El Nino's slide bodes well for southeastern Spring fieldwork
Two camps exist on the CBOT floor and up for debate is just how the "index funds" may greet the trade next week. The bulls camp suggest the index funds will be willing to keep the long term trend intact while the bears are vocal about how the non commercials are estimated be long over 300,000 contracts of combined futures and options breaking into never before experienced higher thinner air and these index funds are ready to bury the futures. With investment money expected to grow from $70 billion in 2006 to $110 billion in 2007, Allendale would strongly recommend the entire investment community to respect the fact that both corn and wheat world stocks are historically tight and until new corn harvest from S Africa and Argentina arrive in March and India's wheat crop, also to begin harvest in March, there is no guarantee of quickly replenishing the world supply. The bearish to corn is near ideal corn weather conditions for #2 world corn exporter Argentina and forecast calling for better days ahead for S Africa corn production. Bullish to corn is good demand, investments funds attraction to bio fuels.
Well, at least one of the many private and public weather forecasters Allendale follows, it is World Weather Inc which forecast El Nino is exhibiting signs this week it may have peaked. WWI does suggest at least two more weeks are needed to help confirm if El Nino has reached its peak. WWI does suggest El Nino is still expected to exhibit its influence well into the spring of 2007 but could be less intense. How does El Nino typically act within the USA? Typically it is both the extreme Pacific Northwest and USA Southeast which usually has much above rainfall. If El Nino is losing its grip, it could allow corn farmers in the southeast to have less problems entering fields in the early spring time. We will keep you informed as we are informed by WWI.
Please be sure to view our Historical Price Trend page to see what the ten year historical odds are for next week. As important is how odds may improve or decrease as we move forward the next four weeks. Of interest is how odds have historically improved for soybean meal and wheat over the four week period of time.
Remember a few weeks back when Allendale's Research found in similar tight end stock years and had sizeable increases in the season average farm price vs the previous year, 2 of 3 years March futures did not take out the Nov low and did take out the Nov high. This present trade is very impressive and flashing signals which may suggest the funds could be poised to take out the March futures high established in the month of Nov (3934).
March futures close is 3840 vs last Friday's 3690 and is down 1.5% in value thus far the month of Dec. Our key custom Moving Averages are 3730, 3730 (key support) and uses a 2950 bull to bear pivot point. July futures close is 3966, vs last Friday's 3834 and end of Nov's 3980. Our key custom Moving Averages are 3870, 3860 and a 3080 bull to bear pivot point.