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PM Comments
Friday, January 27, 2012 Grain Commentary
Corn—today’s strength was driven by export sales to Mexico and S. Korea; and another down day in the US dollar. Since January 16th the US dollar has had a consistent string of down days. It appears the European crisis is over and the market seems satisfied. A continued weaker dollar will benefit all exported commodities and comes at a time the US corn and soybean export programs could us the help. For the week corn closed up 30 ½ cent and moved within 10 cents of the close the day before the limit down. Very impressive. The short time since the report has found demand stronger than the USDA projected and pipeline stocks seem to be hard to originate. The cycle of price strength, attract farmer selling, level; start the cycle over will continue through the summer. The cycle beginning early in the second quarter is unusual. Last year the trade was expecting ending stocks near 800 million and ended with 1128 million. This year somewhat the opposite since demand is picking up and stocks are declining. Last year prices with the summer dryness easily reached over $8.00. The tight old crop stock situation could easily reach last year’s highs with the slightest weather concern. Now you can argue that the spring weather is going to allow for early planting and record yields. I can argue that 1988 started out the same. Oh, how I remember what happened that year. The “la nina” weather condition is still on going and just today new maps expect it to continue through the summer possibly. Both scenarios combined make this a volatile summer.
Soybeans—prices traded the negative side all day. Producer selling has picked up as many analysts are recommending selling more of your inventory. The lack of a major production shortfall in South America is the impetus. Support is under the market but due to weak export sales lower than today’s close. Weather still remains supportive but not enough to push prices into early January highs this week. For the week prices closed up 32 cents. Technically the chart appears to be taking a breather, consolidating for a breakout above the $12.50 area. But it can also breakout to the downside driven by better weather conditions. A pullback to the 40 day moving average is likely to be a good support point, albeit small considering the volatility of world trade price action. The bigger picture has the support of lower planted acres and hopefully lower carryout stocks. Summer weather will be very crucial. I would be patiently watching for a place to own soybeans long term rather than sell below $11.00.
A little light snow or snow showers will move through the southern and eastern Midwest Friday night and early Saturday. The balance of the key U.S. crop areas will be dry through Saturday. Most of the U.S. crop areas will continue dry Sunday as well. » More DTN Weather Commentary
