Joined: Mar 2010
Posts: 57
 
  Viet Nam
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 Nov 15, 2010, 10:28:33 PM | #1 |
New week starts, as usual, just take some minutes to have a short view of the grains market review analyzed by our expert - Pitguru Matthew Pierce - to see how things going and decide your full trading week! Besides, keep up with the daily changes to support your investing: Grain price reports!
The Grains Review
For the week of November 15th, 2010
Friday saw a dismantling of the whole commodity sector with currencies and talk of Chinese inflation hammering weak length. Corn was limit lower lacking any real synthetic market. Bean oil was the only real synthetic and that was thin at best. The market traded 30 points under the limit move. Beans were dramatically lower but could not hold any limit lower momentum. Meal was hammered but held ground versus bean oil with oilshare feeling a bit overdone at current levels. Wheat lost to corn due to the limit move but did not find any weekend momentum following better than expected rains all over the HRW regions. The weekend saw Chinese markets stabilize with heavy talk that China has inked a deal with Argentina to import in excess of 5 MMT of corn in the next crop year. This is unsubstantiated as of yet but the trade has a history of pegging information such as this. I would look for this to be “leaked” out of the next week trying to minimize the overall market impact. The JCI numbers for Chinese corn production are falling below 152 MMT, This is in comparison to the 168 MMT the USDA is using. If the JCI numbers are correct, or closer than the USDA, the deal is all but assured to have happened. Chinese market overnight saw support in corn versus a lower trade in all soy products offering further evidence this deal occurred. Chinese domestic markets inflated overnight on talk of Government only selling 15 days out which is a serious signal of rationing. Domestic basis popped into the weekend due to farmers turning the spigot off following weakness. Farmers will be very tight into the end of the year which should help basis continue to rally. The day session looks to open in line with the overnights with a mixed bag of macro factors. Cotton is lower, crude is higher and the USD is higher. I look to possibly sell any exaggerated pop unless macros turn in bulls favor.
Beans are called 7-10 Higher leaving a messy technical picture. The range is now set between 12.10-1348.50. On a weekly chart, the 2009 high at 1291.50 was broke above but failed against offering more nasty downside corrective potential. Indicators on both the daily and weekly charts are entrenched in overbought territory showing signals of weakness. Corn is called 7-9 Higher leaving a gap between 528.25-534 to fill on the next downside leg. Indicators remain in a strictly negative stance approaching the bottom end of the range. Weekly indicators remain in the upper end rolling over into a negative stance. Wheat is called 7-10 Higher looking to consolidate back above the 100-day MA sitting at 675.00. Indicators are back in a negative stance in the middle of the range. Meal is called 4-5 dollars higher taking back a small portion of Friday’s losses. Indicators are rolling over in the upper end of the range. Bean oil is called 30-50 Lower continuing the limit action seen on Friday with plenty of room before finding support at 49.50.
Concerning fundamentals, the OCT NOPA crush came in just under 152 million bushels. This showed a significant increase over the Sep 126 million. This Oct is right in line with Oct 2009 at 155 million. Should be supportive bean spreads and bearish meal spreads.
The big story over the weekend was China inking a deal to import 5 MMT of Argentine corn for the AMJ period of 2011. This is supportive in that Chinese markets then are well overestimated concerning total production. This has been in the works since the death of Kirchner’s husband. Opposition forces are looking to return to “pre-Kirchner” standards of exports. There is no confirmation and all Chinese traders I can find are denying anything like this occurred. In my mind that confirms it.
Australia is again too wet in the SE with between 1/3” of rains hitting areas looking to harvest. This is again causing problems with heat smut and flattening of the crop. Both will directly affect yield and more importantly, quality. The NW remains a desert with no real relief in sight.
India confirmed its status as a wheat exporter over the weekend. This is no surprise in that they were sitting on a pile of 17 MMT when this rally started. Somehow they found a way to “move” this wheat with export markets seeking anything they can get their hands on for feed usage.
La Nina remains a factor in Argentina with only scattered rains seen over the weekend. Brazil remains wet with between 1-3” expected at the end of this week. Argentina is looking wetter as well heading not the next weekend but this is not trusted so far.
In conclusion, the trade is a bit directionless heading into the end of November. Holiday season is upon us so I have to watch the macro side for money movement into the end of the year. Early talk is that corn and beans will be sold due to relative price pops versus other commodities. It is a bit ahead but something to watch closely. Weather continues to be the best fundamental situation for a rally with demand questionable in spite of all the China/Argentina talk. I continue to like commodities into the 2011 calendar year but feel the overbought technical conditions will hinder any rally in the next 45 days. I like the downside for the immediate future but retain my long term bullish inflation based bias. |
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