February 11, 2009

Grain Markets today closed lower on follow thru selling from yesterday's panic in financial markets. Corn closed down 8 and soybeans closed down 16. Yesterday the USDA released their monthly update on Supply and Demand with really little changes of note. Leaving domestic supply and demand tables nearly unchanged. This leaving room to go with a few assumptions or speculations:
Corn
1) Corn world ending stocks building and demand needing to be sourced.
2) Corn export demand is pent up trying to await lower prices with the USDA stating corn exports are unchanged as we are severly lagging their current goals.
3) They are expecting feed demand to stabalize and/or start to pick up all while we have the lowest cattle on feed since 1959.
4) Ethanol- the wild card, apparently the USDA is expecting the destruction of margins there to stabalize and sort itself out soon?
5) Or, the USDA was sleeping until Sunday night and needed to release something so why not copy the January Report????? Personally, I think they are still taking to many things for granted in the demand side of the equation and corn carryout and/or stocks to use will likely continue to grow, leaving less emphasis needed on "the acre war".
Soy Complex
1) Domestic Crush is slipping along with soybean meal demand.
2) Exports are stellar yet many variables in our equation are in the Chinese hand's.
3) World soybean stocks are dwindling leaving a higher responsibility on the new crop soybean market to secure acres both domestically and abroad.

From a technical perspective March corn still remains trapped in a trading range from 3.50 - 4.00 and march soybeans remain trapped in a ratcheting down trading range from 9.60-10.00 with solid technical support at the 40 day moving average today at 9.65. A violation closing basis of these ranges will likely move us aggressively in the direction of the breakout. The question remains, are commodities a safe investment? Are commodities at or below fair value? Interesting to note that yesterday the Dow Jones lost 5% in one day while the grains losses amounted to less than a mere 1% on the day. Although I continue to believe that the highs for the marketing year are likely to be much earlier this year rather than later assuming a normal spring and summer weather pattern with stabilization of the economy coming now from deflationary action.

On a positive note basis levels especially on corn are firming and do need rewarded.
Up and coming news:
USDA export sales Thursday 7:30am CST estimates as follows:
30-37 mbu of corn
17-24 mbu of soybeans

Jeff Neisler