Monday, March 19, 2012

Grain Market Comments - Markets Fall Hard- Charts for corn, wheat, soybeans, KC Wheat

Markets closed down hard today behind expected rains in the HRW belt and Russia reaffirming that it will not limit exports on wheat out of the Black Sea.

CBOT wheat lead the pressure today down 20 cents, MPLS wheat was off 16 cents, KC wheat was down by 14, beans were down 8, new crop corn was down 4, old crop corn was off 10, equities where near unchanged with the DOW up 7 points, crude is about 70 cents a barrel higher, and the US dollar is down 340 ish at 79.45 on the cash index.

A rather disappointing day for the grains; perhaps just a natural correction but very disappointing as the grains turned lower after putting in new highs for the recent moves in the overnight session.  Corn and beans left key reversals on the charts as they both made 6 month highs and then closer lower.   Wheat also left key reversals on the charts making 2 week highs before getting hammered.  Bottom line today was a poor technical day for the grains; but as some of the attached charts show perhaps just needed corrections as we had reached resistance areas on some of the charts where we should see increased selling pressure.

Speaking of selling pressure basis feels a little softer for corn due to increased producer selling as well as the fact that ethanol margins remain slim to in the red.  Most of the local ethanol plants I talk to have needs bought up until June.

One thing that should help out basis a little bit is the fact that many producers in many areas are shifting their focus to the fields plus many areas have road limits on; offsetting that a little bit is the fact that it seems like the railroads have more cars than ever.

Now whether today’s price action is a reversal or just a natural needed correction in over bought markets is still to be determined; but it probably comes down to demand and weather.  This latest bounce started over a rumor of China buying corn; but we still have yet to see confirmation of the tonnage that was rumored.  Weather presently isn’t doing anything other than allowing for the market to take risk premium out; as it appears early planting probably leads to more corn acres.  Some analyst today threw out 95 million acres with a yield of 162 per bushel; now that is a lot of corn.

Personally I think it is too early to know if we have a big crop or a small crop coming on; but I do think there is a big risk out there or big potential.  I think a small crop or big crop potential cuts our prices in half or doubles them in value.  I don’t think that I want to bet against the American Farmer doing everything he can to produce as much as possible so I think it makes good risk management sense to be very pro-active in making profitable sales while they are there.   So if we do get some weather scares and get bulled up thinking prices are going to shoot higher than at that time don’t be afraid to be a contrarian and make small scatted profitable sales that your gut will probably be telling you to do.

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