CBOT Floor outlook for January 30, 2012
Friday saw a strong session for corn with basis making its last move higher into the weekend. Interior basis continues to back off but the river system remains firm to start the week. Limited bids point to weakening demand at current record levels. This is likely bearish corn for the week ahead and bearish spreads. One positive for corn on Friday was Mexico buying another 170 TMT US corn. Import numbers are almost 200% for Mexico as compared with last year. This is truly indicative of the problem with central Mexican production.
Beans and wheat faltered on Friday on what appeared to be profit taking by weak longs. Recent rains in Southern Brazil and central Argentina have helped beans far more than corn so look for further downside pressure from fundamental factors in the complex as compared with grains. Oil appears weaker than meal to start the week due to Malaysian demand prospects and weakening crude. Meal does not have much to go on due to cattle numbers falling to 60 year lows due to drought in western states. Chicken placement has yet to pick up offering negative demand prospects for meal for the foreseeable future. Chinese problems with Indian meal imports looks to help Canadian exports more than US due to weak Canola prices. The week ahead for beans has little for bulls while bears get to roam free. This could come to an abrupt halt if China starts buying again. Rains in Brazil were wider spread than expected stalling harvest yet again which could allow/force China back to US origination. The flip side to that coin is the beneficial aspect of recent rains and expected rains over the next 5-days in Southern Brazil and central Argentina. There is another .50-1.50” expected over the next 96 hours making this the major fundamental battleground for beans this week. If they get the expected rains, the crop stabilizes and Latin American hedging starts again. If the rains dissipate or miss central Argentina things rally on world consumers covering needs.
Looking at the day session there is little to get excited about. The Euro is getting hit hard on Greek debt concerns and profit taking by weak longs. A weaker crude market exposes a weak underbelly after Saudi Arabia says they can cover any demand increases. Wow, thanks so much. They stabilize prices around $100.00. Too bad for them. It’s sickening. Let’s cut funding for Ethanol and self sustainable fuels but willing pay $100.00 per barrel. Detroit lauds themselves for getting 30 MPG highway. Really? With all the technology out there we can’t come up with something better? What happened to American invention? The answer: Politics and the current palm greasing system in DC.
All commodity markets could see the downside today with Minneapolis wheat the lone exception. Strength due to drought expansion in northern states is a positive impact on this market moving into planting. MWH-K is not leading the charge which is a bit questionable. I continue to feel this spread has inverted strength in the coming weeks. KC and Minny show relative strength which should continue this week. KWN-WN is trading at multi week highs looking for a move out. CN-Z could take a beating this week. Basis is losing steam quickly and macros look to consolidate lower. Not a good sign for all those on the bull side to start. There is plenty of air in this spread so do not be surprised to see a move back. Wheat will lose this week but problems in Ukraine and France offers support. Another reason to fear shorts in wheat versus the lack of longs in corn. All markets look lower but wheat has a decent chance to be the strongest all week.