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Archived Market Commentaries:
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Date:
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2-06-09
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Headline:
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Closing Grain Comments
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Comments:
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Outside markets were firm, Argentine weather forecasts stayed mostly dry, & corn & soybeans were able to build on Thursday's gains on Friday. Wheat traded mostly lower today, reversing some of Thursday's Chinese "drought" rally. Production worries diminished on ideas half of their impacted wheat crop can be irrigated. Dry US southern Plains wheat is also likely to get rain soon, easing drought there. Grains received spillover support from rising stock prices, renewed losses in the US dollar, & recovery from morning lows in crude oil. Outside markets rallied even though Labor Dept data indicated the US lost another 598,000 jobs in January, & the unemployment rate jumped .4% to 7.6%--a 16-year high. Since the recession began in Dec 2007, 3.6 million jobs have been lost--half of those since October. The ability to rally despite bearish news is considered a sign of strength. Commodities like copper, grains, & energy tagged along with rising New York equities today on speculation world demand would soon improve. March corn futures rose 6c, March soybeans settled 21c higher, but March wheat declined 4.75c today. Compared to last Friday, nearby corn edged 1.75c lower--its 5th straight weekly loss. March beans jumped 21c--breaking a 3-week down streak. Nearby wheat lost 11c during the week.
This morning's CBOT open interest report & this afternoon's CFTC Commitments of Traders data provide insight into why speculators were big grain buyers at the end of this week: They were exiting contracts they had previously sold to lock in profits or limit losses. As of Tuesday, the biggest speculators owned the smallest net long position in corn since Jan 24, 2006, & had trimmed longs & added shorts in other grains, too. Normally, the best rallies occur when prices go higher & speculators are adding long positions--not covering shorts. If Tuesday's USDA data is "negative" & prices still cannot sustain downward momentum, odds for a retest of January pre-report highs would increase.
Looking ahead to Monday, traders will again focus on Argentine weather maps & be positioning for USDA reports. This afternoon, traders at the Buenos Aires Grain Exchange raised their Argentine soybean production forecast to 40.0 mmt from last week's 36.6-39.3 mmt estimate. USDA will release its February world production & US & Supply/Demand revision on Tuesday morning. Look for the agency to lower S American corn & bean output, but also decrease US grain use.
Soybean basis levels tumbled sharply at the Gulf today, & corn & wheat were moderately lower as farmer & elevator movement increased & higher prices chased some buyers away. Locally, Feb delivery corn basis declined 7c, bean basis dropped a dime, & wheat basis fell a nickel. For the week cash corn rose 4c, beans were 18c higher, & wheat lost 8c.
With temps warming & snow melting, be sure to check with your local Top Ag Agronomy Center for your wheat top dressing application needs. Need financing? Give Lloyd a call at 243-5293 or contact your local Top Ag Agronomy Center at Okawville, Trenton, or Pierron.
"Closing Comments" are written by David Marshall, Toay Commodities Futures Group LLC, Nashville, IL. To learn more about his services, contact him at dmarshall@tcfg-llc.com or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness. Commodity trading involves risks. You should fully understand those risks before trading.
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