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Archived Market Commentaries:
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Date:
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11-11-09
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Headline:
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Closing Grain Comments
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Comments:
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Strength in outside market trends pushed grains to their highs in the opening moments of today's day session, but lack of fundamental support brought grain well below those highs by today's close. A new 15-month low in the US dollar & reports that Chinese factories were operating at their highest pace in 19-months had lent strength to metals, energy & grains overnight & attracted renewed fund buying near the open. As this week's bullish reaction to mostly bearish soybean & wheat data has proven, trading funds markets continue to see "commodities" as a currency substitute. A sagging US dollar continues to encourage speculators to buy other asset classes as long as world interest rates remain extremely low. A rebound in the dollar & the slow-but-steady harvest pace eventually provided selling pressure that countered speculative interest. Dec corn futures settled with a low-range 1/2c loss. After having traded in a 22.5c range, Jan beans closed with a mid-range 4c gain. Dec CBOT wheat posted a 20.5c range before settling with a mid-range 8.75c gain.
Demand news was limited today. Overnight, Taiwan bought 2.377 mb of US wheat for Jan-Feb shipment, & Japan announced it will seek 2.792 mb of US wheat & .772 mb of Australian wheat on Friday. Jordan bought 4.595 mb of Black Sea-origin feed barley for Jan shipment. Two years ago, that would have been a US corn sale. After today's close, Egypt announced it was seeking optional-origin wheat for late Dec shipment. This week's CBOT rally has probably priced US wheat even further out of the market for that business.
The CBOT announced today that it will initiate a variable-rate storage program in July 2010 to encourage better convergence between the cash wheat & futures markets. Most analysts really feel the "new" program is really designed to buy-off commercial hedgers who own deliverable facilities with the promise of a enormous rate of return on their storage facilities. That would then allow the CBOT to continue collecting the massive fees associated with index fund trading. Will it solve the convergence problem? Not a chance. Index funds own 4 years worth of soft red winter wheat production--about 8 times the relative impact they have on any other grain market. The whole episode is about greed--not grain--& country elevators & farmers still get the shaft.
Barge freight continued to crash lower today. Tuesday-Wednesday declines in freight charges have reversed a large portion of the 30c/bu surge in costs seen on Friday-Monday, improving spot delivery basis levels accordingly. Corn & soybean basis soared 20c higher this afternoon & wheat basis rebounded 14c.
We hope you can attend the Top Ag Annual Meeting on Tuesday, Nov 17th at the American Legion Hall in Albers. Dinner begins at 6:30 pm & the shareholders meeting starts at 7:30 pm. If you have not yet done so, please call us with your dinner reservation Thursday 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 farm marketing advisory or commodity brokerage 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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