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Crude Oil a Dead-Cat Bounce for the Grains -- Analyst

If ever there appeared to be a living example of a dead cat bounce, it would be found over the in the crude oil markets this morning. 

After pressing below $50 a barrel for the first time since May 2009 yesterday and opening lower overnight, we have roared back to post gains of almost $.50 this morning.  I guess I should not make light of it as after 26 weeks of a down swing with losses in excess of 56%, we could be in line for a low at any time. 

As the old Chinese proverb says, “A journey of 1,000 miles begins with one step” but I am not sure if this would qualify as a step quite yet.  Where I have been surprised though is that this has not appeared to impact the psychology of the corn market yet.  Part of this could be due to the fact that we have continued to post impressive weekly ethanol production numbers but one has to believe the handwriting is on the wall.  Blenders are back in the negative and were it not for the mandate, there would be no incentive for usage.  Additionally, with the dollar screaming into higher highs each week, imports appear viable.  As noted previously, inventories have been building and I suspect that number will be closely watched in the EIA report later this morning.

Outside of the cold weather that is gripping much of the nation, there is really little else to push and pull the grain markets as we await the reports next week.  Bloomberg issued an analyst survey, which breaks down as follows; Corn production 14.342 billion bushels with an average yield of 173.4 and projected carryout of 1.944 billion.   This would compare with the last USDA figures of 14.407, 173.4 and 1.998.  The average estimate for December 1st stocks is 11.138 billion.  For beans they came up with production of 3.962 billion, a yield of 47.7 and carryout at 401 million.  The last USDA numbers were 3.958, 47.5 and 411.  December 1st stocks show up at 2.599 billion.  In wheat, they project a domestic ending stocks figure of 667, up 13 million and for all wheat acreage they come up with 42.63.  

The Hueber Report has put together our estimates and we come up with the corn production at 14.54 billion with a yield of 175.4 and carryout of 2.12 billion.  We are looking for a December 1st stocks figure of 11.54 billion.  In beans we are estimating a crop of 3.986 billion using a yield of 47.65 and projected carryout of 413 million.  December 1st stocks of 2.625 billion.  For wheat, we are estimating a carryout of 665 and are looking for all wheat acreage at 42.75.  

The January report traditionally is a critical number as we realistically set the tone for markets then into the spring.  We shall have to be patient and see what Uncle Sam has in store for us but seeing that prices remain towards the upper side of a three-month rally I believe the burden of proof lays with the bulls at this time.

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