Beans

From the China Daily: "China will maintain an upward trend in soybean imports with the rise being driven by the widening profit margins of soybean oil crushers and the recovery of the hog production industry."


We shall see whether that picks up bean prices in the US

Lazy Summer Day

At least the markets behaved as if it were a lazy summer day. Corn was down sharply but corn was pretty much the only major item that moved much. Wheat, beans, crude, stocks and bonds all spent the day trying to wake up. Forex response to everything was nothing if not muted. Or maybe it was nothing AND muted.

The elephants in the room that the markets chose not to deal with today were the impending US debt limit expansion or technical default on one hand and the wide-spread European debt crisis on the other. What the worlds stock markets need is an invasion from Mars, one that we know we can defeat. All the countries will find a way to get paid as a result of a global war against a common enemy, the world's bourses will rally happily, OPEC will decide it is time to control the price of crude, which they will do by selling short one billion barrels which will break the backs of all the hedge funds. They in turn will have to put to work all their now-unemployed bright boys inventing ways to defeat Mars -- even if it is a hostile take-over of the Martian Stock Market(s). And everybody will live happily ever after. Don't they always?

July 17, 2011 CoT Grains

December corn was up better than 60¢ on the week, as reality returned to the market place. Unsurprisingly, the trend-following funds expanded their longs going into this week, and likely expanded them more this week. One might reasonably expect a couple of down days next week, but nothing very serious.

Funds expanded their long positions in beans. Farmers and small specs reduced their shorts while commercials sold to everyone else. Prices are getting near the $14 (basis November) barrier. Actually, I should call it a reflective surface, not a barrier, since there is no particular reason to believe prices cannot or will not go through. The interesting question is whether beans will be towed along by corn or will, instead, develop their own legs. If the unusual weather so much of the country has had this year follows along through summer and into early autumn, beans may under-produce by quite a bit. Weather is tricky business, as farmers know entirely too well.

Wheat, dear old we-gots-too-much-wheat, wheat. Commercials reduced their long positions, funds reduced their shorts and farmers stayed short. Wheat prices struggled, although Tuesday and Wednesday were both strong days. I’ll be surprised if wheat does not drop to $7 or lower, basis December, this coming week. A low above 650 followed by prices nicely through 750 will go a long way towards getting wheat upward bound. Even so, it seems it will be pulled along rather than leading the way as it did last year.

Weekly Grain Update

Open interest in Wheat is quite low; commercials own the long end of things, funds hold about 60% of the shorts and farmers plus small specs the other 40%. Assume for sake of analysis that the wheat crop is going to be much less than a "bumper crop." The position holdings will be nice for bulls, if the "IFs" turn into "WHENs". 

December wheat spent most of the past two weeks reading oversold. Generally, prices do not go straight up from oversold; rather, they tend to go down more but weakly enough that oversold doesn't recur.  September is slightly, but only slightly, less bearish. In terms of targeting, 650 was the first downside target basis Dec. Looks like prices should go on down at least to 620.

Beans are very sideways. In May, prices got just under $13, then bounced. This week was spent bouncing from the same price levels. At this point, a reasonable guess is up to $14 the get tired. If, at any time, bearish news comes from the farms, $14 is likely to be the launching platform. CoT numbers are almost even, with the net longs coming from funds and the short side provided by commercials and farmers.

Corn saw positional CoT shrinkage this report, by which I mean commercials let go of some shorts while funds let go of some longs. Monday saw sharp selling that took prices almost all the way to a mid-March swing low in September's contract. Not quite as much was managed in Dec. Since then, prices have been all up. While I'm not prepared to take permanent position, my short term view is more up motion, likely to reach $7 or $7.20 basis December.

July 2, 2011 CoT Grains

Wheat CoT was unchanged! against last week. I suspect we will see an increase in commercial longs and fund shorts showing up in the next report, given wheat's price declines this week. Unsurprisingly, indicators read "over-sold" but oversold does not imply "end of down." Look for further declines until things change.

Corn was really hammered by this week's plantings report. 70¢ is a lot of hurt in corn prices. Last week's CoT showed funds shedding longs, commercials offsetting shorts. Next week seems likely to show more of the same. Corn, too, is oversold and likely has more downside to go.

Intriguingly, beans were the least damaged by the plantings report. An argument can be made that a bottom is near -- and maybe it is. Commercials offset shorts, funds sold longs and neutrality of positions is near, if things continue in this vein.

Grains June 25

The price action in wheat has been terrible for the bulls. Since the WADSE, July prices have come down nearly $2 and December prices have come down about $2.25. As of Tuesday last, the commercials were in sole possession of the longs, holding them at levels last seen in the last two weeks of last November. Similar, and higher levels were held last summer. In both instances prices moved up $2 or so. And, for what it is worth, December prices are camped out on the normal move target, right at $7. I’m not so bold as to assert that prices will go up from this moment on, into December, but I’m certainly of the opinion that the next big swing is up.

There has been blood spilled in the bean market as well, with prices of both July and November down about $1. Commercials were at their shortest of the past three months going into the WADSE, but nowhere nearly as short as they were in January and February. It seems that beans are going along for the ride.

Who is driving? Corn, as everyone knows, is driving. The two largest corn producers are the US and China. I’m still of the opinion that the Chinese corn crop will be hugely reduced by the massive flooding across about half the growing area. However, to the extent possible and economic, lower quality wheat will be substituted for corn in livestock feeding, the main use of corn in China. The commercials reduced their shorts going into last Tuesday, and likely did so again this week as prices continued to fall. We are still looking at funds being very long and commercials being very short, so no inference is available – except for those of the old time book writers who contend corn must go down. Of course it must, unless it doesn’t, and we have seen this level of commercial shorts since last August. December prices are down about 80¢ since the WADSE and July down about $1.15. None of us expect July prices to recover in the next two weeks; December seems likely to move up, according to how crops actually do. 

Grains May 21

Wheat is sideways with a slightly constructive aspect to the chart. We are getting into the season that normally sees rising grain prices.

Corn looks as if it would like to achieve lift-off, headed for the $7.50 to $9.00 part of price space, but its the rocket is still on the launch pad, engines burning.

Beans don't look so hot. I imagine they will be towed higher by the presumptive rise in corn & wheat, but they don't seem to want to run on their own.

Another 30 days could make a big difference in the way these charts look.