets to remain trapped in a range for the next 60-90 days with the edge now going to bullish "money-flow."
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