Thursday January 21st, 2010

It is said, "the essence of genius is to know what to overlook." As we look to see what is going to shape the future of the energy market, what do we overlook? Well...today it appears we are overlooking the DOE report. The energy market has fallen despite a 400,000 bbl draw on crude(early week estimates were builds of 2.4 million bbls bpd) and a 3.3 million bpd draw on heating oil/diesel. Apparently the market is reacting to the 3.9 million bpd build on gasoline and news that President Obama has put forth plans which would impose stricter limits on the financial institutions, including a ban on proprietary trading. Is the economy recovering? Are our banks more financially stable than a few short months ago? Questions seem to have filled reports today, keeping investors critical or is it cynical on the state of the economy.
While diesel had large draws overall, demand is still down 6.8% from last year and January 2009 demand was down 2.6% from 2008. But referring back to my opening statement, which suggests genius is in the ability to pick the data to follow. Warranted or unwarranted the energy market will most likely bounce moving into spring and summer. While downside potential in the energy market is still possible, it appears to be limited in the short term. Heating oil has pulled back about 62% of their holiday gains and could be looking to start its slow climb. Crude has pulled back 50% of its holiday gains. An intresting crude trend has been 62% short run dips before it bounces into its next technical position. Crude closed today at $76.08, support numbers to watch are $75.oo and $74.50 anything below could send it back to the $70 range, but most seem to believe its more likely to hit $80 in the next two months before it hits $70.
I will be keeping a close eye on the diesel market, today with bullish news it dropped .03 cents, if we can get back another .05 or so, it would be an ideal opportunity to lock-in spring gallons.
Thanks for reading, have great evening.
Zach

Wednesday, January 20, 2010

The corn market scored its lows early in the session and spent the rest of the day coming back. The late rally came up just short of getting corn back to steady. Corn finished lower for the 7th consecutive session (the last higher close was 2 days before the report). There was little fundamental news to impact the corn market this morning so today’s trade took direction from several other sources. The soybean market, which spent the day trading double digits weaker, was a particularly negative influence. The U.S. Dollar index was up a strong 88 points today on news that the Chinese government is scaling back their lending policies to keep inflation in check. The higher dollar index led to a $27.00 sell off for gold futures and $1.50 in crude oil. On the day commodity funds were estimated sellers of 5,000 contracts.




The soybean market opened 10-12 lower, scored their lows around mid session when they were down more than 20 cents, and then spent the rest of the day struggling to get back to where they opened. Negative developments on the export front got the session started on the wrong foot and there wasn't much recovery from there. One of the primary drivers behind the recent weakness in soybeans has been the expectation that the world will start looking to South America for their protein needs. There was an announced sale of 270,000 ton of soybean meal to Thailand from Brazil, not the US. Indonesia is also seen tendering for SA meal. The world obviously has been waiting for this type of development to pressure U.S. bean values but the delivery periods of LH February were a bit earlier than the trade was looking for. Soybeans exports out of the US have been incredibly strong year to date but this may soon be coming to an end.

Phil Farrell

Tuesday January 19th, 2010

A stronger US dollar and good soaking rains in SA over the long weekend pushed corn, soybean, and wheat prices lower. Corn ended the day down 2 cents as fund selling never did really materialize like some expected. Corn has now been down for 6 straight trading sessions with 5 of them coming after the bearish production report last Tuesday. Many producers and companies believe that the production number on corn by the USDA is too high but many also think usage is also overstated, either way with a carryout over 1.6 billion and an anticipated 3 million more corn acres next year, it will be difficult to rally corn until bad weather scares us next summer. Corn basis was virtually unchanged today as the market continues to get adequate supply and is trying to spread out sales to deferred months with board of trade carries leading the way.

Soybeans were off 10 cents today on fears of a huge SA crop. Rains continue to fall over much of the area with only a few places getting too much rain as they try harvesting in the extreme northern regions of Brazil. A soybean sale of 100,00 mmt to China was announced overnight and with delayed wet harvest in SA, soybean basis has firmed up once again at the export market and processor.

Scott Meyer
Funds are estimated long 223,000 contracts of corn and 57,000 contracts of soybeans.

January 18, 2010

The markets are still closed today in observance of Martin Luther King Jr. Day. Will reopen Monday night.

Morris Terminal Update:
Over the past few weeks, the Morris Terminal has undergone some serious changes. A new screener has been installed in order to clean the corn/beans is being loaded into the barges. Since closing a few weeks back we have built a bin for holding screenings, a tower which is now supporting the screener, and a new barge conveyor. Currently, electricians are pulling wire and should have everything landed by Tuesday afternoon. The last sections of spouting should be installed Tuesday as well. We should be ready to dump trucks and load barges on Wednesday! Please call first before driving to the Morris Terminal.

Regards,
Nathaniel Dubravec