Allendale Wrap-Up DATE \@ "M/d/yyyy" March 3, 2009
Corn: The economy and crude oil prices remain at the forefront of this market’s focus. The Dow index closed at the lowest close since April 14, 1997. Also bearish, the U.S. dollar closed at its highest level since 2006. The greenback hit 89.25 in November but was not able to hold that level. That price may be tested soon. News related to corn was pretty mild. Weekly export inspections came in close to expectations of 31.4 million bushels and had little impact. The other issue we are still looking at is with 2009 acreage. We have over 5 million acres left for corn and soybean planting. With fertilizer rates declining we may get a little surprise in corn acres. This issue is a big one and illustrates why your participation in Allendale’s annual Planting Survey is so important. This is one of the only true farmer based surveys around. Last week the trade got wind of USDA’s thoughts on 2009/10 acres and other numbers. A better thing to ask is whether we should even pay attention to their numbers. Are their February outlook, forum numbers any good? We will release their history and what actually happens this week. Look for their corn track record tomorrow.
Soybeans: Today’s price break was led by soybeans. You could argue the Argentina news we discussed on the Closing Corn Commentary page is short term bearish to soybeans. Combine that with the economy and you have new lows for this downtrend. The November contract even broke the lows it had posted back in the month of November. Weekly export inspections at 27.2 million bushels came in as expected. That news will take a back seat this week to any developments for Argentina. On the new crop side we still have USDA’s suggestion that soybean acres will increase by only 1.3 million acres in our head. Even that number is bearish. A higher number, which the trade believes is out there, would be even more bearish.
Wheat: This market continues to play follow the leader after corn and soybeans. If you wanted to paint a bullish argument between the three, you would probably have to talk about wheat. Once weathermen finish totaling February precipitation totals, they will likely tell us the drought got even worse. For short term trading, one of the things we watch is outside money. Friday’s Commitment of Traders gave no indication of a bottom. In the previous week, the traditional trading funds sold 2,901 contracts and the long only index funds liquidated 14 contracts. While we all know, the left over stocks of wheat from 2008 production will drown out the big 5 million acres of fewer wheat plantings USDA is now expecting. If you want to get bullish based on the problems in Texas and Oklahoma you will have to wait until early April. It is when news wires see that the yield determining spring rains don’t come that we will start hearing more about it. For short term trading stay with the trend which is down. For longer term we do look for a rebound into spring. We will not act on that until the trend changes.
Rich Nelson is the Director of Research at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com
