grain market closing comments 1-19-2011

The grain markets closed mixed today in a rather volatile trading session.

Corn closed the day down 18 on old crop, new crop was down about a dime, beans where off 2 on old crop, new crop beans where up about a dime, CBOT wheat was up 4, MPLS wheat was up 1, and KC wheat was down 1.  Outside markets had the dollar softer by 300 some points; but that was also some 300 points off of it’s lows, equity markets where slightly softer with the DOW down 13 points, and crude was down 21 cents.

China buying Australian Feed Wheat helped to spur on the selling in corn; as after making a new contract high corn closed 25 off of it’s highs and left a chart that could open the doors to some massive fund selling.  We also closed below yesterday’s low which left a key reversal or bearish outside day on the nearby charts. 

Now China buying feed wheat instead of corn; is in a sense negative to corn as it shows price rationing or it shows that corn is becoming expensive versus some other grains like the feed wheat which some (Australia) seem to have massive amounts of.  But China didn’t cancel any corn on the books and the fact that they are buying the grain is also a sign of overall demand.  The strong overall demand for commodities in general didn’t change today; we didn’t curve much if any nor have we found the supply needed to put us in a comfortable balance sheet state.  So from that point of view perhaps today was and is simply a correction. 

The risk we have out there is that just in the past few months our corrections haven’t exactly been small and with the length and profits that the funds have it wouldn’t take much to see the selling pressure continue.  But if we are going to move higher we need to have corrections and those corrections need to find consumptive commercial – end user demand.

Overall the bias to the upside should remain in place for grains in general; but proper risk management and risk diversification is always going to be recommended and one never ends up going broke via locking in profitable sales.

The birdseed market is also starting to feel really top heavy; as bids are becoming on the hit and miss.  That market is starting to show signs of a blow off top.  Compared to some of the other grains sunflowers are really becoming overvalued; birdseed offers have traded well over 50% of bean oil and that hadn’t happened much if at all since the 2008 rally.

One component that continues to support basis is freight as the railroads continue to be on the slow side of things.  I would caution that this is creating a little extra volatility as it looks like many buyers have the risk of doubling up inventory; i.e. buying something on spot because to arrive application doesn’t come in and then having the to arrive come in shortly after the spot train is bought.

Technically we have the corn market leaving a key reversal at the same time the dollar managed to bounce off of lows at a support level; we need to watch out for some possible follow threw on those as we go forward.

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