Monday, August 1, 2011

Grain Market Opening Calls- Commentary start of August; end of bull markets?

Markets are called better this a.m. behind a strong overnight session which seemed to be lead by an agreement to raise our debt limit.

In the overnight session we had corn up 9 cents, beans where up about 15, KC wheat was 17 higher, MPLS was 16 higher, and CBOT wheat was up about 12 cents.  At 9:20 outside markets have European wheat up about ½ of a percent, crude oils is up about a dollar a barrel, the US dollar is up 294 on the Sept at 74.330, and the equities are weaker with the DOW down 47 points.

Many of our markets did end the overnight session well off of their highs as most of the wheat markets where a dime off of their highs at 7:15 and since the grains closed the outside markets have weakened up a lot; with the US dollar going into the positive, crude about 2.00 a barrel off of it’s highs, and the equities in the red; after having started up rather nicely.

Perhaps the markets are saying that this debt ceiling getting raised isn’t the best thing in the world after all as right now we have one of those trading action that is similar to a buy the rumor and sell the fact.

As for the grain markets them selves they still have overall good to friendly fundamentals based on demand growing and crop sizes not exactly much if any bigger then the demand.  If we do see a sell off in the outside markets and it get’s as bad as many thought it could have if we wouldn’t have reached an agreement for our debt ceiling there really remains huge downside risk because our biggest fundamental seems to be money flow; not supply and demand of the actual commodity. 

Basis is a little weaker over the past week or so and many spreads have widened out which is a sign of a lack of upfront demand and typically associated with bear markets.

The next big crop report is August 11th; we have seen talk of the corn yield estimates all the way from 160 down to 150 or less.  If the outside markets and world economy’s don’t change the demand side of things; our price direction really should come down to yield; as we simply won’t have much if any if yield continues to slide; whereas a rise in yield could easily turn our balance sheets bearish.

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