Opening Grain Market Comments 12-27-10

Markets are called mixed this a.m. behind what is expected to be choppy trading this week. 

In the overnight session corn was down 1-2 cents, beans where up 7-9 cents, KC wheat wad down 3, MPLS wheat was down 3, and CBOT wheat was down 5-6 cents.  China raised interest rates and that had all of the grains open and trade much lower then where the overnight session left off at.  At 9:10 outside markets have the equities weaker with the DOW down about 50 points, the US dollar is weaker with the March down 172 at 80.660, crude oil is off about 80 cents a barrel, and the European milling wheat contract is nearly unchanged.

The two main things in the market place are China raising interests rates as mentioned above and weather concerns in Argentina.  Many of the soybean contracts made new highs last night.  Technically new highs typically lead to more new highs, I would note however that most grains are very near or at some key resistance points and if we simply trade choppy the next couple of weeks you could be seeing the USDA report setting it self up as a big time catalyst that either moves us into new ground or ends up being a reversal. 

The other thing we really need to watch out for over the next several weeks will be money flow and what the outside markets do in regards to providing direction how that money should flow.  Many have talked about the index funds potentially needing to lighten up on their side of things and as we close out the year it is rather difficult to find many bears for grains or commodities.  It becomes scary when everyone is leaning on one side of a boat and as history tells us usually tops and bottoms happen when everyone least expects it or is convinced it will keep going; as that is usually the blow off top or blow off bottom point; i.e. we no longer find buyers or sellers as things become exhausted.

With the corn futures now over 6.00 it will be very interesting and key fundamentally to see what happens to demand; are we at levels where we will finally see it start to curve off?  If not how high can we go before we see some sort of price rationing and if we go to high how much credit risk is out there? 

Weather being on the cold side and slowing things down with snow storms should help support the birdseed markets a little and could help out basis especially as we come to the end of the month and someone ends up short to a buyer that needs the product.  With this being a holiday week we could see any cold weather firmness in the cash markets offset by plenty on vacation.

As the end of the year approaches many are making planting and input purchasing decisions; these are key steps in helping determining your break even levels.  Break even levels are what basis nearly all marketing plans are written against.  If you need help with your marketing plan please give us a call and make sure to check out our blog in the next coming weeks as we add fictional characters and their marketing plans.