Dollar, demand wag the grain markets

Corn: Corn saw virtually all of its support from outside markets Monday. From those outsides came two sources of at least short-term positive news.

First, there was strong stock market support after a retail sales record was set over the most recent four-day weekend. That had some people feeling a bit more positive on the economy as a whole. Black Friday was strong, but if you put the entire weekend together it was an amazing holiday weekend.

Second, and more important for direct influence on corn price, the dollar set back from more positive European news. Early in the day, there was talk about the IMF moving ever closer to having a longer-term solution to the ongoing problem weighing on the euro. Any day of positive news in Europe is negative the dollar once again helping to support the corn.

Unfortunately for the bulls, that is where the positive news ends. No new sales were announced Monday morning, suggesting corn will have to wait until Thursday’s export/sales report before seeing if recent price breaks have been enough to encourage more corn buying. We know from Friday’s report that breaking 630 was not enough to cause more sales. Now we find out this Thursday if breaking 600 is a far enough slide to break the pattern of poor sales.

On the technical side, 600 in December corn had acted as support on the way down but is now acting as resistance on bounces. Two times last week the high in corn only managed 1 1/2 cents over that 600 level and Monday the bounce never even made it back above that round number.

Bulls will be looking for more good news out of Europe to help turn corn higher or will take a new corn sale on any day. Bears must believe the higher dollar trend is their friend and continue selling corn until larger exports are finally seen. Bears know that at some point they will have driven corn low enough to find these sales and a bounce is likely to be quick but for now they will keep selling until shown otherwise…Ryan Ettner

Soybeans: Beans found strength right along with the outside markets on Monday. Beans were also extremely oversold and found short covering to boost the January contract 14 1/2 cents. Fundamentals will most likely remain the same or show little change until USDA releases there January data. That means the market attitude will have the largest impact on bean prices over the next several weeks.

Funds bought 4,000 contracts Monday, and it was the most buying we have seen from them in eight sessions. Are the beans bottoming? A year ago we put in a bottom around this time and rallied going into February. We could see that again as long as demand can remain strong. Exports over the last few weeks have been better and is giving the bulls renewed strength that our beans are reaching support.

We talked about 2012 beans in our research meeting to start the week. We also talked about similar years and what happened to price. This is a chart that shows what we can expect if we get close to a 37% increase in ending stocks. This year’s fall price high to low winter price was 20%. That was more than in the other four years found. These other years had a moderate rally between November and February. These two points would suggest we are getting close to temporary lows at these levels. It was interesting to see these other years had the “big break” in the late May/early June time frame.

Short term factors that must be watched, which could keep beans negative, are the dollar and demand. These are very key issues to get the bulls to jump back on the long side from these levels…Steve Georgy

Wheat: The wheat market ended the Monday session a little disappointing as it closed weak while the rest of the grain complex closed higher. The market rallied early on the coattails of a macro market rally. The outside markets were higher on reports out of Italy that the IMF was working with Italy on a way stabilize their debt situation.

Also supporting the macros was news that the American consumer spent a record amount of money on Black Friday. This gave hope to the markets that the American consumer is not dead yet. The early buying enthusiasm could not be sustained as it is hard to get speculators excited to own U.S. wheat as it is some of the most expensive wheat in the world.

The Minneapolis wheat held up the best Monday as the quantity of the spring wheat is low while the quality is high so that is keeping some price premium in this contract. Wheat inspections came in at 15.392 million bushels which was up slightly from last week’s 13.721 million bushels. The trade viewed the number as neutral. Allendale still anticipates the overall wheat price to continue to trade in a sideways to lower range. With comfortable supplies of wheat, in both the world and the US it is hard to be bullish unless weather problems extend through spring…Jim McCormick

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com

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