Dave Kruse put out a great comment that needs repeating on grains and the US dollar presently. The WSJ noted that "The Almighty Dollar is Back." The dollar index is not expensive yet in its historical perspective of price territory but it is up 5% on the year. That adds cost to US exports. The world economies are trying to beggar thy neighbors, using currencies as they struggle to produce GDP all the while making official public pronouncements that they are not doing this. Japan has made the sharpest devaluation, 20%, which is angering its Asian trading partners. Japan is our best Ag customer so the loss of buying power of their currency will be felt in Ag markets. As a general rule, commodity markets trade inversely to the trend of the dollar and the short term trend of the dollar is up. Whether that is sustainable or not is yet to be seen but currency values are discovered in relative terms and Europe and Japan are even more relatively troubled than are we. The dollar is still the world's reserve currency, still the destination for capital looking for safety. USDA says that we will only export 825 million bushel of the 2012 10.780 billion bushel corn production, 7.65%. At this point I really don't think what the dollar does will hardly be measurable in the physical corn market. Exports have shrunk too small to wag the dog. In the case of China their domestic corn/soybean markets are so much higher than ours and margins are so good that the dollar should not be a major market determinate factor either. Someone may need to explain this to the funds.
Here is what the press is saying about beans: Soybeans are slumping after rising near four-month highs earlier in the week, as traders take profits and shed risk amid the absence of fresh export sales of US supplies. The lull in recent export sales, coupled with technical weakness, left buyers with few incentives to push prices higher. Market watchers say soybeans, which had climbed on strong, China-led export demand, have essentially ran out of fresh bullish news to inspire buyers. Bullish traders are concerned China might be dialing back demand for US soybeans as more Brazilian soybeans become available. Argentina is also expected to produce a big crop in the next few months. A recent narrowing of the gap between cash prices for soybeans offered for export from the US and futures prices is a sign that Brazil beans are slowly moving into export channels. Pacific Northwest export values are also dropping due to importers finding it expensive to acquire vessels for shipping with a large backlog of ships lined up at Brazilian ports. Technical selling applied light pressure to futures Wednesday as well, with investors worried that soybeans ran into resistance on technical charts. Without fresh export news to underpin the market, traders say the market's upside momentum looked exhausted. Soybeans have continued to struggle to hold prices near the $15 a bushel level for the past four months.
So traders are worried about slumping sales. So what? We only need to sell just over a million beans a week till September 1 to meet what the USDA says we need to sell. Mexico and Canada will likely cover that. Sure we may see a few cancelations too. But if beans go down and we put them "on sale" we will sell to many beans again and create a scenario where beans can go vertical to shut off domestic demand and/or create imports into the US form SA in July. That is if they have worked through SA 60 day delays. It may be that beans bought in SA in June still come with a 60 day delay. Beans have traversed the $14.00 range so much in the past 5 months it is now a bi-weekly event. Lower priced beans now, means even higher prices for old crop in June. Go ahead, make my day... take beans lower now.
US Dollar Daily Chart
Corn
Corn is validating the breakout I showed on Monday and is now above the 50 day MA. March corn expired near 740 and will become a target for the May contract. Looking at the chart you can see the last cycle high was in the mid 740 area, so even a lower high can occur there even if funds try to hold corn back.
May Corn Daily Chart
Beans
Beans need to hold today's low of 1329 to keep the uptrend intact. It really wouldn't surprise me if tomorrow we were to hear of a big sale of beans to a unknown destination and beans have a big up day.
May Bean Daily Chart
Wheat
Monday we warned that a rally is eminent and showed this chart. First resistance is 728-730 with a ultimate potential of seeing 745-750. Now something you should be aware of. The window for freeze scares on Kansas City wheat starts to occur in early to mid-April. That is the window for a spike high to unload last year's remaining wheat you have in inventory.
May Chicago Wheat intraday Chart
Live Cattle and Feeder Cattle
The seasonal tendency for cash cattle is to rally from early March into May, but these days nothing is certain in this world. Cash trade is at a standstill, with packer bids at $126 and feedlot offers at $130. After many months, packers are at a slim positive margin ($5 bucks per head) and they are hesitant to bid higher with choice beef resisting the $197 level. Even if choice beef zooms through $200, deferred feeders may have bid themselves too high to pencil out (other than thinly). For you guys still sitting on feeder cattle, or buying them at the sale barn...hopefully, grassland moisture will eventually propel prices through the stratosphere (good luck with that). In the meantime, do not sell futures short at these levels, but protect yourselves with put options.
Live Cattle Daily Chart
Feeder Cattle Weekly Chart
Gold
The chart below is the 60 minute chart since March 1. There really is nothing to say at this time. Not even the gold market itself in the short term knows what it wants. Longer term 1510-1530 is major support.
April Daily Gold Chart
Crude
Crude oil still looks like it wants to work towards 94.50-95.00 a upside objective.
Continuation Crude Daily Chart
03-11-13
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